Bilbao: Basque Pathways to Globalization, Volume 1 (Current Research in Urban and Regional Studies) (Current Research in Urban and Regional Studies)

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Author: Gerardo del Cerro SantamarAa

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BILBAO: BASQUE PATHWAYS TO GLOBALIZATION


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CURRENT RESEARCH IN URBAN AND REGIONAL STUDIES Series Editor: Steve Tiesdell University of Glasgow, UK [email protected] This new series of research monographs focuses on contemporary research in the fields of urban and regional studies and will present high-quality research monographs of particular interest to academics and policy makers in the fields of Geography, Planning, Urban Studies, and Regional Studies. The series will especially focus on • • • • • • • • • • • •

Economic development; Communication technologies and their urban and regional impacts Regeneration Transport and travel; Brownfield and contaminated land development Urban policy Urban form and morphology Urban governance and institutions Urban liveability Urban cultural economics Land and property development Urban design Urban sustainability Globalization and its urban impacts.

Previous Volumes in the Series: Institutions and Planning VERMA Forthcoming Volumes: Devolution and Transport Policy in the United Kingdom SHAW, DOCHERTY AND FINLAYSON Brownfields Redevelopment and the Quest for Sustainability DE SOUSA Related Elsevier Journals — sample copies available on request Cities Journal of Rural Studies Landscape and Urban Planning Land Use Policy Progress in Planning


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BILBAO: BASQUE PATHWAYS TO GLOBALIZATION

BY

GERARDO DEL CERRO SANTAMARÍA The Cooper Union for the Advancement of Science and Art, New York, USA

Amsterdam ● Boston ● Heidelberg ● London ● New York ● Oxford Paris ● San Diego ● San Francisco ● Singapore ● Sydney ● Tokyo


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Elsevier The Boulevard, Langford Lane, Kidlington, Oxford OX5 1GB, UK Radarweg 29, PO Box 211, 1000 AE Amsterdam, The Netherlands First edition 2007 Copyright © 2007 Elsevier Ltd. All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher Permissions may be sought directly from Elsevier’s Science & Technology Rights Department in Oxford, UK: phone (+44) (0) 1865 843830; fax (+44) (0) 1865 853333; email: [email protected]. Alternatively you can submit your request online by visiting the Elsevier web site at http://elsevier.com/locate/permissions, and selecting Obtaining permission to use Elsevier material Notice No responsibility is assumed by the publisher for any injury and/or damage to persons or property as a matter of products liability, negligence or otherwise, or from any use or operation of any methods, products, instructions or ideas contained in the material herein. Because of rapid advances in the medical sciences, in particular, independent verification of diagnoses and drug dosages should be made British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record for this book is available from the Library of Congress ISBN-13: 978-0-08-045324-8 ISBN-10: 0-08-045324-4 ISSN: 1745-9001

For information on all Elsevier publications visit our website at books.elsevier.com

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For Herminia, Gerardo and Guillermo

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About the Author

Gerardo del Cerro Santamaría, born in Spain and a long-time observer of urban and Basque affairs, teaches at The Cooper Union for the Advancement of Science and Art in New York City. Educated in Madrid and New York, and trained in urbanism and political economy by Manuel Castells, Janet Abu-Lughod, and Diane Davis, Professor del Cerro holds PhDs from the New School for Social Research in New York and the Universidad Autónoma de Madrid, Masters Degree from the Royal Conservatory of Music in Madrid and the New School for Social Research, and Executive Program Certificates from Harvard University and the Massachusetts Institute of Technology. After receiving a High School Diploma in Science cum laude, he completed undergraduate degrees in logic and philosophy of science and music theory, and graduate degrees in classical piano and social science, specializing in urban sociology and urban political economy. He has taught and published on urban issues in Spain and the United States and is author or co-author of publications on urban environmental engineering, science and technology studies, program evaluation, engineering design and social science, and ancient Hindu culture and philosophy. Between 1997 and 2002, he served as Project Area Leader for the Gateway Engineering Program of the U.S. National Science Foundation and advised organizations in the USA, Spain, Russia, Japan, and South Korea on social science methods for program and organizational planning and evaluation. Professor del Cerro is a member of the New York Academy of Sciences, the American Academy of Political and Social Science, and the Society for the Advancement of Socio-Economics. In addition to his teaching responsibilities, he currently serves as Director of Institutional Research and Assessment at The Cooper Union in New York, where he has lived since 1992.


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Contents

List of Tables and Graphs Acknowledgments

xi xiii

Introduction: Bilbao –– A City on the Global Map

1

1. Cities, Globalization, Bilbao

9

2. Economic Globalization in the Pre-Industrial Era

31

3. Industrial Capitalism and the Nation-State

43

4. Global Pressures and the Crisis of Fordism

59

5. The Making of an Urban Megaproject

79

6. Architecture, Globalization, and the Guggenheim Project

101

7. The Economic Globalization of the City-Region

127

8. Basque Pathways to Globalization

153

Bibliography on Cities and Globalization

167

Bibliography on Bilbao and the Basque Country

193

Name Index

207

Subject Index

219


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List of Tables and Graphs

Table 3.1: Table 4.1: Graph 4.1: Table 4.2: Table 4.3: Table 4.4: Table 5.1: Figure 5.1: Table 6.1: Table 7.1:

Population changes in various areas of Metropolitan Bilbao, 1900–1970. Population changes in the Basque Country and Bilbao, 1981–2001. Unemployment rates in the Basque Country, 1965–2002. Employment lost due to industrial restructuring in Spain, 1982–1987. Shipbuilding workforce, 1975–1998. Employment distribution, by sectors (in %) 1975–1996. The 2002 Abandoibarra plan. Abandoibarra: Chronology of events. Flows of visitors to the Guggenheim Bilbao, 1998–2005. Geographic destination of Basque non-energy exports, in million dollars, 1993–2004. Table 7.2: Geographic origin of Basque non-energy imports, in million dollars, 1993–2004. Table 7.3: Value of exports, in million dollars, of Basque Country and Bilbao, by technological content. Table 7.4: Value of imports, in million dollars, of Basque Country and Bilbao, by technological content. Table 7.5: Bilbao’s exports by region and country, 2001. Table 7.6: Port statistics: New York, Chicago, Los Angeles, and Bilbao. Table 7.7: Regular shipping lines from the Port of Bilbao, 2001. Table 7.8: Bank of Bilbao, loans and deposits in foreign currency, 1922–2001 (selected years). Table 7.9: Foreign network of the Banco Bilbao Bizkaia, 1988 (in USD million). Table 7.10: The presence of BBVA in Latin America, 2001. Graph 8.1: Regional industrial jobs, 1985–2004.

54 62 64 65 67 71 87 88 119 134 134 135 135 137 137 142 144 146 148 161


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Acknowledgments

This book is born out of intellectual passion for one of the most complex and fascinating territories I know, the Basque Country, and constitutes a sincere tribute to Basque citizens, especially to those who fight for a more open and peaceful society. My scientific interest in the Basque Country owes to the work of many outstanding Basque, Spanish, and European social scientists. My work — the result of years of transnational research in Bilbao, Madrid, and New York — is an attempt to connect and synthesize my own research with intriguing and provocative debates on cities and globalization in order to provide a precise, meaningful, and hopefully stimulating account of globalizing Bilbao. I am indebted to the uniquely global atmosphere at the New School for Social Research (where I obtained my first doctorate), the interdisciplinary milieu at The Cooper Union for the Advancement of Science and Art (my host institution during the development of this project), and the challenging urban setting of New York City. These venues were conducive and exciting environments for shaping, developing, and testing my conjectures. I would like to thank my teachers and colleagues at the New School for Social Research in New York, Janet L. Abu-Lughod, Diane E. Davis, Robert Beauregard, and José Casanova. I was most fortunate that scholars of their stature were willing to work with me and supervise my progress. I would especially like to thank my chief advisor, Janet L. Abu-Lughod. Janet helped me develop a deep appreciation for cities and an honest aspiration for first-rate professional standards that I will carry with me always. She guided and advised me at the critical junctures of my research and writing and gave me the finest counseling for which one could aspire. Diane E. Davis deserves my deepest gratitude for her extraordinarily creative teaching. As a leading scholar, she always inspired me to continue my quest for knowledge of cities and urbanization, political economy, and global capitalism in ways bold and critical. Several colleagues in Spain read and commented on earlier versions of the manuscript, and from all of them I received encouragement and wise criticism. I would like to mention Miguel Beltrán, José Juan Toharia, Cristóbal Torres, and Carlos Taibo, from my alma mater, the Universidad Autónoma de Madrid, Jesús Leal from the Universidad Complutense de Madrid, and Enrique Martin Criado from the Universidad de Sevilla. Miguel Beltrán especially deserves my heartfelt appreciation, gratitude, and respect for his enlightened teaching and mentoring over the years.


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Acknowledgments

To my informants from Bilbao, who were available and willing to answer my questions concerning the Basque region, I owe my sincere gratitude. In the Guggenheim Museum Bilbao, Andone Narváez kindly responded to my many petitions for information about visitors and other related questions, whereas Erika Barahona Ede made it easy to obtain graphical information about the city. Roberto Bartolomé, from Uniport Bilbao (the managing agency of the Bilbao port) was very helpful in providing me with statistical information about port flows used in my work. Estíbaliz Zabala, from the provincial government of Bizkaia, was prompt to respond to my queries concerning the role of the Diputación in the economic development of Bilbao. Special thanks go to Maika Ortiz de Urbina from Eustat (the Basque statistical office), who provided me with statistical information when I most needed it. Miguel Angel Gómez Bilbao, also from Eustat, produced the maps that appear in various chapters of the book. I would also like to acknowledge Nieves Ventura, a librarian at IVAP (the Basque Institute of Public Administration) for allowing me to review several past issues (which I would not have otherwise found) of Ekonomiaz, the Basque Journal of Economics. Victor Arroyo, from the Historical Archive of the Bank of Bilbao, allowed me to review arcane sources in the Archive’s site and exchanged ideas about the history of the bank that were useful in this book. Thanks go to Koldo Hualde from Ekonomiaz, who gave me access to several Basque government sources I would have otherwise been forced to disregard. Carlos Gorostiza and Susana de la Madrid, from Bilbao Ria 2000, found time to discuss with me a chronology of events in Abandoibarra that I included in Chapter 5. Alexander Ugalde, a professor at the University of the Basque Country and expert on Basque foreign action in historical perspective, kept me informed of recent developments on this subject that helped me frame the Guggenheim operation as a Basque globalization effort. Iñaki Aguirre, Secretary General for Foreign Affairs of the Basque Government, helped me understand the reach and scope of Basque foreign action today. Finally, I would like to thank Izpiñe, from the Basque Sociological Association, who informed me in detail about past and current issues of Inguruak, the Basque Journal of Sociology. I would especially like to acknowledge and thank Alberto Alberdi Larizgoitia, an advisor to the secretary of Trade and Industry of the Basque Government, and former director of Economic Affairs for the Basque administration. Alberto is a man of profound knowledge and curiosity about anything Basque and anything worldly. In addition to giving me access to Basque government materials and reports, Alberto and I had several discussions about Bilbao, the Basque Country, the role of global city-regions in the world economy, and many other issues of importance to my work. I believe I can always count on him to discuss the Basque Country intelligently and passionately. Regina Grafe, a lecturer at the London School of Economics and Political Science, and author of a dissertation on trade in the Basque region in the seventeenth century, kindly shared her findings with me. Her work helped me understand the global character of Bilbao during that period, which I discuss in Chapter 2 of this book. Research by Román Basurto Larrañaga on Bilbao exports during the eighteenth century is reflected in my work, as is Juan Díez Medrano’s accounts on the relationships between the Basque Country and Spain in historical perspective. The work of Manuel Montero and Eduardo Glas helped me understand many aspects of Bilbao’s industrialization. Accounts by Marisol Esteban (on the modifications to the initial Abandoibarra Plan), Arantxa


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Acknowledgments

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Rodríguez (on uneven development in Bilbao and on Abandoibarra’s management and financing), and Joseba Zulaika (on the Guggenheim project), among others, contributed to my understanding of contemporary Bilbao. Román Basurto Larrañaga, Eduardo Glas, Joseba Zulaika, Marisol Esteban, Regina Grafe, Juan Díez Medrano, and Arantxa Rodríguez provided useful feedback to various sections of the manuscript. The edition of this book would not have been possible without Elsevier’s Urban and Regional Studies Series Editor, Steven Tiesdell, who kindly read the manuscript, accepted it for publication and offered many useful suggestions to improve it. Dr. Tiesdell’s enthusiasm for my project and his careful and timely advice deserve my most intense gratitude and are doubtlessly reflected in the published version. Tony Roche and Mary Malin from Elsevier Science worked diligently in order to publish my work in the best possible and most timely way. Thanks also go to the global production team at Elsevier, led by Joanna Scott in Oxford and Ravichandra Reddy and the Macmillan India team, for their first-rate professionalism. I would also like to acknowledge Ebony Coletu, my editor in New York, for her extremely careful work and for helping me untangle the complexities of the English language. My family helped in ways that are difficult to list. Special thanks to my brother and friend Guillermo, who occasionally assisted with locating materials in Bilbao, in spite of his demanding occupation. My parents, Herminia and Gerardo, deserve profound love and admiration for educating my spirit in liberty and thoughtfulness. They will always be in my heart and thoughts. My family has been the most important source of emotional support throughout this project, and this book is dedicated to them. Manhattan New York City November 2006


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Introduction

Bilbao — A City on the Global Map

Bilbao seems to have gone global overnight. A peripheral city in Western Europe with an old industrial tradition but largely unknown to most people outside Spain, it came to the attention of commentators worldwide, thanks to the opening of a branch of the Guggenheim museum in 1997 — a project widely acclaimed as a resounding success, turning the city into a destination for global pilgrimage. Over eight million people from all over the world, about 20 times the city’s population, visited Bilbao between October 1997 and June 2006 in order to contemplate the art and admire the titanium building that wraps the museum — a work hailed as architect Frank O. Gehry’s masterpiece. Architectural critics and the world press have flocked to Bilbao in order to tell the story. The question — “Have you been to Bilbao”? — has acquired the status of a slogan in specialized and public circles alike. “Have you seen the light? Have you seen the future”? (Muschamp, 1997). The news circulated swiftly and widely. To the surprise of most, a well-known cultural foundation had built its new museum in a place alien to art circuits, in a region of Spain — the Basque Country — with a reputation for political unrest and terrorism. Lacking serious competitors, the Guggenheim went to Bilbao, thanks to an advantageous financial offer made by Basque officials, who, because they thought of it as a “strategic investment” that would change the international image of the city and the Basque Country, were willing to pay the full costs of the museum. The Guggenheim project had clear political overtones. Negotiated directly by the Basque government, without official Spanish mediation, the project symbolized Basque autonomous power — a region with ample autonomous political and economic power, but unmet aspirations for political emancipation from Spain in nationalist circles. According to outsiders, the museum triggered the city’s revitalization. After 20 years of decline, Bilbao’s good economic performance since 1994 has been attributed uncritically to the Guggenheim “miracle”. New claims were made about the role of spectacular architecture and the arts in urban renewal and globalization (Giovannini, 2001), with urban officials worldwide seriously considering bidding for a Guggenheim for their own cities. Bilbao became synonymous with the Guggenheim, and many cities around the world wanted to imitate the Basque capital’s success and become instantly “global”. Thomas Krens, director of the Guggenheim Foundation and a key actor in the negotiations with Basque officials, savored his dream of a global museum franchise, by which satellite Guggenheim museums, scattered around the globe and paid for by the host city, would follow the cultural diktats of the New York headquarters by hosting exhibitions of the Guggenheim collection premiered in the United States.


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Bilbao: Basque Pathways to Globalization

Reassured by the accomplishment of the negotiations with Krens and by the museum’s overwhelming success with the public, Basque officials were quick to portray Bilbao as a global city. The formidable (and free) image campaign in the world media was a valuable source of urban marketing and a reason for civic pride. The city’s overall revitalization plan suddenly received increased attention elsewhere, with Bilbao officials and planners happily explaining the keys to a promising urban future in front of a variety of interested audiences. Yet all of this happened despite the museum never having been intended as the stimulus for the city’s revitalization. The overall revitalization plan had been well underway when the deal with the Guggenheim Foundation was sealed, with plans for a more modest, local museum to be designed by local architects already drawn up. Despite the Guggenheim’s overall positive impact on the city, it remains highly debatable whether a museum alone can turn a struggling urban economy around and give Bilbao a continuing international role. Bilbao is not just a museum — a city’s fortunes go beyond the reach of a mere cultural artifact, however successful and “global” it may be. Bilbao was already a globalizing city shortly after its foundation in 1300 — the King of Castile chartered the city as a node in the networks of trade between Castile and the world. As the place from where Castilian wool and Basque iron were exported to Europe, the city played a key role in the European subsystem of trade. As has been well documented (Basurto Larrañaga, 1983; Abu-Lughod, 1989), Basque merchants were present and active in the major world cities at the time — Janet Abu-Lughod mentions “the Biscayans” (people originating in the province of which Bilbao is capital) as one of the 16 “nations” present in the world city of Bruges by the end of the Middle Ages (Abu-Lughod, 1989, p. 90). Bilbao’s development during the following centuries shows an expanding city struggling to preserve its commercial freedoms vis-à-vis the Spanish State. This regional–national tension is best expressed by considering the interests of different economic groups. For example, whereas the merchants in the city (from the late Middle Ages onward) always had an interest in free trade, nineteenth and twentieth century industrialists often sought protection from the State (see Chapters 2 and 3). For much of its history, the city has been a frontier town among Spain, Europe, and America, adapting its commercial relations to the ebbs and flows of world markets and the success or failure of centralizing efforts from Madrid. Whereas for most of the Fordist period Bilbao was gradually integrated into the Spanish economy, the current phase of globalization, together with the high degree of political autonomy for the Basque Country, is again taking the city on a path to globalization. Looking beyond and behind its new architectural image, Bilbao offers a unique opportunity to studying the globalizing status of a city in its cultural context — a poignant contrast with the disembodied rhetoric of the early hegemonic view in global city research (Sassen, 1991, 1994, 1996, 1998; Friedmann & Wolff, 1982, 1995; Friedmann, 1986), which produces valuable insights and conclusions but few in-depth studies of individual cases. Peter Taylor (2004, p. 33) has recently argued that the “world-city literature” has been characterized by “theoretical sophistication and empirical poverty”. Most literature on the global city consists of journal articles in which the global-city hypothesis is applied and tested, with little questioning of its conceptual framework. A substantial part of such literature devotes itself to testing the social polarization thesis, portrayed as a universal


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consequence of globalization.1 One should, however, note some exceptions to this trend, such as recent work on the world-city network by P. J. Taylor and colleagues (Taylor, 2004). Regarding case studies of individual cities published in book format, one should mention most prominently — in addition to Sassen’s pathbreaking analysis of New York, London, and Tokyo (1991) — the pioneering study of London by A. King (1990) and J. L. Abu-Lughod’s (1999) masterful comparative analysis of New York, Chicago and Los Angeles. D. Meyer’s (2000) study of Hong Kong, C. Hamnett’s (2003) study of London, and T. Bunnell’s (2003) analysis of Malaysia are also relevant examples. Since the 1970s and 1980s, Bilbao has undergone major economic restructuring intended to overcome the serious crisis triggered by the end of the Fordist model in the 1970s. In addition, the city is the economic capital of a highly industrialized region with long contested political relations with the Spanish State. At a time when globalization appears to have become the panacea for all urban problems for most local planners and politicians, when the Guggenheim’s success has instantly made Bilbao known in the world, and when the unification of Europe offers new possibilities for political and economic action in various European regions beyond their nation-states, it is not so surprising that a small city in peripheral Europe claims global status. The more important question, however, is to assess what it means for Bilbao to globalize, and how we can best pursue this question and avoid an “over representation” of globalization — one that focuses exclusively on a global explanatory level but ignores local, regional, and national factors — that obscures rather than clarifies explanation. A case study, showing local characteristics and developments that are place and time specific, offers an appropriate means to do this.

A Conceptual Framework This book — a theoretically informed case study and a synthesis of Bilbao’s developments through the lens of globalization — analyzes the Guggenheim project as the latest of Bilbao’s globalization efforts, puts the project in the context of Bilbao’s decades-long transformation and contends that Bilbao’s positive economic performance since 1994 is not fundamentally due to the success of Frank Gehry’s building, but rather to a complex array of causal processes that must be understood in the context of Bilbao's connections with the world economy and a changing world-system. My work shows that globalization processes in Bilbao are as old as the city itself and that the role of the State must be taken into account in order to explain the city’s changing fortunes throughout the years. Globalization, in turn, ought to be understood as a complex and variable network-like process with multiscalar nodes, an approach which is carefully theorized and empirically developed in this book. As a result, this book questions one of the most important and common assumptions in current

1. This literature includes, inter alia, Baum (1997), Cochrane and Jonas (1999), Douglass (1993), Elmhorn (1998), Fujita (1991), Gritsai (1997a, 1997b), Jiménez, Bo-Sin Tang, Yalcintan, and Zibel (2001), Keil and Ronnenberger (1994), Machimura (1992), Rimmer (1986), Shachar (1994), Smith (1992), Stilwell (1998), and Wu (2000).


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research on global cities — namely, that globalization can be applied almost exclusively to the current period of economic restructuring in which States are “losing control” — an expression taken from the title of Saskia Sassen’s (1996) Losing Control? Sovereignty in an Age of Globalization, which hypothesizes that globalization, powered by transnational corporations, is rendering the nation-state powerless to control the process of internationalization and its effects. This study shows that globalizing processes have been common to the history of Bilbao since its foundation in 1300. In addition, it shows that Bilbao's globalization and de-globalization through the centuries cannot be explained without taking into account the important role of the State in processes of economic restructuring and urban development. A growing literature examines the question of the role of the State in globalization processes (see, for example, Boyer & Drache, 1996; Brenner, MacLeod, & Jones, 2002; Dieleman & Hamnett, 1994; Hamnett, 1996; Keil, 1998a, 1998b; O’Riain, 2004; Panitch, 1998; Smith, Solinger, & Topik, 1999; Taylor, 2000; Weiss, 1998; Yeung & Olds, 2001). Similarly, in her recent work, Saskia Sassen, a major globalist, has paid increasing attention to the role of the State. According to her, there have been changes in State functioning due to globalization. States have become deeply involved with the “regulation” of globalization, not only by de-regulating the economy and privatizing, but also by “de-nationalizing” (Sassen, 1999a, 1999b, 2000a, 2000b, 2003). In the analysis presented here, political and historical factors are seen as fundamental components of globalization. It, thereby, departs from conventional explanations of this phenomenon as an exclusively economic or even financial process affecting all cities similarly. The approach adopted here lies at the intersection of sociology, economics, history, and geography. In testing its main hypothesis, it combines insights and concepts from globalcity research, historical macrosociology, world-systems research, economic geography, and relational thinking. The literature in each of these fields is rich and well developed.2 Relational analysis, which in the social sciences began with social-network analysis and world-systems analysis in the 1970s, is increasingly being used in the study of globalization and transnational processes, economic geography, actor-network theory, collective action, network society, systems thinking in organizations, migrations, urban sociology, commodity chains, and world-city network. The present work is, thus, an attempt to incorporate historical macrosociology, worldsystems research, economic geography, and relational thinking into contemporary research on global cities, thereby developing a synthesis able to account for cities’ globalizing processes within historical and political contexts at the regional and national levels. It also 2. For literature on economic geography, see Sheppard (2002), Coe and Yeung (2001), Fujita, Krugman, and Venables (1999), Granovetter (1985), Jessop (2002), Ottaviano and Thisse (2001), Scott (2000), Thrift and Olds (1996), and Yeung (2002, 2003, 2005). For literature on world-systems and historical macrosociology, see Abu-Lughod (1989, 2000), Agnew, Mercer, and Sopher (1984), Agnew (2002), Alderson (1997), Arrighi and Goldfrank (2000), Arrighi (1999, 2000), Arrighi and Silver (1999), Bornschier (1995), Braudel (1981), Chase-Dunn, Kawano, and Brewer (2000), Chase-Dunn (1984, 1999), Chen, Orum, and Chen (2003), Davis (2005), de Vries (1982, 1984), Frank (1978, 2002), Hall (1998), Hohenberg and Lees (1995), Pirenne (1969), Su (2001), Tilly and Blockmans (1994), Tilly (1990), Tirado, Paluzie, and Pons (2002), and Wallerstein (1974). For a network perspective on cities and globalization, see Taylor (2004). For an outstanding analysis of relational thinking’s meaning, see Watts (1999, 2003).


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attempts to explore the Bilbao’s organizational architecture in the world economy. This approach allows us not only to capture a dynamic in formation — because Bilbao is not yet a well-established globalizing city — but also to explain the current cycle of Bilbao’s globalizing process through comparison with previous historical cycles. In short, it discusses the specific trajectories — pathways — through which Bilbao has become and is becoming part of global circuits. These pathways consist of (i) economic and political strategies developed at the regional level to establish flows and transnational connections with the world economy (such as State-led export-oriented growth strategies); (ii) local developments to cope with changes triggered at the global level (such as industrial restructuring); and (iii) structural and territorial adjustments to position the city in the context of world cities (such as megaproject development). The analysis questions whether such global links represent the only basis to explain Bilbao’s urban development throughout history — a growing literature examines the “limits” of globalization and tries to “locate” globalization, inter alia, Amin (2002), Beauregard and Pierre (2000), Cox (1997), Hirst and Thompson (1996), Jessop (2000), Knox and Taylor (1995), Machimura (1998), Smith (2001), Scott (1997), and Wade (1996). Specifically, this book argues that, in order to fully grasp the precise reach of globalization, global flows must be explained and understood in the context of broader developments occurring at the local level, which consist — following a network metaphor, of nodes and flows — not only of “relations”, but also of “structures”, and differentiated “territories” (Storper, 1997a, 1977b; Dicken, Olds, & Yeung, 2001). The goal, therefore, is to explain cities through globalization rather than — as with most current global-city research — globalization through cities. The chapters in this book share a common theme — the interrelationships between the city of Bilbao and globalization processes in the context of the city’s development. In other words, the book focuses on (i) the ways in which forces in the world-system have had an impact on the city, (ii) the ways in which these global forces have been mediated by regional and national factors, and (iii) the ways in which the city has tried to position herself to globalize. Because globalization processes interact with other local processes at local, regional, and national levels to produce specific outcomes, globalization constitutes only a partial explanation of the city’s developments. An argument is therefore developed about the scaling among various “levels” of analysis, which are seen as necessary in order to explain Bilbao and its globalization. Globalization is explained through a city’s specific trajectory rather than vice versa. What emerges is a picture in which globalization appears to be (i) “leveled” at the local, regional, and national domains; (ii) “cyclical”, with interim periods of “de-globalization”; and (iii) a political as much as an economic process. In Chapter 1, the theoretical foundations are developed and explored in detail: a relational, place-based understanding of globalization is proposed and developed. This is followed by a discussion about complexity, networks, and globalization. The roles of State developmentalism and of pathways/path-dependence in globalization analysis are then


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explored. The theoretical foundations and, in turn, the development of the book are organized around four key sets of questions: • How has Bilbao articulated its relations with the world economy over time? • What has been the State’s historical role in shaping globalization in Bilbao? Has globalization triggered a relative diminution of the State’s regulatory powers? • In the light of the recent restructuring and current globalizing period, what is the likely scenario for Bilbao’s urban development in the coming decades — “post-industrial city” or “emerging city-region”? • What is globalization? How can we conceptualize globalization in a manner that is sensitive to history and to both economic and non-economic forces? How can we conceptualize globalization as a partial explanation of a city’s urban development? Chapter 2 traces Bilbao’s development from the fourteenth to the mid-nineteenth centuries, from the city’s foundation as a node in trade flows between Castile and the world, up to the local transformation of commercial capitalism into industrial capitalism. The narrative highlights two main variables that explain urban development and globalization during those centuries. First, the city’s global networks of foreign trade were based mainly on wool, iron, and codfish, which made Bilbao a frontier town of international character. Second, the evolution of the political and economic relationships between the city-region and the Spanish State was fraught with tension, contention, and attempts at assimilation, as revealed in the various trade disputes throughout the centuries. The chapter not only shows that globalization had already happened in Bilbao in the late Middle Ages and the early modern period (and therefore is not a new historical process), but also that globalization was often shaped within the confines of the State and, in particular, in the local–national relationships that had evolved throughout history. The chapter demonstrates, in addition, how globalization, as a quintessential network process, consists of relations, structures, and differentiated territories through which a city positions herself to globalize. Chapter 3 focuses on the development of Bilbao’s political economy during the Fordist period — that is, between the rise of industrial capitalism in the mid-to-late nineteenth century and the historic crisis of the 1970s. On the one hand, industrialization gave rise to Bilbao’s modern business elite, which grew out of the mining business and diversified investments in other sectors and other regions in Spain, exemplifying the Spanishness of Basque capitalism. On the other, foreign economic relations continued at a good pace in Bilbao. Exports of local iron, in particular, reached unprecedented levels as the city became the main supplier for Great Britain (70 percent of exports) during the later’s imperial apogee prior to the First World War. Structural adjustments in the Basque industry and the consolidation of liberalization and centralization policies undertaken by the various Spanish governments during the nineteenth century, however, meant Bilbao’s industry was much more geared to producing and selling in a protected Spanish market than competing in foreign arenas. Following the abolition of the Basque privilege to import goods dutyfree, the city became fully integrated into the Spanish economy. In historical terms, when compared with other times, Fordist Bilbao was an era of de-globalization for the city, especially the period 1936–1973. Through its port, Bilbao continued to serve as a node in trade


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between Spain and the world, but uneven development within Spain helped Basque industrialists to execute a strategy of industrial expansion, which strengthened the structural ties between the city and the nation-state. The chapter demonstrates how globalization — as a complex multiscalar process — is leveled at the local, regional, and national domains, and how, when observed in historical perspective, globalization turns out to be a cyclical process — with interim periods of de-globalization. Chapter 4 examines the structural changes that occurred in Bilbao during the period of crisis of the Fordist model and the restructuring and tertiarization of the Basque economy during the 1970s and 1980s. It shows that restructuring was not a direct, unmediated by-product of globalization, although it had a close relationship with it. Specifically, a variety of local, domestic factors influenced outcomes during the attempt to turn Bilbao into a “post-industrial” economy. The political atmosphere in the Basque Country and the overall industrial policy implemented by the then socialist government in Madrid greatly influenced the fate of Bilbao’s steel manufacturing and shipbuilding industries. Because local plants were not adapted to the environment of lower industrial demand and had to be downsized or closed, the global restructuring of these sectors also contributed to Bilbao’s decay. The specific ways in which restructuring took place, however, were matters of political choice at the national and regional levels. Ironically, Bilbao’s strengths — Fordist industrial power, entrepreneurship, and linkages to the world-system — made the city particularly vulnerable to world trends. The chapter demonstrates how globalization as a causal mechanism and economic restructuring as a local response are not linked in a necessary and direct way, but rather mediated by regional and national dynamics, with the politics of developmentalism playing a very active and fundamental role in the shaping of globalization in cities and regions. Chapter 5 shows the contrast between the city’s globalization via revitalization plans and the “selling the city” strategy reflected in the planners’ global rhetoric, on the one hand, and the organizational and political obstacles present in local–urban planning development and implementation on the other. Focusing on Bilbao’s urban megaproject, Abandoibarra, it is argued that the potential of the project to become Bilbao’s territorial link to the global economy has not yet been realized. Abandoibarra remains a global project in terms of ambition but, in practice, is one of the only local reach and impact, with foreign investment playing little significant role in the redevelopment of this downtown waterfront area into a new Central Business District. The Role of Bilbao Ría 2000 (an urban development corporation) in the development of Abandoibarra is discussed, and the many project modifications implemented over time are analyzed. The chapter demonstrates how, because it has influenced contemporary urban planning’s organizational and managerial tools, globalization has acquired a relatively new dimension in recent times, with megaprojects representing the physical manifestation of urban elites’ entrepreneurialism and global ambitions. Here again, an argument about “levels” of analysis — scaling — is developed: the global ambitions of the local elites often have to face internal strife and obstacles that might ultimately slow down or immobilize global megaprojects. Chapter 6 explains the Guggenheim project as the latest of Bilbao’s globalization efforts. The motives of Basque political leaders in bringing the museum to Bilbao, after a negotiation process in which coincidences played an important role, were not shaped primarily by "cultural" concerns, but, instead, are better explained by two factors, one global


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and the other domestic: (i) recognition of the need for regional image change and urban regeneration in Bilbao under conditions of contemporary globalization — which in practice meant participating in a global venture for spectacular architecture, and (ii) the long historical desire on the part of the Basque Nationalist Party leaders for political emancipation from Spain, reflected in this case in the realm of cultural politics. In this way, the Guggenheim project was not an isolated case of urban boosterism. Instead, it is the latest and most successful example of how Basque leaders have managed to bypass Madrid and conduct their own independent international affairs. The project’s political overtones are clear, but its economic dimension is also important. Although the museum has been hailed by the international press as the icon that has turned Bilbao’s economy around, this chapter questions the strategy's long-term feasibility and shows that an urban economy, the size of Bilbao, cannot rely simply on a museum for economic development. Nonetheless, as a State project fully funded with public money, the Bilbao Guggenheim will remain an urban icon independent of financial pressures. The chapter demonstrates how, because it has the power of rescaling the significance of specific buildings and the cities where they are built, iconic, spectacular architecture — driven, in this case, by the ambitions of entrepreneurial politicians and cultural managers rather than transnational corporations — plays a fundamental role in the worldwide deployment of contemporary globalization and the creation of large-scale social spaces representing capitalism’s transnational strategies. Chapter 7 explores Bilbao’s international role and the city-region’s new economic globalization, based on the power of its regional foreign trade, which has found a main partner in the European Union, with export figures tripling between 1994 and 2004. Part of this foreign trade, which, inter alia, reveals the Basque Country’s strength as a high-tech manufacturing region, is channeled through the port of Bilbao — a port managed by the Spanish government's agencies, which continues to serve its ancient function of linking large segments of the Spanish economy with the world. Bilbao’s international role is also based on the flows of transnational banking deployed by the city's global bank, Banco Bilbao Bizkaia Argentaria (BBVA), mainly in Latin America. In this respect, it shows that BBVA's globalization is an early twentieth century phenomenon as much as a recent one and, thereby, questions claim suggesting the “newness” of financial globalization in the world economy. As evidence of historical continuity, and a reminder that globalization is but a partial factor in a city’s development, Bilbao’s international role is explained through both the region’s dependency on global trade and financial networks and the intricate relationships of the region with the nation-state. The chapter reviews three important dimensions of contemporary Basque economic power (trade globalization, global connectivity via Bilbao’s port, and financial globalization) and demonstrates that present-day Basque globalization is based on traditional regional strengths which have fostered local links with global ciruits in past historical periods, thus questioning the radical newness of globalization’s current phase. The final chapter returns to the key questions in the light of the evidence presented throughout the book. It discusses (i) the articulation of Bilbao and the world economy over time; (ii) the role of State developmentalism in shaping globalization in Bilbao; (iii) the likely scenario for Bilbao’s urban development in the coming decades; and (iv) a proposed conceptualization of globalization drawing from the book’s empirical analysis. Although each chapter has its own logic, only a consideration of the evidence presented in each of them will render a full account of Bilbao and its globalization.

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Chapter 1

Cities, Globalization, Bilbao

Toward a Relational, Place-Based Understanding of Globalization Globalization is a contested concept in the social sciences (Guillén, 2001; Brenner & Kiel, 2005). Yet it is an idea that can be broadly defined as the formation of networks across time and space on a transnational scale. More specifically, it is in effect when there is a process of extension of local–regional economic change by virtue of transnational expansion and international linkages. It can be usefully captured by the phrase “action at a distance”, provided that “distance” encompasses actors or processes in different national territories. Globalization is, therefore, time-space distantiation (Giddens, 1991, pp. 21–22, 1981, pp. 91–97) taken to the world level. The configuration of the world-system in the sixteenth century (Wallerstein, 1974) and the early form of a transnational system of commerce in the thirteenth and fourteenth centuries (Abu-Lughod, 1989) both constitute historical instances of globalizing processes. Globalization is also related to local structural transformations that take place in locales when processes of economic action at a distance occur. Structural moves on the part of regions and nation-states to cope with the array of forces that constitute the extension of markets worldwide can be considered a significant part of globalization processes. Regional transformations in economic policy and in the ways policy is delivered also account for explanations of the globalization phenomenon. Rather than understanding globalization as a mere “space of flows” (Castells, 1989, pp. 126—172, 1996, pp. 376–429), this book presents an analysis in which processes of economic action at a distance are placed in structural and territorial context. Thus, historical trajectories of development, negotiations between local–regional and national domains of social action in order to extract the benefits of economic growth, local transformations in urban policy, and, more generally, a deep and contextual understanding of the settings of social action, all help us to better understand how and why the space of flows is constituted and reconstituted. As Dicken, Olds, and Yeung (2001, p. 91) put it: We must avoid privileging specific organizational loci of analysis. Studies purporting to develop an undersanding of the global economy have generally analyzed just one, or perhaps two, types of agents, such as firms or industrial sectors. Other agents (such as states, labor organizations, and global regulatory bodies) and non-human intermediaries (for example port facilities, telecommunication infrastructure, policy documents and manuals) have been neglected or even dismissed as irrelevant and anachronistic.


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As early as 1991, Janet Abu-Lughod warned against explanations of globalization that do little to help us understand the process’s specific dynamics, leading us to fall into what she termed “the global babble” (Abu-Lughod, 1991b). Globalization’s assumed pervasiveness, and the concept’s fashionable character among social scientists for the past 15 years, have triggered a vast amount of analyses (Guillén, 2001) — most of which could easily lead us into an explanatory trap in which we are unable to distinguish the process’s causes and effects, because the analyses are not based on sufficient empirical evidence nor on a sufficiently careful treatment of specificities and variation across time and space. So, have we gone beyond “global babble”? The answer is probably not sufficiently. Globalization’s specific meaning and actual reach are still contested topics. Michael Storper (from Dicken, Olds, & Yeung, 2001, pp. 89–112) points out that “… the theoretical meaning and practical impact of economic globalization remain obscure”. Some research has been developed to provide empirically precise accounts of cities and globalization around the idea of “the world-city network” (see, inter alia, Beaverstock, 2005; Taylor, 2004). Because cities provide an adequate empirical reference for the study of globalizing processes worldwide, balancing the quest for general theory with the necessity of case-based peculiarities as they develop over time, urbanists focusing on the development of cities now have a more privileged standpoint from which to sensibly understand the specific meaning of globalization (or, more precisely, “globalizations”) as it develops at the beginning of the twenty-first century. Empirical accuracy, however, ought to be a product of theoretical and conceptual precision, which is a complex task considering the vast panoply of names and concepts suggested to characterize recent urban change (Taylor & Lang, 2004). Nonetheless, aimed at furthering our understanding of globalization from an urban perspective, some theoretical propositions can be advanced: • Globalization is not simply an “external” force that is crushing (or saving) self-contained localities and territories. Rather, globalization is made up of the relations of these localities at various spatial scales. In this sense, localities have always been constructed in relation to the global scale and have always been global (at least since the formation of the world-system in the thirteenth century). • Globalization is a contested and political phenomenon, it is not natural and inevitable — as historical macrosociology shows, there can be an end to the hypermobility of capital flows, trade, and international migration. • Globalization is not universal (not global). The geometry of networks that makes up globalization is unevenly deployed around the world — precisely because such geometry of networks depends on preexisting material conditions that are place specific (which brings the role of both place and history to the fore). • As a consequence, globalization consists of an interaction of global forces and local conditions that produce specific outcomes. Such continuous interaction leads us to characterize globalization not as a cause or an outcome, but as a process in formation with open-ended results. In some cases, local conditions will shape globalization (and thus globalization becomes an outcome); in other cases, globalization affects specific localities (and then it is a cause). In all the cases, however, it is a contingent process constantly in flux and open to contestation.


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• As a result and because not all the interactions between various spatial scales produce globalizing outcomes, globalization is only a partial explanation of a place’s development. The networks linking a place to the global economy are not sufficient to explain the place’s fortunes. There is an asymmetry between places and globalization, because globalization does not always explain local socio-spatial formations. But, equally, globalization itself should always be explained in relation to those local socio-spatial formations. This makes globalization “dependent” on places at an explanatory level, but does not make places dependent on globalization. To a certain extent, it makes globalization an outcome rather than a cause. • Space, therefore, matters in globalization studies. It matters in two senses — “space” understood as positionality in the global economy (Sheppard, 2002) and “space” understood as place and contingencies that interact with globalization at the local level (Drainville, 2004). • Agency matters in globalization because the agency–structure duality is a part of an analytical whole, understood in terms of networks. Local actors participate in the process of constructing, negotiating, reacting to, and suffering globalization, which is no longer an abstract construct out there. Even within a specific place, globalization shows a varying, complex, and even chaotic character over time. Thus, our analysis of Bilbao, for example, shows globalization appearing in various ways at different times. Because the meaning of global is open and contested, this book discusses a variety of processes that can be called “global”. Rather than a unifying, universal process over time and space, the present analysis will show various “globalizations”. Sometimes globalization shows itself as international networks of trade; sometimes as export-led development and industrialization; sometimes as a global industrial restructuring process; and sometimes as a symbolic catalyst for political arguments by planners and officials about “selling the city”. In all the cases, however, globalization processes interact with local (pre) conditions to produce specific outcomes. The approach taken here, therefore, does not follow what could be called “the strong globalization thesis” — namely, the unmediated and unilinear impact of global forces over particular territories worldwide. Instead, rather than assuming unilinear causality from the global to the local, it seeks to establish a multicentered link between abstract globalization theories and specific processes involving local actors in places. This link is established through “levels” of analysis.

Levels of Analysis: Scaling the Global By deconstructing globalization — and by, thereby, preventing it from becoming another epoch label (i.e. a catch-all concept with little explanatory power) — such levels of analysis assuage what could be called “the chaos and complexity” of globalization. For this purpose, it is essential to question the global city hypothesis’ “universality” and to submit the concept to an informed, place-based critique. Developing their critique from a Third World perspective, Davis and Tajbakhsh (2005), for example, treat the universality of the global city as a feature of advanced capitalist countries. Taking Bilbao as a city in Europe, the


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universality can be questioned within the scope of the First World. Rather than just a universal application of the hypothesis based on a few cases taken as exemplars from within such a perspective, a variety of urban outcomes in time and space, from the United States to Europe to Asia, can be seen. Globalists such as Castells, Sassen, Gereffi, Dicken, and Giddens do not follow the “limits to globalization” argument advanced by many geographers (e.g. Cox, Storper, Young), and by some political economists and other social scientists (e.g. Hirst and Thompson, Abu-Lughod, Davis, Beauregard, Drainville). Instead, they provide general theories of universal application but — and this is problematic — without actually contextualizing their hypotheses. Hence, what is needed is a specific and empirically grounded analysis of globalization; an analysis of globalization at multiple spatial scales (provided that we understand scales only as heuristic tools); and an analysis of a variety of structures and relational processes that actually shape the very concept of globalization as it develops in space-time. A serious problematization of levels of analysis can also contribute to the deconstruction of the “local–global” duality. Analysts have frequently portrayed globalization as consisting of two clearly delineated conceptual categories — the “local” and the “global” (see Borja & Castells, 1997). According to this view, the global is active and powerful; the local is passive and weak. By contrast, the understanding of globalization proposed here does not confine cities to be merely “reactive” to globalization processes, nor does it view globalization as the only explanatory key of cities’ development. As understood by the “hegemonic view” on global cities (represented, inter alia, by Sassen, Hall, Castells, Friedmann, and Wolff), globalization is produced and managed in a few global cities, with all other places somehow reacting to the process. Hence, from this perspective, there is a city “response” to globalization — whether resistance, acquiescence, or adaptation. As Beauregard (1995, p. 237) put it, “… even though global forces impinge upon cities, they do so in different ways, sometimes being resisted and transformed, sometimes overwhelming local conditions and actors, and sometimes being warmly embraced”. Bilbao is not an example of a city passively reacting to globalization processes. It is, as shall be seen, a case of a city actively engaging in globalization strategies and getting transformed in the process. Thus, globalization is “made” in Bilbao just as it is made in New York or London, although with a varying substance and a different degree of impact and reach in each specific locale. Deconstructing the local–global pair leads us toward a characterization of globalization as merely a “partial” explanation of a city’s development. Indeed, by positing levels of analysis, explanatory importance must be given to units of analysis that actively mediate the links between cities and globalization forces, such as the region and the nation-state. Not all the world economy is organized in global networks (Nikitin, 2005) — globalization selectively bypasses places; locales selectively engage in globalizing strategies. Such selectivity may involve the alternation of cycles of globalization with cycles of deglobalization. It may also mean that not all institutional arrangements in a city participate in globalizing strategies. As shall be seen, Bilbao is a case in point because the city’s development cannot be explained solely by globalization forces. Because forces located in the intermediate levels also explain the city’s development over time, the city is an instance of “partial” engagement in globalization processes. The problem with the local–global duality is not only that it confines cities to a politically irrelevant role in the face of globalization, but also that it reifies spatial scales as


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self-contained units. Globalization should, instead, be understood beyond any reified conceptualization of spatial scales. What are here called “levels of analysis” are therefore useful in order to link and transcend reified geographical scales, which work, at best, as “attractors” — from which the emergence of patterning in any given complex system stems (Urry, 2003, p. 26). In fact, the analysis provided here consists of both an articulation of geographical scales and an understanding of globalization as a process transcending such geographical scales. Most analyses dealing with the current process of global transformation present it as devoid of geographical scales — that is, as a process that occurs only at the “global level” — and only implicitly deal with the subsequent transformation of the State system and other relevant units of analysis. The analytical approach adopted here takes as its point of departure a consideration of the links between the cityregion and the nation-state over time, which some analysts have termed the “local–national nexus” (Davis, 1994). A problematization of levels of analysis (the nodes in a global network) renders a more realistic portrait of changing cities. Urbanists dealing with the question of globalization are usually careful to specify basic geographical scales, such as the city or the city-region (Scott et al., 2002). Such analyses highlight how geographical scales change in the midst of global processes. Yet the literature produced by urbanists on globalization rarely devotes itself to a careful consideration of all the scales that change as globalization expands and contracts. The influence of Sassen’s paradigmatic study of New York, London, and Tokyo (Sassen, 1991) is very clear on this point. In her analysis, propelled by a structuralist and presentist logic, cities are linked to the global economy without intermediate social formations that may influence outcomes at the local level. Sassen’s argument is that global cities are linked “directly” to the global economy and, as a consequence, resemble each other more than they belong to their own nationalized territories. Scott et al. (2002) extend this argument by simply varying the unit of analysis from the global city to the global cityregion. The core of their analysis lies upon discovering the linkages between the local and the global, but omits possible covariations of units of analysis larger than the city or the city-region yet smaller than the global level. Such analytical perspective is perilous because it risks neglecting a contextual understanding of the specific historical and political trajectories that explain how a particular locale is linked to the global economy. Such an analysis may lead to a neglect of place as a relevant context for social action, as seen in Castells’ assertion that global cities are processes not places (Castells, 1996). As an example, consider the role of the State in globalization processes. All over the world we witness the repositioning and “reterritorialization” (Brenner, 1999a) of States and the transformation of State systems as a reaction to global processes, both within the confines of what has traditionally been characterized as “the national” and in the context of States developing geopolitical agendas. Indeed, regional and national States play a significant role in the reconfiguration of local processes, not only because they “react” to processes occurring at the global level, but also because they take the initiative and mobilize resources to actively link cities and nations with the global economy (Sassen, 1999a, 1999b, 2000a, 2000b). The purpose of these moves is primarily to gain economic advantage vis-à-vis other regions and States that exert powerful competition. Equally salient, however, is the political dimension of such strategies, constituting a not-so-surprising link between globalization and geopolitics. Globalization’s


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dual nature, as both an economic and a political process, and the interrelationships of these two dimensions, cannot be ignored. Multiple spatial scales exist to explain the world economy (Park, 2005). Insofar as we accept that actors make the scale, the partition local–regional–national–international is simply a heuristic tool with little theoretical value. But if we focus on actors making scale, we are close to positing networks to understand the global economy — as is well understood in actor-network theory (Latour, 1993; Law, 1986; Hassard, Law, & Lee, 1999; Thrift, 1996). Local–regional–national–international are at best “nodes” in networks — they are being reinscribed constantly and are in flux, constantly expanding and contracting, or, we might also say, constantly globalizing and deglobalizing. In this process, there is both a mixing of layers and a fragmentation of actors’ interests. We cannot deny the effect of emergent properties, however, nor assert that all that exists is local action by local actors. The consequence is an acceptance that globalization is shaped locally. In this respect, we should remember the agency–structure duality — actions create structure that influences action (Giddens, 1984, pp. 185–193).

Complexity, Networks, and Globalization The present analysis attempts to be an instance of relational thinking.1 It is relational in the sense that it conceives a place (Bilbao) as a network in formation, and understands globalization as a network in which places are embedded (Granovetter, 1985).2 Bilbao is not a spatially self-contained unit of analysis and, instead, it is always, in the words of Brian Berry (1964), a node in networks, “a city in a system of cities” — although such networks do not always span the globe nor are global in nature. In fact, we must ask: what can networks explain in the case of Bilbao? What portion of the overall explanation can be attributed to the networks that shape globalization? Networks, as understood here, contain relations, structures, and territories. All networks have nodes and flows, and the linkages among nodes transcend spatial scales. Structures come into being in networks (through time-space distantiation and because actors are always actors-in-networks). Territories (including cities) are embedded in networks as well, since they are not spatially contained (although decades of traditional thinking in economic geography make this sound counter-intuitive). The constitution of Bilbao as a commercial node in Northern Spain, for example, is a process produced and reproduced by the city’s embeddedness in transnational networks of trade (wool, codfish, and iron). Such transnational networks of

1. For an understanding of relational thinking see, inter alia, Tilly, Goodwin, and Emirbayer (1995), Emirbayer (1997), Tilly (2000), Dicken et al. (2001), Sheppard (2002), Dinai and McAdam (2003), Coe, Hess, Young, Dicken, and Henderson (2004), Yeung (2005). 2. For an understanding of networks as a suitable tool to analyze global processes see, inter alia, Alba (1982), Dicken and Mahmberg (2001), Emirbayer and Goodwin (1994), Gulati, Nohria, and Zaheer (2000), Henderson, Dicken, Hess, Coe, and Yeung (2002), Murdoch (1995), Nohria and Ghoshal (1997), Nohria (1992), Prigogyne (2000), Sornn-Friese (1998), Storper (1997), Taylor (2004), Uzzi (1999), Whatmore and Thorne (1997), and Whitley (1996).


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trade had great influence in the way significant economic actors in the city-region conducted their political relations with the Spanish State, seeking always to preserve commercial privileges. Moreover, the nineteenth-century linkages of the city with the nation-state (what can be called sub-national networks, or the local–national nexus), were established in part as a result of both Bilbao’s relative inability to compete in foreign arenas and as the possibility of controlling a protected national market emerged. There is, therefore, a clear connection between sub-national and transnational networks of trade. In these respects, Bilbao’s developments obey a transnational network logic and much of what occurs in the city (although not all) can be explained in terms of by globalization (and deglobalization) processes. From this perspective, globalization is best understood through the concept of complexity and non-linear dynamics, which distinguishes among regions, networks, and fluids (Urry, 2003, p. 40). Insofar as the analysis here is relational — replacing a metaphor of scales with one of the connections — it is also concerned with the systemic non-linear relationships of global complexity that transcend most conventional divides in social sciences. Such a complex transnational network logic of regions, networks, and fluids is “located” in all spatial scales under consideration (local, regional, national, international), both in the structural transformations that take place as globalizing processes develop, and in the actors’ ability to influence the course of such structural transformations. In other words, both agency and structure play roles in the shaping of globalization, through two fundamental and parallel processes — time-space compression (Harvey, 1990) and time-space distantiation (Giddens, 1981, 1991). These processes help explain the architecture and the functioning of global networks and their interaction with territorial units of analysis. To be sure, scales mediate the process. We could posit that agency is more visible at the local level, whereas structure operates more effectively at the global level with interactional effects in the middle levels. There are some caveats, however. The reification of levels of analysis, for example, goes against a relational approach that sees networks as operating at various spatial scales. A solution to this is to consider “levels of analysis” only as heuristic constructs helping to explain the phenomenon of globalization but having no real existence. The idea of “networks” and a relational approach fits well with the processes of time-space compression and time-space distantiation outlined by Harvey and Giddens. This study deals with only one process of constitution of social relations in space-time — Harvey starts his analysis of space-time with a consideration of the structures of advanced capitalism as they develop over time and discusses “compression”; by contrast, Giddens starts with the constitution of society from its most basic units and proposes “distantiation”. In fact, as Smith (2001, p. 168) contends “… the local, national, and transnational connections that go into the making of transnational urbanism are mutually constitutive”. Through time-space compression, global networks can impact localities; through timespace distantiation, localities construct global networks. As this process is historically and culturally rooted and mediated, we can no longer essentialize “the global” or “the local”, because these spatial scales work (it is useful to emphasize) only as heuristic tools with no reified empirical reference. Hence, we have cities-embedded-in-networks that work as nodes in the production and reproduction of such networks and the matter, energy, capital, and information they carry with them. If “the global” is a network, the city is also “a network” of relationships, structures (including powerful agents), and embedded territories.


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Rather than equating agency with the isolated individual, what we are actually considering is the practices of agents-in-networks: The historically specific patterns of politics, culture, and economic life found in particular locales significantly mediate the transnational flows of people, resources, ideas, and information. Any given city receiving particular transnational economic, political, or cultural flows provides a specific configuration of potential opportunities and constraints into which immigrants, investors, or political and cultural brokers enter. Thus, the play of agency operates differently from place to place and even differently within the same place at different times. Because of power differentials among the various networks interacting in particular places at particular times, the local social context of these interactions is in constant flux. (Smith, 2001, pp. 168–169) For human intentionality to take effect, however, “… it must be mediated through heterogeneous actor-networks” (Dicken et al., 2001, p. 93), since networks reconstitute agency into structure. Agency and structure can thus be seen as a whole, as an integrated unit of network processes in space-time shaped by nodes and flows. Indeed, going beyond the “topological presupposition” reminds us of the role of territorial institutions such as the firm, the region or the nation-state. Whereas networks are embedded within territories, territories are embedded into networks. This notion of network dissolves the micro–macro distinction that has plagued social theory from inception. The metaphor of scales going from the individual, to the nation, through family, groups, institutions, etc., is replaced by a metaphor of connections. Instead of having to choose between the local and the global view, “… the notion of network allows us to think of a global entity that remains continuously local” (Dicken et al., 2001, p. 103). Instead of opposing agency to structure, we can simply follow how a given element becomes strategic through the number of connections it commands and how it loses its importance as it loses its connections. Global reach (the making of globalization in specific localities) “… is a labored, uncertain and contested process of acting at a distance” (Dicken et al., 2001, p. 104). From this perspective, the present analysis is sensitive to the descriptive level of actors-in-networks acting-at-a-distance, while attributing causal power to institutions and structures. It is, therefore, a middle way between networks and levels, emphasizing flows, but also nodes. In fact, in order to explain the global economy, “… any network methodology should consider governance structures, institutional frameworks and territorial embeddedness” (Dicken et al., 2001, p. 107). Rather than an external force preexisting in a vacuum, globalization is, therefore, a locally mediated process. Globalization “makes” cities, regions, and States (à la Roger Keil (1998b) it transforms and reconfigures them), and, in turn, cities, regions, and States make globalization or “denationalization” (Sassen, 2003). So again, there is an interplay between global forces and national and local conditions. It is the interplay that renders specific outcomes. Globalization is a chain of action–reaction processes. It is often hard to pinpoint where the initial causes are — unless, of course, we take a specific place and define “the global” as “the foreign” (that is, as global flows originating elsewhere). In the original definition by Friedmann and Sassen, global cities are defined by their functions in the international division


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of labor, characterized by spatial dispersal and global integration. As global cities were basing and organizational points for global capital, global control capability is an essential defining feature of these global cities. Due to such control functions, global cities converge to a similar urban model. These features, it is contended here, are visible in various degrees in most cities closely linked to the global economy. Yet the key question is to explore the multiple processes by which a city links itself to global circuits. Such multiple processes only partially obey a global logic and, in addition, are constituted and embedded in local histories, sub-national institutions, and reconfigured territories. Viewed from this perspective, “… what is generally labeled as “economic globalization” rarely, if ever, involves full structural integration and strategic coordination across the globe” (Jessop, 2000).

State Developmentalism and Globalization Following Smith (2001), “post-national discourses” must also be questioned. States continue to have a capacity to act independently in the face of globalization processes. Local, domestic politics matters to a degree, reinforcing the levels of analysis argument. In fact, the Spanish case shows that States are not really “losing control” in the face of globalization processes. The evolving relationships between the Basque region and the Spanish State show the viability/reality of one of the most economically and politically independent regions in Europe (not to say the world) within the context of a nation-state that, in recent years, has not reduced its international role (rather the opposite). Spain’s expanded role in Latin America could not have happened without a clearly defined State policy of protecting national industrial champions during the 1980s, which inhibited mergers and acquisitions with foreign companies and made possible Spain’s current world economic role. Contrary to Kenichi Ohmae’s (1995) argument , it is not always the case that regions rise because States shrink. The regional–national relationship is complicated and nuanced. It is not a zero sum game, but a more complex articulation of forces at both the regional and the national levels — one that it is not only economic but also political. In sum, States may gain global control even as regions gain it too (it depends on historical, political relationships between the region and the State), as has happened in a country such as Spain with great regional decentralization. Of course, in the Spanish case, the relationship between such strong State structures, regional and national, is not easy. But, because they have historical roots, such difficulties cannot be explained by exclusively focusing on the present day. Mention must also be made of developmental States and the “growth machine”. Manuel Castells has proposed a useful definition of the concept: A State is developmental when it establishes as its principle of legitimacy, its ability to promote and sustain development, understanding by development the combination of steady high rates of economic growth and structural change in the productive system, both domestically and in its relationship to the international economy. (Castells, 1998, pp. 270–271) A recent illustration of developmental States in the global economy focusing on the Irish case has been provided by O’Riain (2004). The concept of the “growth machine” was


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introduced in the 1980s in the United States in order to explain contemporary transformations of neoliberalism (Logan & Molotch, 1987). As shall be seen, the Basque Country is a case of an “old” developmental State, manifested since the fifteenth century in the local growth machine that sought the promotion of economic development and the retention of local commercial privileges due to the scarcity of food and agricultural resources. This commitment to economic development was reflected in the local laws of fueros, which had an important economic component. The priority of regional State action has always been for economic development, defined for policy purposes in terms of growth, productivity, and competitiveness. Business and politics are almost completely intertwined and political entrepreneurship is common in the Basque Country — a clear example being the actions of elite political actors utilizing State funds to bring the Guggenheim to Bilbao. This growth and competitiveness agenda is derived from comparisons with external reference economies that provide State actors with models for emulation. In the Basque case, such external reference has often been Europe rather than Spain. In fact, Spain has often been the anti-reference — the model the Basques (or at least Basque nationalists) had to separate from. An additional reason explains the strength of regional State action in the Basque case. Because latecomers to the industrialization process, such as Bilbao, invariably face a different set of problems and possibilities than their technically more advanced predecessors, they must forge their own development institutions and ideologies. But equally, lessdeveloped regions and latecomers have hidden reserves of labor, savings, and entrepreneurship. Nations and regions wishing to overcome the penalties of late development also seem to require a strong State. The issue is less whether the State should or should not intervene, and more achieving something through intervention. As shall be seen, Basque developmentalism addressed industrialization at the city-region level in close relationship with the needs of the nation-state. The economy was viewed strategically with the aim of building an industrial structure that would maximize Basque gains from international trade and export-led development. Fordist Bilbao was an era in which State regulations and non-market governance mechanisms were designed to restrain competition so as to concentrate resources in strategic industries and allow the region’s industrial growth and its expansion into other areas of Spain. Bilbao’s relationship to the world economy is not driven exclusively by market efficiency, but also by a strategic concern to preserve regional autonomy through international trade networks and global economic power. The city’s “global reach” resides in the powerful bureaucracies and political entrepreneurship of regional political policy organizations and ministries, in close connection with regional business elites and their companies. Although attracting foreign investment is a priority for the Basque government, facilitating the foreign trade and investments of Basque corporations is also a major regional economic policy priority. In addition, global political visibility may be yet another important factor shaping the region’s involvement in the world economy. In sum, it is clear that the economic base, spatial organization, and social structure of world cities are strongly influenced by the national and regional development model and regional context in which each city is embedded. From the perspective of global city-regions, regionalization and the debate on the new regionalism (see Aldecoa & Keating, 1999; Amin & Thrift, 1992, 1994; Barnes & Ledebour,


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1998; Benz & Furst, 2002; Bergman & Todtling, 1991; Charlie, 2000; Evans & Harding, 1997; Gren, 1999; Harvie, 1994; Keating, 1998, 2001; LeGales & Lequesne, 1998; MacLeod, 2001; Markusen, 1999; Marston, Knox, & Liverman, 2002; Martin, 2001; Martin, Sunley, & Turner, 2002; Simmonds & Hack, 2000; Storper, 1997a, 1997b), globalization is not causing the demise of the nation-state, while regionalization does not rise at the nation-state’s expense. The current work departs from such a view, because it highlights two strong State institutions (regional and national) in contentious relationships over time. The rise of the region may obey local, domestic circumstances — in the case of Spain, devolution and federalization — which have little to do with globalization. Again, we have another instance of Bilbao and the Basque region partially engaging in globalization processes, and, as such, another reason to accept that globalization is only a partial explanation of a city’s and a region’s development. The rise of the city-region is not (at least not always) a reterritorialization of State power, especially in cases of multinational, federal, and de facto federal States such as Spain. Talk of the declining significance of nation-states due to globalization is misleading. Rather, States “reconfigure” to participate in the workings of globalization, which materializes in national territories. The role of “national” financial institutions and how they become executive in implementing the new “global” rules of the game should not be forgotten. It is not only “foreign” actors and structures that implement globalization — in fact the extent of foreign investment, trade and stock ownership is very small in GDP terms — but also reconfigured national actors and institutions. Rather than dissolving, States “reconfigure” due to globalizing pressures. Depending on our definition of globalization, this can be seen as a new or not-so-new phenomenon. In addition, by focusing on the interaction between mobile factors and less mobile factors in the process of globalization, one could argue that the role of the State becomes more important in some significant respects as the pace of globalization accelerates, contrary to the popular perception that it should be diminished invariably (Shin, 2005). It is apparent in the Basque case that much regional economic policy is determined by membership in the European Union and, as a direct consequence, by trade liberalization. The Basque government has set out to help Basque companies to participate and compete in foreign markets, with firms reorganizing themselves to compete effectively. The same can be said about the Spanish government. These policies go back to the period of industrial restructuring in the 1980s and, as such, obey a regional and national political logic aimed at preserving Spain’s and the Basque Country’s industrial power and at positioning the country and the region in the global game of the 1990s.

Pathways and Path-Dependence There is little real debate about the “newness” of globalization — scholars, who claim that globalization is a radically new process, do not usually examine past developments, while analysts, who cultivate history, claim there is nothing new to current global processes — significant exceptions are LaBianca and Scham (2006) and Sassen (2006). Bridging historical macrosociology, world-systems analysis and global-city research — in order to show today developments’ path-dependence (David, 2000) — is one of the aims of the


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present analysis. The question here is about continuities with long-run cycles and the unique features of the current wave of globalization. What is new and what is not new about the current cycle? Is time-space compression a significant break with past developments or merely an acceleration of the long-term trend toward technological development? Similarly, is the space of flows a radically new phenomenon, or is it a time-space-compressed version of the transnational networks that have been present in the world-system for centuries? Evidence of an interconnected world-system traces back to the thirteenth century at least (Abu-Lughod, 1989). In addition, international synchronization of cycles of globalization and deglobalization shows the reality of a world-system before the current wave. National economies’ rates of growth have been highly correlated, especially in two periods — 1913–1927 and after 1970 — both periods of increasing globalization (see Chase-Dunn, 1999). Bilbao’s economy is highly connected, especially with the Spanish economy, but these periods of globalization in the world-system were also periods of the city’s globalization. The answer to “what is new” about globalization may be illustrated by Bilbao’s Guggenheim Museum and the “global awareness” of the city that it has triggered. The fact that Bilbao is now, in Peter Hall’s words, “in the world consciousness” (Hall, 2002, p. 72) speaks about time-space compression and the space of flows — two arguments used to explain the current phase of capitalist restructuring. The structural component of the Guggenheim project’s success is a result of time-space compression in contemporary capitalism, which gave the project a worldwide echo in a short period of time. But the agency component of the Guggenheim project — that is, the strategy pursued by both Krens and the Basque negotiators — was one of establishing a new space of flows between unlikely partners. What may be new about the current phase of globalization is a reassertion of agency, which uses the Castellian space of flows through time-space distantiation. Powerful actors, of course, are more likely to take advantage of the power of information technology for their own purposes. This is visible in the case of Basque political elites, who have become switched on in various networks and have used their connections to gain political and economic advantage in order to accelerate the region’s global development. Not surprisingly — and besides current global awareness about the Basque Country — the specific trajectories that fostered Basque globalization have deep historical roots. The space of flows is not a radically new process in the world-system — although the debate is open on this point. As Castells (1996) has pointed out, the specificity of the current global transformations has to do with the fact that the late twentieth century witnessed the formation of a global economic system operating as a unit in real time on a global scale. It is legitimate to ask whether the supposed “newness” of the current global system is simply a quantitative development (the spread of technological creativity and economic development) rather than a qualitative transformation of the world-system. Furthermore, the evidence is not conclusive regarding whether the current wave of globalization is integrating the economic system to a significantly higher degree than it had been integrated in previous historical periods (Chase-Dunn, 1999). Another important voice in the globalization debate, Saskia Sassen, insists that the current globalization process is radically new because it is triggering an important transformation and reconfiguration of States and the State system in order to cope with changes produced at the global level. In her most recent work (Sassen, 1999a, 1999b, 2000a, 2000b, 2003), Sassen offers an analysis that underlines a vast panoply of transformations


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occurring in national territories by virtue of their links to the global economy — changes that are affecting the way States produce law, the shaping of citizenship, and the arbitration of processes of negotiation between local/regional/national institutions and global actors (firms and institutions) that intend to operate in specific territorial contexts. Sassen’s analysis advances a powerful proposition that does much to overcome the current mythical imagery about globalization — that is, globalization occurs in national territories and affects local enclaves as well as the structuration of that historical formation we call “the national”. As an urbanist, Sassen reminds us that “global cities” concentrate most of the processes that are significantly changing the landscape of the economy in our current period, simply because — as she has brilliantly demonstrated in her path-breaking study of London, New York, and Tokyo (Sassen, 1991) — these global cities are the key nodes that articulate globalization and remain centers of command and control for the main agents of global processes. It cannot be denied that “à la Sassen” global cities undergo deep socio-economic transformations that cannot be compared in extent to processes defining socio-economic change in most other cities, including Bilbao. Yet it remains unclear whether “global cities” constitute a unique social formation in late capitalism, due to their interactions with the global economy, or whether they are simply major “concentrations” of general processes occurring all over the world in many other cities, including Bilbao. If this is the case — a hypothesis explored here — then we can legitimately call Bilbao a global city. The question is whether we are witnessing qualitative transformations in the world-system or, more simply, the effects of a generalized time-space compression deeply affecting the global economy — and cities all over the world that are linked to the global economy — at the beginning of the twenty-first century. Time-space compression, and more specifically the idea that the world-system has not been qualitatively transformed by the recent globalization wave, is the hypothesis followed by another leading urban researcher, Janet Abu-Lughod. In her extraordinary study of New York, Chicago, and Los Angeles, Abu-Lughod (1999) convincingly argues that the seeds of globalization in these three cities were planted in the nineteenth century and that all the characteristics usually attributed to “new” global cities in the current period were already present back then, albeit in embryonic form. Historical continuity rather than rupture is expressed by processes of economic transformation leading to the formation of global networks by the three cities. Hence, globalization can hardly be considered a radically new phenomenon, although it manifests itself with more intensity and in somewhat distinct forms in the present time. Historian Harold James (2001) suggests that most analyses confuse the cause of globalization with its effects. International openness, he argues, did not, as is too often assumed, lead to the spread of technology. Rather, it was technical changes and efficiencies of scale that made purely national markets relatively inefficient, thereby compelling business, institutions, and firms to spread across borders. This argument offers insight into why globalization and the inertia of transnational links tend to operate in the face of convulsions and contractions of the global financial system. It was assumed that as nations took measures to regulate nationally in order to protect national economies from global turbulences, they would also staunch the flow of people, information, goods, and services. Open borders, however, are not the cause of globalization as much as the result of a process of capitalism, which, initiated in the years after the Second World War, sought to extend its reach and enlarge its profits.


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Even as deepening global integration makes nations more vulnerable to exogenous shocks, it strengthens their resolve to cope with crises. While globalization might be resilient to external shocks, it tends to create its own internal stresses. James (2001) offers another history lesson pointing to the end of the current globalization wave. Many consider that the Great Depression — which effectively ended the twentieth century’s first era of globalization — was the direct result of World War I. By contrast, James (2001) cites three factors inherent in globalization that caused it to auto-destruct — the instability of capitalism; the backlash among those who did not reap the benefits of global integration; and the failure to create institutions that could adequately handle the psychological and institutional consequences of the interconnected world. The jury is still out on whether history is repeating itself today. As seems clear in various index that try to measure the level of globalization worldwide — see for example the index created by the journal Foreign Policy at http://www.foreignpolicy.com/ — technological and personal integration continues unabated even in countries whose overall levels of economic integration are minimal. As the benefits of multilateral cooperation appear to outweigh the costs of going it alone, political engagement has expanded. Those most interested in promoting global integration, however, must do more to heed the concerns of those who feel marginalized by it — lest the backlash against globalization becomes a selffulfilling prophecy. As we look back to history, the only truth that stands is that globalization is a cyclical, rather than an irreversible, process in which periods of expansion are followed by periods of “deglobalization” — periods in which transnational linkages retract and cities’ economic development is best explained by forces at the national and subnational levels. British geographer Peter Taylor (2005b) has recently suggested a narrative to understand relationships between world-systems analysis and contemporary research on global cities. That cities as international financial centers have steered the capitalist world economy for centuries is well known (Arrighi, 1994): Arrighi — drawing from Braudel (1981) and Pirenne (1969) — identifies four overlapping systematic accumulation cycles — globalization cycles — in the capitalist world-economy: the Genoese/Iberian cycle from the late fifteenth century to the early sixteenth century, the Dutch cycle from the late sixteenth century through the eighteenth century, the British cycle from the second half of the eighteenth century to the early twentieth century, and the American cycle from the late nineteenth century to the present. For Arrighi, Taylor explains, the contemporary relevance of his model is that current descriptions of recent restructuring of the world-economy can be seen through this historical perspective as not at all unique. For instance, Harvey’s (1989) historical transition from Fordism-Keynesianism to flexible accumulation, which overcomes rigidity leading to financialization of capital, is the latest capital accumulation


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phase, another epoch of financial expansion, the latest ‘rebirth’ of capital. (Arrighi, 1994, p. 4) Taylor continues that, from his perspective there is a second important implication of the model. … As economic globalization has provided new outlets for capital, the competitive phase of inter-city relations that dominated the 1970s and 1980s (generally, bad times for cities) has given way to a new cooperation (since 1990, there have been good times for cities). … The outcome is a contemporary world city network. (Taylor, 2005b) It is within this world-city network that Bilbao’s current wave of globalization develops. However, while Bilbao shares long-term trends in the world-system, the city has also found specific trajectories for joining global circuits, suggesting the idea that place and scales matter when studying globalization — a process visible at local, regional, and national levels.

Key Questions Having outlined this book’s conceptual framework, the intellectual journey into the relationships between the city of Bilbao and globalization processes can begin. This book is structured around four key questions: (i) How has Bilbao articulated its relations with the world economy over time? Globalization is usually depicted as a cause or outcome rather than a process in formation, with arguments mostly being developed about its impact, usually portrayed as similar across time and space, on (a few) specific sites. Accepting that globalization is not exclusively a recent process (Arrighi & Goldfrank, 2000; Arrighi, 1999, 2000; Arrighi & Silver, 1999; Chase-Dunn, 1984, 1999), and seeking to present the various ways in which a city has become global throughout history, then, in the case of Bilbao, it is appropriate to speak of “pathways to globalization”. These pathways or trajectories consist of (i) economic and political strategies developed at the regional level to establish flows and transnational connections with the world economy (such as State-led export-oriented growth strategies), (ii) local developments to cope with changes triggered at the global level (such as industrial restructuring), and (iii) structural and territorial adjustments to position the city in the context of world cities (such as megaproject development). Rather than presenting Bilbao as a passive receptor of global flows originating elsewhere, this book develops a view of the city as an active participant in processes of globalization. Accepting globalization as a process rather than an outcome, and by identifying periods and paths to globalization in the case of Bilbao, enables us to speak of periods of deglobalization, in which the city’s urban and economic development is best explained by forces at the national and subnational levels.


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(ii) What has been the State’s historical role in shaping globalization in Bilbao? Has globalization triggered a relative diminution of the State’s regulatory powers? Among the main agents in the process of globalization are transnational corporations, industrial and financial, which develop their global strategies across States that are seemingly powerless to control them (Sklair, 1998, 1999). However, the State’s role in globalization processes, especially in nations and regions with strong State structures such as the Basque Country, has been somewhat neglected in most of the literature, although with some important exceptions concerning European and Asian cities — for European cases see, inter alia, Bagnasco and LeGales (2000), Brenner (1998, 2001), Budd (1998), Clout (1994), Hall (1993, 1995b), Harding (1998), Harding, Dawson, Evans, and Parkinson (1994), LeGales and Harding (1998), LeGalés (1998), and Stohr (1992). For East Asian cities and their relationship with their developmental States see Bunnell (1999, 2002), Chiu, Ho, and Tai-Lok (1997), Chua (1998), Douglass (1993), Hill and Kim (2000), Machimura (1992), Sirat and Ghazali (1999), Wu (2000), and Yeung (2000a, 2000b). Rather than assuming that States “dissolve” under globalization, they often transform themselves to mediate in incorporating global flows into local economies. In addition, States may contribute to globalizing processes started at the local level via public policies promoting internationalization of companies and foster direct foreign investment. Bilbao offers an interesting illustration of two powerful State administrations — regional and national — with political relationships fraught with tension and contention over history. Although both may have been subject to similar global forces, each “State” may have developed independent strategies toward globalization. (iii) In the light of the recent restructuring and current globalizing period, what is the likely scenario for Bilbao’s and the Basque Country’s urban development in the coming decades — “post-industrial city” or “emerging city-region”? One of the labels attached to cities in the current period of restructuring after the demise of the Fordist model is “post-industrial” (see, for example, Savitch, 1988). Tertiarization has triggered a rise in the labor force occupied in the service sector and a concurrent decrease of industrial jobs, many of which have moved elsewhere. This has happened in some cities that have been presented as exemplars. It is tempting to assume a similar outcome in Bilbao — after all, globalization has caused the city’s basic industrial sectors (steel and shipbuilding) to disappear. Nonetheless it is worth exploring whether restructuring has been synonymous with complete de-industrialization in a metropolitan area with an incredibly strong industrial tradition and where manufacturing really “matters” (Cohen & Zysman, 1987). Because the Basque Country remains an industrial powerhouse and the city’s economic ties with the region have multiplied in recent decades and given that many urban scholars have noted the rise of global city-regions in the world economic context, this question is especially worth exploring at the regional level. The suitability of this concept for the Basque city-region — a poly-nucleated area with Bilbao as its economic capital and most populated urban enclave — will be explored.


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(iv) What is globalization? How can we conceptualize globalization in a manner that is sensitive to history and to both economic and non-economic forces? How can we conceptualize globalization as a partial explanation of a city’s urban development? Although transnational financial strategies and the role of information technology may be strengthening its role in world economic processes at the turn of the twenty-first century, globalization is not an entirely new process. Rather than assuming an extension of the finance-market-globalization paradigm to all cities similarly, it may be valuable to hypothesize that globalizing forces can account only for some of the developments in a city’s economy (Abu-Lughod, 1999). Because the rise of international forces does not necessarily occur at the expense of other forces of local, regional, and national reach, national and regional factors also play a substantial role. Bilbao’s urban development has as much to do with the city’s geographical position (i.e. a port near iron deposits) and the articulation of contentious relationships (e.g. between the regional and the Spanish States) as it does with Bilbao’s traditional and longstanding (since the fourteenth century) international vocation. The interplay among these factors explains the city’s transformations and developments through the centuries. In addition, the city’s reaction to globalization forces has not always been passive. Rather, the regional State, as well as the Spanish State, has actively sought ways to promote links between the local economy and the world economy. Hence, it would be misleading to understand globalization as a force opposed to State power in all cases and at all times. In fact, it may well be that globalization is a geopolitical process in which States position themselves as potential global players. Rather than losing control, States may develop global strategies to cope with changes produced by globalization. States might, therefore, contribute to the “making” of globalization in cities and regions. These four questions will structure the search for globalization processes in the city of Bilbao over time. The analysis, organized chronologically, starts in Chapter 2 with an account of economic globalization in the pre-industrial era, from the city’s foundation in 1300 to the coming of industrial capitalism in the nineteenth century.



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BASQUE COUNTRY Bizkaia Bilbao

Donostia-San Sebastián

Gipuzkoa

Vitoria-Gasteiz

Araba-Álava

GREATER BILBAO Getxo Berango Zierbena Santurtzi Leioa Muskiz Abanto y Ciérvana Portugalete Erandio Abanto-Zierbena Sestao Ortuella

Loiu Derio

Valle de trapaga Trapagaran

Sondika Zamudio Lezama

Barakaldo

Larrabetzu

Bilbao

Etxebarri

Basauri

Galdakao

Alonsotegi Arrigorriaga Zaratamo


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NASA Satellite View of Bilbao Metropolitan Area

Nocturnal View of Bilbao


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Panoramic View of Bilbao


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Chapter 2

Economic Globalization in the Pre-Industrial Era

Introduction Tracing Bilbao’s development from the fourteenth to the mid-nineteenth centuries — that is, from the city’s foundation as a node in trade flows between Castile and the world, through to the local transformation of commercial capitalism into industrial capitalism — this chapter locates globalization processes in Bilbao’s pre-industrial history. In the previous chapter, it was argued that, to fully grasp the nature and reach of globalization, global flows must be understood in the context of broader developments occurring at the local level, since globalization — as a quintessential network process — consists of relations, structures, and differentiated territories. In our quest to identify Bilbao’s pathways to globalization, this chapter explores not just the city’s global networks of foreign trade — based mainly on wool, iron, and codfish, which made Bilbao a frontier town of international character — but also the evolution of the political and economic relationships between the city-region and the Spanish State, focusing on various trade disputes throughout the centuries. The chapter is organized into four sections. The first discusses Bilbao’s foreign trade since the late Middle Ages; the second analyzes trade disputes in the eighteenth century; the third deals with eighteenth century export-led development, while the fourth analyzes crisis and de-globalization in the nineteenth century.

Bilbao’s First Globalization — Foreign Trade Since the Late Middle Ages The coastal area of the Basque province of Bizkaia in northern Spain has been home to transnational mercantile activities, shipbuilding, and fishing for centuries. Founded in 1300, Bilbao was not the oldest port in the province. It was, however, conveniently located where the three main rivers in Bizkaia converged and gained control of almost all trading activities in the province very early in its history. Bilbao’s port was the center of mercantile activities and of the city’s foreign trade and, as such, the place where Basque iron ore and Spanish wool were exported to Europe. Rich forestation in the area surrounding Bilbao allowed the early development of shipyards along the easily navigated Nervión River. Bilbao was also part of the Burgos-Bruges axis — a trade area including the British


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Isles, the south of the Scandinavian peninsula, the Northern Sea, the Baltic, and the Cantabrian seas, in the coastal North Atlantic Ocean (Guiard, 1913, 1917, 1971; Lafarga Lazano, 1976; Ugarte, 1999). As a frontier town, Bilbao bridged the Iberian markets and the main European ports. Basques were active in both the North Atlantic and the transatlantic economies, with a significant iron and wool export business channeled through Bilbao. The city played a pivotal role in the wool trade with the Low Countries, “… handling nearly half of Spain’s export trade and sending a third of their exports to Spain by the middle of the sixteenth century” (Díez Medrano, 1999, p. 29). Wool flows originated in Castile, where wool was prepared for market. From there it traveled to Burgos, the main trade center in northern Castile, and from Burgos to Bilbao. From Bilbao it was shipped to Flanders. Wool exports also benefited the other coastal provinces in Northern Spain, because they favored the growth of the merchant fleet, which was built in the Cantabrian ports. The Basque Provinces “… offered opportunities for shipbuilding using the plentiful supplies of local timber and iron and their location on the trade route between Castile and the Low Countries”. Although Seville had a monopoly on trade with the American colonies, the north of Spain (especially Bizkaia) had a monopoly on shipping, “… for it supplied — particularly between 1520 and 1580 — almost all Spanish vessels in the Indies trade” (Díez Medrano, 1999, p. 30). Although it was not a port, Burgos’s centrality in this trade system was constantly challenged by Bilbao, which was unwilling to accept Burgos’s monopoly over wool exports from the Cantabrian ports. Bilbao, a thriving port in its own right, was the center of the Bizkaian iron trade, one of the major components of the local economy. The commercial relationship between Burgos and Bilbao would become the first episode of inter-city rivalry for Bilbao. Differences between Burgos and Bilbao merchants “… arose over competing jurisdictions delineated in ship charters and the payment of trade rights” (Basurto Larrañaga, 1983, p. 21). The dispute worked against the interests of both communities, which were mutually dependent — the Bilbao fleet needed the Burgos merchants, who depended on the Bilbao ships to export their wool. Although a formal agreement between Burgos and Bilbao was reached in 1499, disputes continued until the eighteenth century. This contention notwithstanding, “… Bilbao ships continued to carry Castilian wool, which was exported in large quantities throughout the fifteenth century, especially to the Flemish” (Guiard, 1917, pp. 11–15; Suárez Fernández, 1959, p. 121; Basas Fernández, 1963; Childs, 1981; Basurto Larrañaga, 1983, p. 21). Iron production and export, together with shipbuilding, were the main indigenous industries in the Basque Provinces. Iron production for export gave rise to a prosperous merchant sector, which, instead of merely mediating the passage of products from other regions, began to sell Basque products. In exchange, merchants imported cloth and food for the local population: “Trade, shipbuilding and iron production flourished, while limited firearms manufacturing maintained a steady stream of business. All were dependent on foreign markets and the Spanish Crown” (Díez Medrano, 1999, p. 30). During the fourteenth and fifteenth centuries, the iron trade expanded to new European and Mediterranean markets. Some scholars estimate that the Basque share of Europe’s annual iron production during the fifteenth century was one-third of the total (approximately 13,000 tons).


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Bilbao’s vessels exercised control over the trade along the eastern seaboard of the Atlantic through French and Spanish ports as early as 1280, when a new long-distance maritime traffic line had developed between Italy and Northern Europe and the first Italian ships appeared in the northern sea. Bilbao’s sailors supplied wine from Gascoigne and iron from Bizkaia to Northern Europe. They also served as merchants of cloths acquired in the English, Flemish, and Norman ports (Heers, 1955; Suárez Fernández, 1959 in Basurto Larrañaga, 1983, pp. 20–21). Bilbao ships carrying wool and iron stopped in Bayonne, Bordeaux, and La Rochelle on their way to the Flemish region, where they took on wine. In Bruges the merchants sold the wool and the iron and acquired cloths from Flemish merchants (as well as Castilian and Bilbao dealers) located in that city. The journey usually lasted between one and a half and two months. Bilbao merchants were established in Flemish ports, in Bordeaux, and in other ports since the mid-fourteenth century, and probably also had official representatives there. Establishing permanent trade missions was a means to secure greater international trade. The significance of Bilbao merchants in Bruges is well documented (Abu-Lughod, 1989, p. 90). In 1494 Bruges gave the Basques two houses, which were used as headquarters for trade and called “Proetorium Cantabrium” (Basurto Larrañaga, 1983, p. 22). At the same time, Italian traders hired Basque sailors to help develop Geneva’s local economy in the fifteenth century. In fact, it was Bilbao navigators who introduced the Nordic transport vessel known as Kogge to the Mediterranean. Mainly because of this important maritime traffic, Bilbao was a commercial city very much in its ascendancy toward the end of the fifteenth century (Finot, 1899, pp. 77, 93, 284, 314; Heers, 1955, pp. 292, 298, 302; Braudel, 1949, p. 183; Basurto Larrañaga, 1983, p. 22). By the early sixteenth century, together with Sweden and Germany, Bilbao had become one of the greatest European centers of the iron industry. The shipbuilding industry was favored by increasing demand from the Spanish crown and Andalusian merchants, who would use the ships in American trade. Indeed, the best vessels in the trade with America were built in Bilbao. As Spanish interests in America were at stake, the Spaniards supported Bilbao’s shipbuilding industry through protectionist measures, including select taxexempt status. In addition, the discovery of fishing banks off Newfoundland increased Bilbao’s economic profile. King Carlos V of Spain stimulated greater free trade in 1529 through a resolution allowing some Spanish cities including Bilbao to trade freely with America — the only obligation being a mandatory stop at Seville’s customs to declare cargo (Braudel, 1974, p. 297; Haring, 1918, p. 331). The royal resolution, however, was canceled four decades later, in 1573. From then on, all ships to America had to depart from Spain in a fleet leaving from Seville or Cádiz. In any case, it seems that Bilbao sailors did not take advantage of the royal prerogative to trade freely with America. The threat of pirates in the Gulf of Biscay meant that the Basques usually preferred to sail with the fleet of the Spanish Crown (Haring, 1918, pp. 18–19; Braudel, 1974, p. 300; Phillips, 1988). After several wars with Europe and to accommodate the increasing importance of the American trade, the commercial center in Spain moved to the south. Bilbao, however, entered a period of relative decadence, supported by the strength of European fleets, England, and the Netherlands in particular, which pushed the northern Spanish fleet into relative dependency. As the presence of the Basque fleet in European trade diminishes gradually from 1575, Bilbao’s relative decline reinforces the changing geographical center of commerce: instead of Basque ships, foreign vessels en route from America carried


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wool and gold to Antwerp. Finally, Bilbao also had to face increasing competition from other Spanish ports, such as neighboring Laredo and Santander, which by 1564 led the wool export trade to Europe (Chaunu, 1968, pp. 256–258; Lapeyre, 1956; Priotti, 1997; Stein & Stein, 2000). Two important economic developments marked Bilbao’s economy in the seventeenth century. First, Bilbao merchants acquired increasing control of the wool export trade, which was no longer the exclusive concern of the local fleet or of the Castilian merchants. In their quest for commercial expansion, Bilbao merchants even accepted foreign trade settlements in the city to help revitalize the wool trade. Second, there was continued development of the local steel and iron industry, which went along a similar process in the rest of Europe. The number of foundries (ferrerías) grew, and the trade with Europe was stimulated by rising ore prices, which benefited exporters even more than it benefited the owners and tenants of foundries. Despite increasing competition from Liège and Swedish iron, the foreign markets for Basque iron remained strong and were vigorous throughout the centuries (Bilbao, 1977, p. 164; Guiard, 1917, pp. 522, 527). A contemporary commentator gave the following description of commercial Bilbao and its harbor during this period: This is how the river is filled with foreign vessels, which load, bring and go with commodities; and the commodities they load the most are wool and iron. With so many ships and other smaller vessels crossing, the river is like a population of floating people in the waters. And what about the factories of galleons and other boats, made of wood and other stuff, and crafted masterly by the locals? (Henao, 1894 in Basurto Larrañaga, 1983, p. 27, author’s translation) Basques were also crucial to the development of a triangular trade of codfish and wool that developed between Northern Spain, England, and North America toward the end of the sixteenth century (Grafe, 2001a, 2001b). Although during the Middle Ages England had been the main European exporter of wool, by the fifteenth century exports of raw wool from England had declined and exports from Spain had increased significantly (Barkham, 1991). By the mid-sixteenth century, wool exports from Spain were eight to fourteen times by volume those from English. Most of that wool was shipped from the Port of Bilbao and was destined for the continental European markets (Bruges, Antwerp, Italy) and for England. Spain’s new position as a dominant exporter in the wool market led to increased control of the market by Spanish merchants (Israel, 1980; Azpiazu Elorza, 1990; Phillips & Phillips, 1997). Basques also developed the first cod fisheries, probably reaching American soil by the end of the fifteenth century and establishing regular fishing routes in the sixteenth century, competing first with the Portuguese and later with English fishermen (Innis, 1940; Davis, 1971). But, as English cod fishermen took control of the American coastal fisheries, Basque dominance in this trade would come to an end. The structure of both the wool and the codfish trade also changed dramatically in the first half of the seventeenth century with their integrating into a single North Atlantic trading network (Grafe, 2002, p. 41). Starting in the late sixteenth century, the traditional wool trade from Spain to continental Europe decreased noticeably. It rebounded, however, with the emergence of England’s


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“new draperies” industry that developed in England’s West Country region (which is also credited with a decisive role in the English commercial revolution). During the 1630s wool exports to England routed through Bilbao expanded three to four times, stabilizing in the 1640s to 1,000 tons per year. This accounted for 8–10 percent of the total English and Welsh domestic wool production at the time. Vessels shipping wool to England needed a return cargo to make the trips profitable, but demand for English goods was low in Spain, and the only product that consistently found a good market was codfish. Thus, as Grafe (2002, p. 43) explains, “West Country merchants began to concentrate on selling the English catch in Northern Spain to finance wool imports”. The integration of the wool and codfish trades affected the structure of commerce. More English vessels engaged in the trade and by 1640 there were hardly any northern Spanish ships importing codfish. The English ships captured the fish on the coasts of Massachusetts and Rhode Island, which gave them an edge on the traditional Newfoundland supplies. New England merchants organized the trade of codfish with English merchants in return for the manufactures provided to the young American colonies: Thus, the European wool trade and the Atlantic cod trade became closely integrated within a triangular exchange that included wool shipments from Spain to England, exports of manufactures from England to North America and large-scale fish exports from North America to Northern Spain. (Grafe, 2002, p. 45) Compared with those in Castile, Bilbao merchants’ status improved with the reorientation of wool exports to England. In fact, Castilian merchants were almost cut out of the trade as Basque merchants negotiated directly with the English and with the fishermen bringing codfish to northern Spain. Well established in the city of Bilbao in the sixteenth century, these merchants constituted a large community and organized the shipment of codfish between northern Spain and the Castilian interior. The wool trade, which until then had been organized by monopoly companies from Castile, “… became a much more open and competitive trade incorporating local and foreign exporters as well as smaller carriers with no significant capital” (Grafe, 2002). Significantly, changes in the commercial networks affected the spatial structure of trade in these regions. In Spain, the networks helped to move economic activity from Castile to the northern coastal region of which Bilbao was the main city: The northern Spanish merchants were quick to seize the opportunities that the de-regulated trade with England and British North America offered, while the success of the English and New England merchants depended crucially on the co-operation of the northern Spanish commercial community. (Grafe, 2002, p. 47)

Trade Disputes in the Eighteenth Century Despite Bilbao’s traditional commercial strength, the local economy suffered from a continuing agricultural deficit, which in turn explains the concentration of merchants in the


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city and their early devotion to trade. Aside from iron, Bizkaia produced only chestnuts and apples. In fact, local agricultural production was hardly sufficient to feed the population for three months out of a year, which, in turn, also explains why imports of food, clothing, sugar, cocoa, and tobacco played a significant role in local development. It also explains why the local elite saw commercial activities and industrial development as the only solutions to economic deprivation. The local economic structure was well supported by local laws. The three Basque Provinces had been de facto free trade zones ever since they joined the crown of Castile in the twelfth century through an agreement that preserved the local laws, or fueros. The fueros granted a high degree of autonomy for the Basques within the Spanish State and established the universal nobility of the region’s native population, which granted Bizkaians rights such as exemption from direct royal taxation, from import duties within their province, and from military service outside Bizkaia. In addition, they granted Bizkaians the right to reject all royal legislation that contradicted local laws. Most importantly, the fueros contained provisions sanctioning the development of trade and industry as the two pillars of the Basque economy, setting regulations reserving the exploitation of iron mines exclusively for Bizkaians, and preserving the foreign commercial relations that Bilbao had developed since the thirteenth century. The defense of commercial franchises through the Spanish State would be a key concern for Bilbao until the nineteenth century. Free trade was considered the only means to avoid economic hardship. Given the absence of agricultural production and other sources of economic development, Basque mercantile freedoms were, in this case, a necessity rather than a privilege (Floranes, 1776 in Basurto Larrañaga, 1983, p. 29). In this sense, the local laws and local economic structure suited the requirements of an early “developmental State”. For the Royal Treasury, however, Bilbao was an area of low commercial tariffs (relatively lower than in Castile) because many traders were effectively smugglers carrying merchandise, particularly tobacco, to Castile (Laborda, 1978; Zabala Uriarte, 1994). Many royal provisions and orders were issued to stop this illegal traffic. Despite all the efforts by the local authorities to enforce legislation and agreements between Bilbao and Castile, however, contraband continued to flow. The Spanish government reacted by taxing some of the imports to Bilbao, specifically merchandise shipped from Hamburg, and limiting certain products from America, such as tobacco, sugar, cocoa, and sweets. In addition, a new order required all commodities imported from abroad to be registered in a new government warehouse built in Bilbao (Novia de Salcedo, 1852 in Basurto Larrañaga, 1983, p. 30). The only products that could be traded freely were meat, wine, oil, wheat, and beans, which were needed for basic consumption. In 1717, the Spanish government decided to move customs to the coast, selecting Bilbao, San Sebastian, and Fuenterrabía as the new locations with the additional purpose of bringing the Basque Country into the Spanish trading system. Provincial governments staunchly opposed this move, leading to a popular uprising in Bizkaia. If the Basques would not accept the new customs arrangement, the Spanish government threatened to move the wool trade to the neighboring city of Santander (Echevarría Alonso, 1995). However, the government retracted the 1717 provision in 1722, and reestablished the customs in their old Basque locations further inland. This change was prompted by a negative report from a commission created to evaluate the advantages and disadvantages of the proposed customs locations (Novia de Salcedo, 1852 in Basurto Larrañaga, 1983, pp. 31–32).


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The struggle between local and Spanish governments regarding trade legislation continued throughout the eighteenth century. In a major attempt to change the status quo, Basque representatives requested permission from the Spanish government to trade freely with the Spanish colonies in America and, in exchange, offered to stop foreign trade with Europe. The Basques considered that free trade with America would benefit the local iron industry as well as agricultural products from Castile, which could be exported via the port of Bilbao. Despite the potential benefits for the Spanish economy, the Spanish government somewhat surprisingly refused to accept this offer (Novia de Salcedo, 1852 in Basurto Larrañaga, 1983, p. 31). Instead, the government allowed an increase of trade in foreign products in the Basque Provinces, a decision that undoubtedly damaged local production. The new arrangements preserved Bilbao’s free trade zone status, although the import of foreign products to Castile was prohibited. Subsequent royal provisions in 1751 required the registration of all products destined for the Cantabrian regions of Galicia and Asturias. “A 15 percent tax was imposed in 1771, for example, on sugar and leather arriving in Bilbao from La Coruña, in Galicia — a measure that the Basques protested loudly” (Basurto Larrañaga, 1983, p. 32; Ribechini, 1995).

Bilbao’s Second Globalization: Eighteenth Century Export-Led Development Despite trade disputes with the Spanish government, with the government refusing to allow free trade between Bilbao and America, and the partial redirection of the wool trade to Santander, Bilbao enjoyed a period of economic prosperity during the second half of the eighteenth century (Feijóo Caballero, 1991). The city was second only to Cádiz in commercial activity. It negotiated with the main European ports and cities to which it shipped locally produced iron and a significant portion of Castilian wool. Bilbao’s port was the center of codfish imports and a redistribution site for European textiles. The local fleet expanded to include 300 boats and, in addition, many of the vessels going to America from other ports belonged to Bilbao merchants (Guiard, 1931, p. 36). Economic prosperity was reflected in some important infrastructure and public works projects undertaken at the time, such as the enlargement of the Bilbao port and the construction of a new road linking Bilbao with Burgos. Building new piers in the port allowed better navigation in the Nervión river and access for larger vessels. The construction of the road to Castile was Bilbao’s response to the road between rival Santander and Burgos, which had been sponsored and financed by the Spanish government, which was interested in enhancing inter-city competitiveness, often to the benefit of Santander and the detriment of Bilbao. Local merchants paid for Bilbao’s road and improved the wool traffic from Castile and commercial activity in general. As a result of the general prosperity of the city during the second half of the century, Bilbao’s population almost doubled during the eighteenth century, from 6,000 inhabitants in 1700 to 11,000 in 1800 (Mauleón Isla, 1961, pp. 74, 78–80). Despite this growth, Bilbao continued to be a rather small town compared with the other commercial cities in Spain, such as Barcelona — a situation that did not change until Bilbao’s modern industrialization during the second half of the nineteenth century.


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Economic prosperity was also reflected in the volume of iron and wool exports, the codfish trade, and the abundance of foreign markets for these products. Approximately 13,500 tons of iron (97 percent of the total local production) was exported annually (Guiard, 1917, p. 557). Most of the iron produced in Bizkaia between 1750 and 1800 was exported to America through Cádiz, Seville, Santander, Gijón, La Coruña, Málaga, Cartagena, Alicante, and Barcelona (the nine Spanish ports allowed to trade freely with the New World). A significant portion of the export trade was destined for Europe, particularly France, Great Britain, Holland, Portugal, and Italy and, to a lesser extent, Germany, Finland, Norway, and Denmark. Trade with North American colonies after their independence from Great Britain and through Cantabrian ports acquired an increasing importance through the century.

Iron Exports France was the main importer of Bilbao iron during the second half of the eighteenth century, absorbing 56,178 tons (15.6 percent of the total iron exports) over half a century. Bordeaux and Nantes were the main French ports receiving Bilbao iron, together with Rouen and Le Havre, Landerneau and Morlaix in the French Brittany, and Bayonne. Due to the development of the French iron industry, and competing iron exports from Holland, Sweden and Russia, the French market for Basque iron plunged after 1780. The political crisis between France and Spain, triggered by the French Revolution, also reduced demand for Basque products (Basurto Larrañaga, 1983; Fernández de Pinedo, 1981, p. 113; Dardel, 1966, p. 182). Iron trade with America, both directly and through other Spanish ports, was the second largest market for Bilbao. Cádiz was the main port receiving iron products from Bilbao, although it is not possible to determine the exact proportion that was actually exported to America and the amount destined for use in Spain. Exports to Cádiz peaked in 1763 at 5,199 tons. After textiles, iron constituted the second most significant export product from Cádiz to America. The presence of Bizkaian merchants in the New World trade had been significant since the seventeenth century. After the Andalusians, Bilbao merchants in Cádiz represented the second main group. Some direct exports to America also took place between Bilbao and the ports of Havana, Veracruz, and Santa Marta. The lack of iron in the colonies “required imports in order to encourage the development of the main shipping center in the Caribbean, located in Havana” (Vázquez de Prada, 1968; Basurto Larrañaga, 1983; García Baquero, 1976; Mariluz Urquijo, 1981). Portugal was the third main destination for Bilbao iron (receiving 45,221 tons or 12.6 percent of the total exports) during the second half of the eighteenth century. The mercantilist policies adopted by the Portuguese government “encouraged the creation of many foundries and factories in that country, particularly in Lisbon and Porto”. The government hired foreign experts in iron works, drawing technicians from Bilbao and a massive import of iron bars. Spain’s foreign relations affected the trade in iron with Portugal. Relations between Spain and Portugal, an ally of Great Britain, were especially problematic between 1761 and 1778 — a period that included confrontations in America. Only after 1780 did diplomatic relations improve (Oliveira Marques, 1972, pp. 521–522).


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Great Britain was the fourth main importer of Basque iron. “About 26,468 tons of iron, or 7.5 percent of all the Bilbao iron exports, were sent there in the second half of the eighteenth century where Bilbao iron bars were used for the Royal Navy’s manufacturing work”. The Basque product was also mixed with Russian and Swedish iron to make anchors. After England, Ireland received imports through Dublin and Cork. Scotland, by contrast, did not receive significant amounts of Basque iron. In England, the imports were channeled through the ports of London, Bristol, Exeter, Falmouth, and Jersey. Imports of Bilbao iron decreased throughout the century, particularly after 1779, due to the war between Spain and Great Britain (MacLachlan, 1940, p. 10; Caro Baroja, 1974, pp. 69, 87). Italy, Morocco, southern Spain, and the Cantabrian ports “were also destinations for Basque iron during the second half of the eighteenth century”. Exports to Italy entered through Geneva, but this trade only lasted until 1782. Cartagena and Málaga were the cities in Southern Spain most interested in iron from Bilbao for the development of the local iron industries. A commercial treaty between Spain and Morocco facilitated trade with the Muslim kingdom. Finally, Basque iron was sent to Galicia and Asturias in the Cantabrian coast for the work of the foundries, in exchange for sardines, oil, wine, fruits, and ham (Basurto Larrañaga, 1983).

Wool Exports Since the thirteenth century, Castilian wool had been the main Spanish export to the countries of northern Europe, specifically Holland, Belgium, England, and France. Although competition for the wool trade with neighboring Santander had existed since the Middle Ages, Bilbao had been the main port. Several factors encouraged such inter-city competition. The center of wool production, Burgos, was searching for an alternative port to Bilbao in order to free themselves from Bilbao merchants’ dependence. In addition, foreign merchants wished to reduce competition from Bilbao and to move part of the trade to Santander. Furthermore, the fiscal policy of the Spanish kings favored the development of Santander in retaliation for the Basques’ refusal to move the customs to the coast in the early eighteenth century. Nonetheless, the port of Bilbao remained a main wool export location during the second half of the eighteenth century. Between 1749 and 1796 Bilbao exported about one-third of the total foreign sales of wool from Spain. Bilbao merchants dominated the trade and would frequently travel to Castile in order to buy the wool in situ (Guiard, 1913–1914, Chapter I; Palacio Atard, 1960). England was the most significant importer of Spanish wool during this period, particularly during the 1790s. “The importance of the wool industries and the English government’s protectionist policies increased demand, with shipments traveling from Bilbao to London, Bristol and Southampton”. Holland was the second largest importer of wool. While they also sought wool from Portugal and Turkey, the Dutch preferred the high quality of Spanish wool. Amsterdam attracted merchants from all over Europe and served as a clearing house for imported wool. France was another important market for Spanish wool, imported through Rouen, Le Havre, Bordeaux, and Nantes, where wool was exchanged for cocoa, sugar, and cloths. Hamburg and Altone were the German ports receiving wool from


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Bilbao, which also exported chestnuts and hazelnuts as well as iron to those cities. The Prussian government increased its interest, particularly after 1787, through a liberal customs policy. Belgium, Denmark, Russia, Norway, and Sweden also participated in Bilbao’s wool trade (Basurto Larrañaga, 1983, pp. 162–187).

Crisis and De-Globalization in the Nineteenth Century Important economic transformations during the nineteenth century marked the end of commercial capitalism and initiated the transition to industrial capitalism in Bilbao. At the turn of the century, Bilbao and the Basque Provinces were less prepared for economic development than other Spanish regions: “With 3 percent of the Spanish population in 1800, the Basque Country produced only 2 percent of the Spanish GDP and was one of the poorest regions in Spain” (Díez Medrano, 1999, p. 58). This condition was a consequence of the limits of Basque agriculture as much as the commercial and industrial crises created by the Napoleonic Wars, the loss of the Latin American colonies and markets for iron owing to more competitive northern European production. From the late eighteenth century, continuing into the first part of the nineteenth century, Bilbao’s iron industry collapsed, despite admirable growth leading up to this period. The foundries entered a severe slump from which they never recovered. The foundries were doomed by production methods that had changed little since the fifteenth century. Iron manufactured using new techniques introduced during England’s Industrial Revolution captured a growing share of the market. Competition in the European markets stiffened for the Basque industries. Even markets within Spain were seriously threatened by foreign production, particularly Swedish iron (Montero, 1993). A new mercantile policy had attempted to tackle this course of events, increasing the share of Bilbao iron exports to America to compensate for declining exports to Europe. “Between 1760 and 1780, 62 percent of the iron shipped from Bilbao went to Europe, with 34 percent directed to various Spanish ports for trade with America. In 1800, however, Europe received only 29 percent of Basque iron, with 71 percent of production going to America through the Spanish ports” (Montero, 1993, p. 44). Additional protectionist measures, such as the 1770 prohibition on foreign iron sales in the Spanish market, or the 1776 provision that prohibited the shipping of foreign iron to America from Spanish ports, attempted to resolve the situation. Yet the root of the problem was structural, not commercial, and the protection of the Spanish market for Basque iron did not affect the outcome. The ferrerías were no longer able to compete with the modern production techniques of European industries. The crisis affected commerce as well. During the first decade of the nineteenth century, ore trade and the sale of manufactured iron diminished significantly, harming mercantile traffic generally. But more serious was the gradual disappearance of the traditional mercantile circuits that had passed through Bilbao since the Middle Ages, breaking down the intermediary role of the city’s merchants. Once the Industrial Revolution privileged the production of cotton, the decline of the centuries-long wool trade from Castile to northern Europe was inevitable. “During the first five years of the nineteenth century, for example, the wool trade through Bilbao decreased by 25–30 percent compared with the previous decade” (Díez Medrano, 1999, p. 66).


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In 1827, a new Mining Law, which introduced private ownership of the mines, presented a major breakthrough for the foundries. The mines had been the property of all Bizkaians, according to a regime of free appropriation, which respected exploitation by individuals and groups but did not recognize ownership titles. According to the new law, however, the soil became the property of the King and companies could exploit them through purchasing franchises, but, in accordance with the fueros, only Bizkaians could register the mines in franchise. This provision radically changed the situation of the Bizkaian mining industry. For two decades, Bilbao mining industrialists could register mines for exploitation without competition from foreign investors. A decisive turn in mining legislation created a small provincial business elite connected to the mining sector — an elite that would, in turn, be at the origin of Bizkaia’s industrial revolution (Montero, 1993, pp. 50–51). In the following decades, the Bizkaian commercial bourgeoisie followed different strategies to adjust to the structural changes underway. Using low-risk investments in public debt and real estate and lobbying for the privatization of mining, this elite group took steps to mechanize iron production and favored the transfer of customs houses to the coast (Aguirreazkuenaga, 1987). “These transformations were so successful that between 1800 and 1860 the Basque Country’s GDP increased faster than any other Spanish region except Madrid and Catalonia. The Bizkaian commercial bourgeoisie had succeeded in redirecting its economic activity, thereby establishing the foundation for a smoother transition to industrial capitalism” (Diez Medrano, 1999, p. 58).

Conclusions Bilbao’s pre-industrial pathways to globalization show a geography of networks that significantly shaped the city’s transnational reach. As a frontier town, and starting shortly after the city’s foundation, Bilbao bridged the Iberian markets and the main European ports, with Basque merchants active in both the North Atlantic and the transatlantic economies, and with a significant iron and wool export business (originating in Burgos) channeled through Bilbao. The commercial relationship between Burgos and Bilbao would become the first episode of inter-city rivalry for Bilbao. Iron production for export gave rise to a prosperous merchant sector, which, instead of merely mediating the passage of products from other regions, began to sell Basque products. By the early sixteenth century, together with Sweden and Germany, Bilbao had become one of the greatest European centers of the iron industry. Bilbao increasingly acquired control over the trade of both wool and iron. In their quest for commercial expansion, Bilbao merchants even accepted foreign trade settlements in the city to help revitalize the wool trade. Basques were also crucial to the development of a triangular trade of codfish and wool that developed between Northern Spain, England, and North America toward the end of the sixteenth century. In addition to the deployment of transnational trade relationships, Bilbao’s early pathways to globalization were significantly shaped within the borders of first the Kingdom of Castile and then the Spanish State, as shown in Bilbao’s relative dependence on trade flows originating in Castile and the various struggles between local and Spanish governments regarding trade legislation, which continued throughout the centuries, as argued in Díez Medrano’s, Basurto Larrañaga's and Montero’s accounts, which we followed here. Despite


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trade disputes with the Spanish government, with the government refusing to allow free trade between Bilbao and America, and the partial redirection of the wool trade to Santander, Bilbao enjoyed a period of economic prosperity during the second half of the eighteenth century. Bilbao was part of the early globalizing processes occurring in the late Middle Ages (Abu-Lughod, 1989) and the early modern period (Wallerstein, 1974), which confirms that globalization is not exclusively a late twentieth century phenomenon. In addition, the city did not develop as a passive receptor of global flows originating elsewhere, but rather as an active participant in globalization, which suggests that globalization shows a variable geometry dependent on place — making us cautious about generalizing from a few exemplars. Finally, globalization was often shaped within the confines of the State and, in particular, in the local–national relationships that evolved throughout history. Bilbao’s early pathways to globalization obey a multiscalar logic in which local, regional, and national domains of social action function as nodes in a complex network of relationships. Hence, the chapter has shown that globalization — rather than being an external force impacting specific territories without mediation — consists of an interaction of global forces and national, regional, and local conditions producing specific outcomes. This chapter has also highlighted two main periods of globalization for the city, and one main period of de-globalization, thus confirming globalization’s cyclical character. These cycles will become even more apparent in the next chapter, which discusses the formation and development of Fordist Bilbao since the mid-nineteenth century.


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Chapter 3

Industrial Capitalism and the Nation-State

Introduction As previously explained, this book searches for interrelationships between the city of Bilbao and globalization processes in the context of the city’s development. In other words, it searches for (i) the ways in which forces in the world-system have had an impact on the city, (ii) the ways in which these global forces have been mediated by regional and national factors, and (iii) the ways in which the city has tried to position herself to globalize. Because globalization processes interact with other local processes at local, regional, and national levels to produce specific outcomes, it is argued that globalization constitutes only a partial explanation of the city’s developments. The main elements of this analytical approach are present in this chapter, which focuses on the development of Bilbao’s political economy during the Fordist period — that is, from the rise of industrial capitalism in the mid-nineteenth century until the crisis of the 1970s. By focusing on a de-globalization period in the city’s history, we contribute to developing our argument about the scaling among various “levels” of analysis seen as necessary in order to explain Bilbao and its globalization. Since our general aim is to explain globalization through a city’s specific trajectory, rather than vice versa, what emerges is a picture in which globalization appears to be (i) “leveled” at the local, regional, and national domains; (ii) “cyclical”, with interim periods of “de-globalization”; and (iii) political as much as an economic process. Our review of Bilbao’s globalization during the twentieth century and until the Fordist crisis of the 1970s demonstrates that the city, although never losing its international trade networks, centered its economic development in the growth of industrial sectors that played a pivotal role in the expansion of Spain as a whole, thus showing the scaling of globalization at the national level. From a transnational perspective, Bilbao’s fortunes during this period offer a picture of de-globalization, because the keys to urban development are best explained by national and sub-national forces. This chapter is organized into six sections. The first — “Preparing for Industrial Capitalism” — provides an introduction to the years previous to Bilbao’s explosive industrialization, which are recounted in the second section — “Export-led Industrialization in Bilbao”. The third section — “Negotiating Economic Growth” — summarizes the political economy of Basque industrial development during Fordism, which leads on to the fourth section — “Bilbao’s Third Globalization: 1900–1937” — discussing the period of maturation of capitalism in Bilbao and the Basque Country. The final two sections — “De-globalization


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and Autarchy in the Franco Years”, and “Selling to the Protected Spanish Market” — analyze Bilbao’s economy during the Franco dictatorship years, 1939–1975.

Preparing for Industrial Capitalism According to Montero, while growth between the two Carlist wars, in the 1841–1872 period, was moderate, the region at least recovered some of its economic vitality. “Although the resources and conditions created by the mining boom in the last third of the nineteenth century were not yet present, thanks to enterprising local merchants the region recovered rapidly from the wars and political instability of the early nineteenth century” (Montero, 1993, p. 68). Bilbao again became one of the most important ports in Spain. With fewer than 20,000 inhabitants, Bilbao around 1850 was still not a large port. According to the value of its trade, Bilbao ranked tenth among the major Spanish ports, clearly behind Barcelona and also behind its traditional rival Santander. One decade later, however, Bilbao had become the second most important port in Spain after Barcelona (Basas Fernández, 1961; Tortellá, 1973, pp. 100–101; de la Puerta, 1992, 1997). By then it had the largest number of sailing ships (739) and its fleet ranked second in the country for overall tonnage (68,200). Small ships assigned to the northern European and Mediterranean routes constituted half of the fleet. The rest were much bigger vessels dedicated to transoceanic trade. The growth of the city’s port and fleet reflected prosperous times for Bilbao commerce in general. As a consequence of the first Carlist War, the customs were once again relocated on the coast in 1841, and the city became fully integrated into the Spanish economy, abolishing the former privilege for Basque duty-free imports. This meant easier access to the main peninsular markets and trade with the remnants of the Spanish colonial empire. Nevertheless, gradual integration into the Spanish economy did not trigger the loss of traditional destinations for products shipped from Bilbao. Indeed, trade with the main European countries continued at a good pace. Both imports and exports grew consistently between 1840 and 1860. Great Britain, France, and Norway provided about three-fourths of the imports. Textiles, machinery for the railroads, drugs, and chemical products came from Britain; luxury items such as silk and textiles arrived from France, and large shipments of codfish were imported from Norway. In the other direction, grain, flour, wine, and local iron ore were exported via the port of Bilbao. Grain and flour accounted for about 72 percent of the port’s total exports in the midnineteenth century. Most of the trade between Spain and Europe passed through the Port of Bilbao (Glas, 1997, pp. 78–80). Unlike the shipyards, which were made obsolete by new technology, the local iron industry was gradually breaking away from the obsolete methods of the ferrerías. The scale of plants grew larger; the number of foundries in Bizkaia decreased from 141 in 1786 to fewer than 100 in 1846 (Montero, 1993, p. 78). The local industry adopted production processes similar to those used in other European countries without ample coal deposits. Lack of coal fuel explains the slow growth during this period. Compounding the problem, scarce internal demand dampened the possibilities of rapid expansion. After the second


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Carlist War, the meager coal supply was partially overcome by new production techniques and with increasing competition the iron industry even found markets beyond Spain’s frontiers, permitting the resurrection of traditional Bizkaian shipbuilding. Although Bizkaia’s iron industry reached a plateau during the 1860s, new factories such as Santa Ana de Bolueta (1841) and Nuestra Señora del Carmen (1855) provided the foundation for new companies developed during this period. The prominent family of mining entrepreneurs, the Ybarras, made their first industrial investments at this time (Aguirreazkuenaga, 1987, p. 146; Nadal, 1977). In addition to the transition from ferrerías to the modern steel industry, the local economy showed growth in other areas. Integration into the Spanish economy required adequate means of transportation between Bilbao and Castile. This was the argument given by Bilbao’s merchants when they initiated a railroad project connecting Bilbao with Tudela in the Spanish interior. The local merchants’ resourcefulness indicates how trade with the most advanced countries in Europe prompted awareness of new ways to facilitate commerce. It also indicates their unwillingness to let Santander, their historic rival, benefit from the lack of a railroad in Bilbao. In order to cope with the financial burden of the enterprise, the local bourgeoisie funded a credit institution in 1856, the Banco de Bilbao, which became the first bank in the city and a clear sign of local commercial influence (Glas, 1997, p. 83; Montero, 1993, pp. 84–87; Basas Fernández, 1960). Development in commerce and industry proceeded despite complications in the agricultural sector, and even at the expense of agriculture with Bilbao’s capitalist development bringing great harm to the peasantry (Fernández de Pinedo, 1974). Land speculation and the privatization of municipal land and mining concentrated landholdings. As a result, the proportion of peasant households in Bizkaia occupied by landowners, about 60 percent in 1704, fell below 30 percent by the early decades of the nineteenth century (Fernández de Pinedo, 1974, p. 156). The harmful effects of modernization fostered deep unrest among the Basque peasantry with serious political consequences. The spectacular rate of industrial growth in Bilbao also had dramatic social consequences. “While a small group within the traditional Basque commercial and landowning elites benefited, the new industrial capitalists displaced the remaining commercial capitalists, iron producers, and big landowners. The displaced pre-industrial elites would later form a political alliance with the disgruntled peasantry and oppose the whole modernization process” (González Portilla, 1981; Nadal, 1977; Basas Fernández, 1978). As a result of economic prosperity, Bizkaia’s population grew spectacularly during the period. In 1787 Bizkaia had 116,000 inhabitants. By 1857 it had expanded by 45.4 percent to 169,000 inhabitants, becoming the most populated province in the Basque Country for the first time in history. Between 1857 and 1877 Bizkaia’s population grew by 12.5 percent, from 169,000 to 190,000 inhabitants (42.2 percent of the total Basque population). This unprecedented growth accelerated during the last two decades of the nineteenth century. In the midst of the Industrial Revolution, it was four times higher than the median growth rate in Spain at the time. Bizkaia also experienced increased migration, with almost 15 percent of its population in 1877 being born outside the province (Montero, 1993, pp. 96–97; Arpal & Minondo, 1978; Basurto Ferro et al., 1999).


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Export-Led Industrialization in Bilbao Late to industrialization, “by 1876 Bilbao hardly incorporated modern European manufacturing techniques and its industry played only a secondary role in the local economy. Twenty-five years later, in 1901, industrial capitalism vigorously drove production” (Montero, 1993, p. 89). Explosive growth and transformations led to numerous steel and iron businesses, the railroad system was built, a modern financial sector created, and an important fleet of steamers had been built. Insurance companies, shipyards, and hydroelectric companies also became visible in the new economic structure. Scholars seem to agree that the development of the mining sector was at the core of Bilbao’s industrial revolution. Indeed, between 56 and 74 percent of new company investment from 1877 to 1899 was recycled from the profits of local entrepreneurs in the mining industry (Fernández de Pinedo, 1993). Members of the local mercantile community and other investors from outside Bizkaia complete the picture of capitalists involved in the industrial development of the Bilbao region. The Bilbao Nervión River was the epicenter of industrial production in the Basque Country. The proximity of the mines to the river, the development of an important return trade based on coal from Great Britain, and the existence of an economic and mercantile center in Bilbao, all contributed to this geographical advantage. In addition, the populous Basque Country offered the human element that would make the industrial revolution and economic development possible. “The proportionally high number of merchants in the active population combined with the significance of commerce from the eighteenth to the mid-nineteenth century determined Basque capacity to support industrial productivity”. Many of these merchants accumulated new levels of income and channeled them toward industrial development. “In addition, individuals in the commercial bourgeoisie were accustomed to diverse forms of association”, which led to the development of an “entrepreneurial mentality” indispensable to the growth of the new industrial sectors (Montero, 1993, p. 96). Bilbao’s mining entrepreneurs were the most dynamic industrialists in the final quarter of the nineteenth century. Extraction of iron ore grew exponentially between 1878 and 1899, from 1.4 million tons per year to 6.5 million tons. The average yearly production escalated from 159,000 tons in the period 1866–1870, to 1,144,000 tons between 1876 and 1880, to 5,487,000 tons between 1896 and 1900 (Montero, 1993). The sale of iron generated an important inflow of capital. The value of iron ore exceeded 1,000 million pesetas — “an exorbitant amount if we consider, for example, that the total capital of the Banco de Bilbao in the 1880s was 5 million pesetas” (Montero, 1993, p. 102). Most of the profits generated by this activity landed with Bilbao entrepreneurs, although the presence of foreign capital increased at various stages of the production process. About 87.5 percent of ore was extracted in mines owned by Bizkaians. Local companies extracted 60 percent of iron. Between 31 and 36 percent of the ore was transported by rail with mostly local capital. Estimated local participation in exporting companies operating at the port hovered around 28–30 percent. But prior to 1898, the percentage of Bilbao iron transported in ships owned by local shipping companies never rose above 10 percent (Montero, 1993, 1996a, 1996b, p. 133; Galarza Ibarrondo, 1996). Despite increased foreign capital, about 60 percent of the profits generated by the sale of ore between 1890 and 1897 remained in Bizkaia, concentrated in the hands of a small number of mining entrepreneurs. Fifty-eight percent of the


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profits channeled into six mining companies. Subsequent investments of these profits created other businesses in Bizkaia and were also used to buy mines in other regions in Spain. Thus, Basque capital emerged as a formidable factor in the Spanish economy. Using capital accumulated in the mining sector, three modern companies with powerful blast furnaces (San Francisco, Altos Hornos de Bilbao, and La Bizkaia) were created between 1878 and 1882 on the Left Bank of the Nervión River. With the creation of these factories, Bizkaia regained its hegemony over Spain in the iron and steel markets. While Bizkaia’s factories had produced 23 percent of all the iron bars manufactured in Spain between 1861 and 1879, they increased their share of total production to 66 percent between 1880 and 1913 (Nadal, 1977, p. 181). Heavy industry in Spain was thus transferred from the Asturian coal region to Bilbao — where certain types of iron could be produced via the Bessemer method, which required relatively small quantities of coke. During the late 1890s, Bilbao factories produced inexpensive steel that appealed to the rest of Europe. A stiff devaluation of the Spanish currency in the mid-1890s made local products even more competitive in international markets. Between 1878 and 1900, 89 percent of Bizkaian iron was exported. Great Britain, the world economic superpower at the time, was the primary destination for Basque iron, totaling 58 million tons and representing 62 percent of total production and 70 percent of total exports. Between 1887 and 1890, Italy (with 65 percent of the exports), Germany, and France were also critical destinations for Basque iron. Bilbao’s iron-supply relationship to Britain continued until the British Empire’s decline through the 1930s (Glas, 1997, pp. 99–100; Gortázar, 1966; Arrighi, 1999). During the 1890s, however, exports decreased noticeably. Protectionist measures adopted all over Europe made it difficult for Bilbao steel to enter foreign markets. As a result, factory owners concentrated their efforts on supplying the Spanish national market and sought the State’s protection in order to assure higher profit margins than in the more competitive European arena. Three companies formed a cartel in the late 1880s, which also contributed to higher profits in the national market. Finally, in 1901 Altos Hornos de Bilbao, La Bizkaia and La Iberia merged to create Altos Hornos de Bizkaia, Bilbao’s flagship steel company, which closed in the 1990s. The shipping industry attracted enormous capital investments during the final quarter of the nineteenth century. The shipping industry grew from massive mineral exports sourced in Bilbao. The local fleet’s share of the ore traffic had always remained small, “between 5 and 10 percent until the late 1890s”. But in a few years it increased significantly to 40 percent by 1901. During the final years of the century, Bilbao’s fleet “increased its total tonnage by approximately 50 percent, becoming, for the first time in history, the largest in Spain, and accounting for about 50 percent of the total tonnage registered under the Spanish flag” (Montero, 1993, p. 112). Tied to the development of the fleet was the founding in 1901 of Euskalduna, a shipyard that started repairing vessels and which eventually became one of the country’s most important shipyards. The industry had also received additional impetus in 1888 with the creation of Astilleros del Nervión, a company created to build battleships for the Spanish Navy. Although the company failed and the government took over the shipyard to ensure vessel construction, the enterprise demonstrated the Spanish government’s desire to promote national industry. The needs of the shipyard triggered the creation of ancillary facilities and other industries, such as metallurgical firms (Montero, 1993).


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The financial sector was also completely transformed and modernized during the period. The Bilbao Stock Exchange was established in 1890. The stock market incorporated thousands of Bizkaian citizens into the economic revolution of the late nineteenth century. The nominal value of capital in stocks increased almost 50 percent before 1895, and during that year the value of stocks exchanged reached 95 million pesetas. It boomed toward the end of the decade, during the new investment cycle of Bilbao’s economy. The boom lasted until 1901, when a financial crash liquidated many of the companies that had been created during the previous years and bankrupted many small investors. That same year, the value of stocks exchanged in the Bilbao market had reached 236 million pesetas (Montero, 1993). In 1891, several local entrepreneurs created the Banco del Comercio, which “attempted to challenge the restrictive lending practices of the Banco de Bilbao, the oldest financial institution in the province of Bizkaia” (Montero, 1993, p. 121), and closely tied to the interests of the mercantile community, through more aggressive and competitive policies. The Banco de Bilbao’s response was to double its lending capital to 10 million pesetas. The Bizkaian banking system responded to the province’s massive industrialization with these measures. In 1901 the two banks merged, and six new banks appeared to compete with Banco de Bilbao. The seven local banks had a combined nominal capital of 98 million pesetas. Only three of the seven survived the 1901 financial crash, however. Two of those three banks, Banco de Bilbao and Banco de Bizkaia, were consistently among the five largest Spanish banks until their merger in 1988 (Montero, 1993). Demographic growth resulted from the economic boom. Bizkaia’s population increased “from 190,000 to 311,000 inhabitants between 1877 and 1900 — an increase of 64 percent in only 23 years. This was an annual growth rate of 2.2 percent, almost six times the rate in Spain as a whole”. Internal migration accounts for this sharp rise. In 1900, more than 20 percent of the population in the Basque country had been born elsewhere in Spain. Twentyseven percent of Bizkaia’s population, and 31 percent of males, moved into the industrial districts along the Nervión River. Around the turn of the century, Bilbao’s population reached a similar peak, “with 42 percent of its population having been born elsewhere in Spain”. This large migratory wave provoked changes in the occupational structure of the Bizkaian population. By 1887, employment in the industrial and service sectors rivaled the number of jobs in agriculture. Whereas in Spain as a whole, agriculture “occupied almost two-thirds of the active population as late as 1900, in Bizkaia the proportion of the population engaged in secondary and tertiary sector jobs had reached 58 percent”. Manufacturing jobs accounted for two-thirds of secondary sector employment; mining accounted for the other third (Olabarri, 1978, pp. 447–478; Cava, 1996; Chapa, 1989). The merchants’ tight control of the local economy had come to an end after the Second Carlist War (1872–1876) and the subsequent industrial revolution in Bizkaia permitted the incorporation of a new group of entrepreneurs into Bilbao’s business elite. “The new group represented a cohesive elite able to bridge the potentially diverse business interests of the various Bizkaian industries” (Glas, 1997). At the dawn of the twentieth century, Bizkaia was the most vibrant economic region in Spain. Local entrepreneurs had seized the opportunities created by the mining boom to modernize traditional industries and develop new business throughout Spain. This continued in the first decades of the twentieth century. In 1929, Basque capital constituted 25 percent of Spanish banking resources, 38 percent of


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investment in shipyards, 40 percent of the stock in engineering and electrical construction firms, 68 percent of funds dedicated to shipping companies, and 62 percent of the monies invested in steel factories. Such forceful economic investment was concentrated among barely 3 percent of Spain’s population (Glas, 1997; Fraile, 1985, p. 229; Meca, 1996).

Negotiating Economic Growth While the Bizkaian workers struggled during the years of the Industrial Revolution, both the local government and the business elite favored the economic transformations in Bilbao. The local government in Bizkaia promoted economic development during the second half of the nineteenth century — development that directly benefited the business elite, as Glas (1997) has effectively documented. “The government encouraged more efficient exploitation of the mines by tightening property rights, lifting the traditional restrictions on the number of months during which extraction of ore was permitted, and improving the infrastructure of the Triano mining district”. In addition, during the mid-1840s, the local government launched a program to expand and repair the provincial road network. In 1858, the provincial government, or Diputación, agreed to subsidize the private railroad line linking Bilbao with the Castilian interior. At the same time, it decided to build and operate at its own expense the mining railroad linking the Triano district with the Nervión River. The Triano railroad turned a surprisingly consistent profit and became one of the Diputación’s main sources of income (Glas, 1997; Aguirreazkuenaga, 1987, pp. 510–519, 527–532; Villota, 1978). The government also helped the business community with legislative measures. “Despite the restoration of local laws (fueros) enacted by the Diputación in the 1840s, the laws regarding the customs collection at the coast and the centralized justice administration were left unaltered, reflecting an effort to maintain the provincial business community’s stability. In 1863, when the central government was planning to reduce duties on imported iron products, the local government supported the Bizkaian iron producers’ active opposition to the new tariff”. Similarly, the Diputación defended the Banco de Bilbao against the national government’s attempt to collect a 5 percent tax on its earnings by arguing that the fueros exempted Bizkaia’s financial institutions from such levies (Aguirreazkuenaga, 1987, p. 582). “At the time, conservative politicians who emphasized tradition and the importance of the fueros dominated the Bizkaian government — their actions show that economic development was a goal shared by the political elite” (Glas, 1997). This “pro-growth” attitude of the local government continued after the Second Carlist War (1872–1876). The defeat of the Carlists represented a further opportunity for the central government to tackle the fueros issue in the Basque Country. Once again, some modifications were implemented, but the characteristic autonomy enjoyed by the Basques was preserved. Although the Diputación continued collecting taxes, a major change was introduced when the Concierto Económico — or, Economic Agreement, the new fiscal formula for the region — was established. Each year a quota would be negotiated between Madrid and the Basques to determine what each of the Basque Provinces had to turn over to the central treasury. “Fiscal autonomy meant that the local government of Bizkaia managed one of the most affluent provincial budgets in Spain, assuming broad administrative functions, including contracting loans and issuing debt” (Glas, 1997, Chapter 6). Although the


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quota paid to the national treasury increased noticeably when the fiscal agreement was renewed in 1887, 1894, and 1906, Bizkaia’s payments remained relatively low. “In fact, the payments were lower than the amount the central government could have collected had it applied the national rate to this province”. A contribution to its prosperity, Bizkaia’s tax rates were among the lowest in Spain (Glas, 1997). The national government also allied itself with local business interests. During the 1880s and 1890s, Bizkaian entrepreneurs succeeded in persuading the Madrid government to promote their region’s economy. “By criticizing the unfair trade practices of foreign competitors, and arguing that infant industries merited protection until they were strong enough to compete, Bilbao’s business elite promoted protectionism and the development of national industry”. These two interrelated goals clearly aided the parties who advocated them. As Glas (1997, p. 136) observes, “Even though requesting government support for business development was not new, the impact of the message carried more force when the iron industry acquired a critical mass and market conditions worsened for Bizkaian’s producers”. In 1866, Bizkaia’s industrialists cooperated with the national government’s desire to reduce several iron-product tariffs “by requesting long-term tariff protection to improve the competitiveness of their factories. In addition, they proposed an end to railroad company exemptions, which had allowed duty-free imports. They also demanded abolition of coal and coke import-tax”. The Board of Trade’s opinion on the tariff matter reinforced the position of local iron factory owners. The Board recommended delaying any reduction in import duties until the market situation improved. It also asked the government to reduce the cost of transportation, eliminate the coal and coke tariff, and apply duties to rail construction imports (Glas, 1997, p. 195–196). Bilbao businessmen asked for government help not only to protect local production against foreign competitors, but also to make their products more competitive abroad. In 1887, supported by the local Chamber of Commerce and the provincial representatives in the Spanish parliament, Bizkaia’s three major steel companies secured a reduction in the export duty levied on iron bars (Fusi Aizpurúa, 1984, p. 13). “That same year, when the government solicited the opinion of the Bilbao Chamber of Commerce regarding the bilateral commercial treaties signed with other European States, Basque producers did not express any opposition. On the contrary, they requested that the national government negotiate provisions exempting their iron bars from hefty import duties in the signatory countries”. The fact that the business elite sought protection at home did not exclude an interest in foreign markets with support from the government (Glas, 1997). Years later, however, the commercial treaties threatened Basque interests. Basque businessmen feared that the national government would grant special concessions to the countries willing to sign them. Mounting opposition to the treaties led to a strong lobbying effort in defense of national industry, sponsored by primary companies in the steel sector who formed the Liga Vizcaína de Productores (Bizkaian League of Producers). “The Liga and other groups successfully lobbied the government on commercial treaties in 1894, the railroads’ import exemption in 1896, and the revision of the tariff law in 1906. Aided by interlocking investment patterns, Bizkaia’s businessmen were able to present a unified front to the national government. As the twentieth century progressed, successive Spanish governments promoted national industry more actively”. During the 1900–1930 period,


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Basque entrepreneurs benefited from a highly protected steel industry — an industry that supplied 83 percent of national consumption and charged prices that in some cases were twice as high as those paid on the international market (Glas, 1997).

Bilbao’s Third Globalization: 1900–1937 The period 1900–1937 represented the maturation of the capitalist society born in Bizkaia during the final decades of the nineteenth century — although, of course, there were periods of expansion (1900–1903, 1914–1918, 1924–1929) and periods dominated by crisis (1904–1913, 1921–1923, 1930–1934). Despite the progressive exhaustion of the mines, Bizkaian industry around Bilbao, particularly the iron and steel and shipbuilding industries, enjoyed continuous growth. Bilbao had become the only center of Basque industry, a situation that would last until the decade of 1960. Between 1901 and 1916, 1,225 new companies were created in Bizkaia. “Bizkaian capital investments reached 6,500 million pesetas between 1903 and 1928, an impressive amount representing approximately one third of all Spanish investment capital during the period” (Fusi Aizpurúa, 1984, p. 23). Toward the end of the Spanish Civil War (1936–1939), the region accounted for about 3 percent of the Spanish population but generated 6 percent of its GDP. Thus, Bizkaian capital played a hegemonic role in the development of industry (iron and steel, hydroelectric and chemical in particular) not only in the Basque Country, but also in the rest of Spain. Following the appearance of industrial labor unions in 1910–1914, labor relations tended toward modernization and corporatism. Violent confrontations and miners’ strikes (prevalent between 1890 and 1910), gradually disappeared, although not completely. Instead, representatives of capital and labor established bargaining processes to forestall the conventional strike. The socialist union, UGT, exerted the strongest influence during this period (Montero, 1996a, 1996b, p. 69). Between 1900 and 1937 Bizkaia’s population grew at rapid pace. By 1937 the province had 485,000 inhabitants, about 50 percent more than in 1900, mostly concentrated in the Bilbao’s industrial areas and on the banks of the Nervión River. Bizkaia’s population growth was the highest of all Spanish provinces during the period, mainly due to migration from neighboring provinces. Bilbao’s population rose from 83,000 inhabitants in 1900 to 161,000 in 1930 — a 95 percent increase. In metropolitan Bilbao, some neighborhoods had more than 60 percent of the population originating from outside the area (Montero, 1998, p. 153; Macías, 1993). The structure of urban space in the city grew more complicated, but still discernible — the workers lived in the Left Banks of the Nervión River, while the Right Banks and portions of El Ensanche (next to city center) developed into bourgeois quarters. Neguri, which would become a favored place of residence for Bilbao’s business elite, started construction in 1906. The population’s occupational distribution changed dramatically, reinforcing tendencies seen in the final years of the nineteenth century. While agrarian employment decreased from 41.7 percent in 1900 to only 21.5 percent in 1930, the industrial sector grew from 32.6 percent of the active population in 1900 to 47 percent in 1930. The tertiary sector increased from 25.7 to 31.5 percent during the same period (Fusi Aizpurúa, 1984, p. 15). The rise of urban middle classes and the industrial proletariat therefore produced the most important sociological change of the period.


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The Bilbao Stock Exchange’s crash in 1901 saw a new era of economic recession began. The recession persisted until the First World War and was most clearly manifested in the loss of new stock investments. For many scholars, the first years of the twentieth century saw a large number of mergers and the establishment of cartels to take advantage of the Spanish government’s protectionist policies. As discussed previously, the creation of Altos Hornos de Bizkaia in 1901 exemplifies this trend. The First World War provided exceptional stimulation for Basque capitalism, offering a number of opportunities for Basque businessmen. Neutrality allowed Spain to meet demand with high prices. In Bizkaia, the shipbuilding and the banking sectors profited tremendously, and the price of iron spiked dramatically. “During the final year of the war, economic activity approximated 1901 levels. Capital accumulation generated new investments in shipyards, banking, and the iron and steel industry, with a number of new companies being established such as Babcok Wilcox, in the machinery construction sector, in 1918” (Montero, 1998, p. 163). War’s end heralded a new economic recession, already in the making by 1919. In this recession the iron and steel industries incurred the most damage, with the trade in iron ore suffering the loss of its main market, Great Britain, by 1921. “Exports from Bilbao decreased from 2,170,000 tons in 1920 to 501,000 tons in 1921 — although iron ore sales did partially recovered after 1922” (Freire Rubio, 1991, p. 22). The sharp decline in iron ore trade soon affected maritime traffic, which depended on the transport of Basque ore to Great Britain. The Euskalduna shipyards sought to avoid bankruptcy by diversifying their activities, and started to produce locomotives and other products for the railway system. Despite the obvious benefits of the price arrangements in the national market favored by the tariff agreements of 1906, 1922, and 1928, in the long run protectionism hurt Bilbao companies. The gradual loss of international markets rendered the Basque industry obsolete, particularly when it was deprived of regular technology transfer from Great Britain (Fraile, 1985, p. 244). The new national regime of General Primo de Rivera (1923–1930) proposed yet another set of structural reforms for industry. Consisting mainly of new protectionist measures, Bizkaia businessmen accepted them enthusiastically. Locomotive building, construction, and concrete were favored most by the government’s program. The iron and steel industries were subsidized to help them recover maritime trade and ore exports. But in 1930, the economic policies of Minister Argüelles had immediate and disastrous consequences for Bizkaia. The government program to rebuild the railway system was curtailed, which, in turn, meant a sharp reduction in production for Bizkaia’s industries. “Production of steel in Bizkaia, for example, dropped by 37 percent between 1929 and 1931” (Montero, 1998, p. 166). These changes were the local by-product of the 1929 world crisis. The crisis continued during the years of the Second Republic (1931–1937). In fact, industrial production nearly stopped altogether in 1934. The implementation of the government program for industrial restructuring also triggered a drop in company profits. Dividends of Altos Hornos de Bizkaia, the most important company in the province, decreased by half in 1931. In addition, a chaotic situation in the labor market spiraled into a 25 percent unemployment rate in 1935 — a year that recorded slight improvement in economic conditions. General Franco’s 1936 insurrection found little support in Bizkaia, which remained loyal to the legal Republican government. Although Bilbao resisted the


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advance of Francoist troops until June 1937, one month later the Basque Army surrendered to the rebels. The fascist regime soon abolished the conciertos económicos and all other symbols of Basque liberties, while Franco gained access to the resources of the powerful Bilbao industry, a key to the resolution of the war. Following the Civil War, Spanish and Basque industry, and in particular that in the Bilbao area, entered a period of recession that would not end until the beginnings of the 1960s.

De-Globalization and Autarchy in the Franco Years, 1937–1975 The Franco dictatorship was disastrous for the development of the country, not only politically but also economically. The fascist ideology stood for an economy strictly based on national resources — although, in any case, Spain’s political isolation between 1939 and 1953 forced it to implement such a formula. Economic self-sufficiency was not easy to achieve, however, due to the scarcity of resources generated by the war. As a result, large segments of the population, particularly in urban areas, lived off food coupons, and the threat of hunger was very real for many years. “A crippling black market and generalized administrative corruption were common features of the period. In cities such as Bilbao, over 50 percent of the resources were distributed outside official channels”. The existence of a dual market and an informal economy of such magnitude dramatically affected the price structure and condemned the population to misery. “Basic products such as bread sold on Bilbao’s black market at prices 13 times higher than the official figures. Compared with two years earlier, by 1946 the standard of living had dropped almost 50 percent. Salaries would never grow at the rate of price inflation. In fact, in the years between 1936 and 1947 the real purchasing power of the population dropped by 80 percent”. Many people took the road of emigration into adjacent provinces’ rural areas during the 1940s (Montero, 1998, pp. 192–197). This desperate economic situation required a new approach, which came about many years later, toward the end of 1950s. The United States economic support for the dictatorship in exchange for military bases meant the end of Spanish isolation. At home, the regime opted for economic liberalization and planning for economic expansion. A Stabilization Plan in 1959 and various Development Plans during the 1960s set the basis for a period of significant growth after two decades of misery. The prosperous Western economy positively affected the financial boom of the 1960s — although the world energy crisis of 1973 put an end to the so-called Spanish economic miracle. Despite Bizkaia not being one of the “national interest” areas in the Development Plans, which sought a geographical diversification of industry in Spain, it benefited enormously from the improved economic climate. Enhanced by the Acción Concertada (“concerted action”), the Bizkaian metallurgy sector received generous loans to increase production. By 1972, businesses located in the Bilbao area had absorbed 52 percent of the total public funds received by the Basques (Torres Enjuto, 1995, p. 68; Costa Morata, 1991). In all, although some new chemical industries were created near Bilbao, the province’s industrial base did not change significantly. Moreover, the service sector did not develop sufficiently in spite of the industrial growth, a pattern that has characterized Bilbao’s economy until very recently.


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The population of the Basque Country doubled between 1950 and 1975, from about 1,000,000 people to over 2,000,000. Bizkaia’s population grew at a similar rate, increasing from 570,000 inhabitants in 1950 to about 1,000,000 in 1975, mostly concentrated in the Bilbao metropolitan area. Between 1950 and 1960, Bilbao’s population grew by 30 percent, and the number of Left Bank residents increased by 64 percent (Montero, 1998, pp. 205–207; Urrutia, 1979; Clemente, 1981). Migration was a decisive factor in the city’s demographic transformation. Bilbao received the largest number of migrants of all Basque cities, exceeding 100,000 in the period 1951–1960. However, population growth was not uniform in the city’s metropolitan area. Whereas the city itself was the engine of growth, the Left Bank served as both the productive and residential center for the working class. Most factories were established on the Left Bank, mixed with the workers’ residences. The large increase in the population produced rapid and uncontrolled urban growth, which created a very polluted and congested area. The Right Bank, on the other hand, became an upper-middle-class residential area and a vacation spot for Bilbao’s bourgeoisie. The Nervión River, which had traditionally been the axis of metropolitan Bilbao’s economic development, now served as the frontier between the two main agents involved in the industrialization process (Table 3.1).

Selling to the Protected Spanish Market During the post-Civil War period, and particularly between 1955 and 1975, the Basque Country, alongside Madrid and Catalonia, was the most dynamic region in Spain but both the Basque Country and Catalonia remained highly dependent on the Spanish economy. Data on trade between the Basque Country and the rest of Spain illustrate this economic dependence. In 1983, Basque imports from the rest of Spain represented 54 percent of its GDP, while exports to the rest of Spain represented 72 percent. Similarly, imports from Spain made up 86 percent of total imports in the Basque Country. Exports to the rest of Spain accounted for 76 percent of all Basque exports (Díez Medrano, 1995; Eustat, 1986; Pérez-Agote, 1978; Sánchez Tirado & Martín de Retana, 2000). The Basque economy was centered on the steel sector, which in 1955 represented 29 percent of Basque GDP. This sector maintained a crucial association with the two major Basque banks, the Banco de Bilbao and the Banco de Bizkaia, leading to monopolistic

Table 3.1: Population changes in various areas of Metropolitan Bilbao, 1900–1970. 1900 Bilbao 104,500 Left Bank 56,800 Right Bank 9,400 Metropolitan Bilbao 178,100

1910

1920

1930

1940

1950

1960

1970

119,100 65,800 12,000

148,400 182,300 80,900 99,700 17,100 25,000

205,300 99,500 26,300

239,600 112,100 28,500

312,500 184,300 34,000

416,500 273,300 60,000

207,800

261,000 328,000

353,800

405,300

574,300

822,100

Source: Urrutia (1984, pp. 83, 94).


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concentration and a high level of vertical integration. For instance, in 1952, Altos Hornos de Bizkaia, the leading firm in the steel sector, owned or was the primary stockholder in 11 companies providing raw materials, and owned or was the primary stockholder in another 19 that transformed the steel produced at Altos Hornos into more elaborate products. The Banco de Bilbao and the Banco de Bizkaia, in turn, controlled Altos Hornos. This example illustrates on a smaller scale, but with closer concentration, the main structural characteristics of Basque capitalism. At the top were two banks, the Bilbao and the Bizkaia. These banks were primary stockholders in the major companies of various monopolized sectors of the Basque economy, such as the steel industry and the energy sector. In turn, these companies owned or were major stockholders in a string of smaller companies. In the final analysis, two banks and a few large corporations controlled the majority of the Basque economy. “Local capitalism depended upon these large corporations and on the banks that controlled them, most of which were managed by people who held Spanishoriented and pro-Franco attitudes” (Díez Medrano, 1999). In addition to constraints faced by local capitalists, members of what Smith (1981) calls the technical intelligentsia (e.g. engineers) and the humanistic intelligentsia (e.g. lawyers) depended in large measure on employment, contracts, loans, and connections controlled directly or indirectly by the owners of the big industrial and banking monopolies (García Crespo, Velasco, & Mendizábal, 1981; Tamames, 1967; Smith, 1981; Aberasturi, 1982). The Basque upper class maintained strong economic ties with the Spanish State and economy. The early years of the Franco regime (1939–1952) were characterized by an autarchic and interventionist economic policy, focused on rebuilding the infrastructure destroyed by the war. During this period, the market economy largely disappeared and the State became the main consumer of goods and services in Spain. Because of its symbiotic relationship with the State, this situation — and the international demand for capital-goods production created by World War II — was of significant benefit to the Basque capital-goods sector (steel production, shipbuilding, electricity, metallurgy). As Díez Medrano (1995, p. 221) notes: “Although there was almost no internal private demand for heavy industrial products, the state needed Basque heavy industry to rebuild the country’s infrastructure and to satisfy military needs. By 1940, about two-thirds of Spanish steel production was located in the Basque Country, with the main consumer of this steel being the state”. Moreover, investment in Bilbao’s stock market (which increased 10-fold between 1936 and 1942) further strengthened Basque capitalism’s interdependence with the Spanish State, for it was directed chiefly toward the purchase of public debt. Indeed, between 1941 and 1949, public debt represented 53 percent of this investment. In addition, the volume of public capital investment during those years was highly concentrated in the Basque Country. Data for 1941 show that an amazing 21 percent of the total capital invested throughout Spain was registered in Bilbao (compared with just 9 percent registered in Barcelona). As in the pre-Civil War period, Basque capitalist power was based on the strength of its banking system, which the dictatorship helped to increase. In the early 1960s, seven Spanish banks controlled 70 percent of all deposits placed in private banks (Díez Medrano, 1999). These seven banks also controlled the largest Spanish corporations through stock ownership, credit-distribution (60 percent of the total value of bank loans was provided by these seven banks), speculation in the stock market, and other indirect


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mechanisms. Four of these banks were either Basque (Bilbao and Bizkaia) or had very strong connections to Basque capital (Urquijo, Banesto). The formation in 1946 of the “Highest Banking Council” to advise the Ministry of Finances on banking matters institutionalized the influence of the Spanish financial sector (largely Basque) over State policy. Representatives from the “big seven” played a determining role in the Council. Thus, during the Franco era, Basque capitalism solidified its leadership of the Spanish economy up to 1975 (Moya, 1975, p. 205; Tamames, 1967, p. 67).

Conclusions The cyclical character of globalization, the role of State developmentalism, pathways to globalization, and scaling have been highlighted in this chapter. On the one hand, industrialization gave rise to Bilbao’s modern business elite, which grew out of the mining business and diversified investments in other sectors and other regions in Spain, exemplifying the Spanishness of Basque capitalism. On the other, foreign economic relations continued at a good pace in Bilbao. Exports of local iron, in particular, reached unprecedented levels as the city became the main supplier for Great Britain (70 percent of exports) during the latter’s imperial apogee, up to the First World War. Structural adjustments in the Basque industry and the consolidation of liberalization and centralization policies undertaken by the various Spanish governments during the nineteenth century, however, meant Bilbao’s industry was much more geared to producing and selling in a protected Spanish market than competing in foreign arenas. Following the abolition of the Basque privilege to import goods duty-free, the city became fully integrated into the Spanish market. In historical terms, when compared with other times — and although between 1900 and 1937 the city experienced a third globalization phase — Fordist Bilbao was an era of de-globalization for the city, especially in the period 1936–1973. Through its port, Bilbao continued to serve as a node in trade between Spain and the world, but uneven development within Spain helped Basque industrialists to execute a strategy of industrial expansion, which strengthened the structural ties between the city and the nation-state. The chapter demonstrates how globalization — as a complex multiscalar process — is leveled at the local, regional, and national domains, and it confirms that globalization turns out to be a cyclical process — with interim periods of de-globalization — when observed in historical perspective. Bilbao was late to industrialize. By 1876, the city incorporated few modern European manufacturing techniques and its industry played only a secondary role in the local economy. Twenty-five years later, however, in 1901, industrial capitalism vigorously drove production. The proportionally high number of merchants in the active population combined with the significance of commerce from the eighteenth to the mid-nineteenth century determined Basque capacity to support industrial productivity. Many of these merchants accumulated new levels of income and channeled them toward industrial development. In addition, individuals in the commercial bourgeoisie were accustomed to diverse forms of association, which led to the development of an entrepreneurial mentality indispensable to the growth of the new industrial sectors. Despite increased foreign capital, about 60 percent of the profits generated by the sale of ore between 1890 and 1897 remained in Bizkaia, concentrated in the hands of a small


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number of mining entrepreneurs. Subsequent investments of these profits created other businesses in Bizkaia and were also used to buy mines in other regions in Spain. Thus, Basque capital emerged as a formidable factor in the Spanish economy. During the late 1890s, Bilbao factories produced inexpensive steel that appealed to the rest of Europe. A stiff devaluation of the Spanish currency in the mid-1890s made local products even more competitive in international markets. Between 1878 and 1900, 89 percent of Bizkaian iron was exported. Great Britain, the world economic superpower at the time, was the primary destination for Basque iron, totaling 58 million tons and representing 62 percent of total production and 70 percent of total exports. Between 1887 and 1890, Italy (with 65 percent of the exports), Germany, and France were also critical destinations for Basque iron. Bilbao’s iron-supply relationship to Britain continued until the British Empire’s decline through the 1930s. The shipping industry attracted enormous capital investments during the final quarter of the nineteenth century. The shipping industry grew from massive mineral exports sourced in Bilbao. The financial sector was also completely transformed and modernized during the period. The Bilbao Stock Exchange was established in 1890. The stock market incorporated thousands of Bizkaian citizens into the economic revolution of the late nineteenth century. At the dawn of the twentieth century, Bizkaia was the most vibrant economic region in Spain. Local entrepreneurs had seized the opportunities created by the mining boom to modernize traditional industries and develop new business throughout Spain. This continued in the first decades of the twentieth century. In 1929, Basque capital constituted 25 percent of Spanish banking resources, 38 percent of investment in shipyards, 40 percent of the stock in engineering and electrical construction firms, 68 percent of funds dedicated to shipping companies, and 62 percent of the monies invested in steel factories. Such forceful economic investment was concentrated among barely 3 percent of Spain’s population. While the Bizkaian workers struggled during the years of the Industrial Revolution, both the local government and the business elite favored the economic transformations in Bilbao. The local government in Bizkaia promoted economic development during the second half of the nineteenth century — development that directly benefited the business elite. The government also helped the business community with legislative measures. This “progrowth” attitude of the local government continued after the Second Carlist War (1872–1876). The national government also allied itself with local business interests. During the 1880s and 1890s, Bizkaian entrepreneurs succeeded in persuading the Madrid government to promote their region’s economy. In 1866, Bizkaia’s industrialists cooperated with the national government’s desire to reduce several iron-product tariffs by requesting long-term tariff protection to improve the competitiveness of their factories. Bilbao businessmen asked for government help not only to protect local production against foreign competitors, but also to make their products more competitive abroad. The period 1900–1937 represented the maturation of the capitalist society born in Bizkaia during the final decades of the nineteenth century. Bilbao had become the only center of Basque industry, a situation that would last until the decade of 1960. Between 1901 and 1916, 1,225 new companies were created in Bizkaia. Toward the end of the Spanish Civil War (1936–1939), the region accounted for about 3 percent of the Spanish population but generated 6 percent of its GDP. Thus, Bizkaian capital played a hegemonic role in the development of industry (iron and steel, hydroelectric and chemical in particular) not only in the


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Basque Country, but also in the rest of Spain. The gradual loss of international markets after the end of the First World War rendered the Basque industry obsolete, particularly when it was deprived of regular technology transfer from Great Britain. The Franco dictatorship was disastrous for the development of the country, not only politically but also economically. The fascist ideology stood for an economy strictly based on national resources — although, in any case, Spain’s political isolation between 1939 and 1953 forced it to implement such a formula. Economic self-sufficiency was not easy to achieve, however, due to the scarcity of resources generated by the Civil War. The Basque upper class maintained strong economic ties with the Spanish State and economy during the Franco years. The early years of the Franco regime (1939–1952) were characterized by an autarchic and interventionist economic policy, focused on rebuilding the infrastructure destroyed by the war. During this period, the market economy largely disappeared and the State became the main consumer of goods and services in Spain. In the late 1970s and 1980s, especially, the armed group ETA (Euskadi Ta Askatasuna, or Basque Land and Freedom) frequently put into practice its terror strategy against the Spanish State — a strategy that continues today. The ascent of ETA’s bloody fight for in dependence and socialism in the Basque Country coincided with the transition to democracy in Spain after Franco’s death in 1975, and with the world energy crisis of 1973. These were all major events that dramatically influenced the course of history in the Basque Country and Bilbao specifically. While Basque political leaders bargained for regional autonomy with Spain’s new democratic leaders, Bilbao’s years as an industrial giant were numbered. With the irreversible decline of Fordist Bilbao in the 1970s, a new era began for the city — an era of economic restructuring first, and urban revitalization later. This story begins in the next chapter.

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Chapter 4

Global Pressures and the Crisis of Fordism

Introduction Chapters 2 and 3 were devoted to analyzing Bilbao’s development during the centuries of commercial capitalism starting in 1300 (Chapter 2), and during the period beginning with industrialization in the mid-to-late nineteenth century and up to the 1970s (Chapter 3). Bilbao’s pathways to globalization during these periods were tracked in those chapters. We now continue the journey by analyzing globalization in Bilbao during the end of the Fordist model in the 1970s and 1980s. Although urban revitalization started in the late 1880s in Bilbao — as shall be seen in Chapter 5 — the societal and economic restructuring that triggered it began to manifest earlier in the 1970s with the unfolding crisis of the Fordist model that sustained local development for much of the twentieth century. The structural ties that linked Basque economic elites and production systems with the Spanish State — ties that sustained a relatively stable period of Fordist accumulation in the Basque Country for decades — suffered from widespread economic transformations in the West and Spain during the 1970s and 1980s. This chapter, which examines the structural changes that occurred in Bilbao during such period of crisis, restructuring and tertiarization of the Basque economy, shows that restructuring was not a direct, unmediated byproduct of globalization, although it had a close relationship with it. Specifically, a variety of local, domestic factors influenced the outcomes during the attempt to turn Bilbao into a service economy. The political atmosphere in the Basque Country and the overall industrial policy implemented by the socialist government in Madrid greatly influenced the fate of Bilbao’s steel manufacturing and shipbuilding industries. Because local plants were not adapted to the environment of lower industrial demand and had to be downsized or closed, the global restructuring of these sectors also contributed to Bilbao’s decay. The specific ways in which restructuring took place, however, were matters of political choice at the national and regional levels. Ironically, Bilbao’s strengths — Fordist industrial power, entrepreneurship, and linkages to the world-system — made the city particularly vulnerable to world trends. This chapter demonstrates how globalization (as a worldwide phenomenon) and economic restructuring (as a local response) are not linked in a necessary and direct way, but rather mediated by regional and national dynamics, with the politics of developmentalism playing a very active and fundamental role in the shaping of globalization in cities and regions. Globalization has often been portrayed as a universal process affecting places similarly. Most notably, the unqualified idea that globalization leads to social dualization has


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received significant support among scholars — the validity of this proposition being dependent on the precise meaning of globalization. Without questioning the value of such an idea as a social science heuristics, one must ask whether processes of urban restructuring generally — which are usually triggered by larger social forces — can be sufficiently explained without the mediation of national, regional, and local developments and whether social and spatial dualization is but a “muddy metaphor” for cities already “quartered” before the advent of globalization’s current wave (Marcuse, 1989; Marcuse & van Kempen, 2000). The structure of this chapter is straightforward. It begins with an account of the economic crisis that ended Fordism in Bilbao. It then analyzes the crisis’ political responses that triggered restructuring, a process aimed at turning Bilbao into a service economy with the help of revitalization. The chapter continues with a survey of tertiarization in the Basque economy and an account of socio-spatial fragmentation in the Bilbao metropolitan area.

Fordism’s Crisis in Advanced Economies The political situation in the Basque Country during the late 1970s — marked by ETA’s terrorist campaign and transition to democracy in Spain — was not the only serious circumstance affecting Bilbao’s development. The local economy had to confront the reality that the period of economic growth — and indeed the Fordist accumulation mode — was coming to an end as economic recession spread throughout the Western world. From 1973 onward, the world energy crisis — whose main symptom was a sharp increase in the price of oil — hit the Bilbao productive system hard, with its effects lasting until the mid-1980s. Although the Basque crisis was similar to that of neighboring economies (all Western Europe was immersed in the energy crisis, which triggered a deep restructuring of advanced capitalist economies), other factors deepened it, making it more profound than other areas in Spain and the rest of Europe. Political and economic factors, as well as local and global developments, account for the depth and scope of this acute crisis. Although it is hard to quantify its influence, the atmosphere of political violence and anxiety in the Basque Country negatively affected investment and development. The Basque situation was complicated by its political impasse. Basque political violence instigated by ETA has been a major impediment to investments in the Basque Country during the last 30 years. The so-called impuesto revolucionario (revolutionary tax) was demanded from capitalists under death threats. Several industrialists were kidnaped during the 1970s and 1980s, causing several firms to abandon the Basque region. Political leaders were slow to react to the crisis. Instead, they focused on engineering a viable political pathway to democracy. Still, politics explains only one variable in the overall economic crisis. In fact, the factors influencing Bilbao’s economic performance were intertwined as mistaken domestic policies caused huge deficits and led to high inflation — inflation rates for Spain were double those of other European countries. In addition, global pressures that were a result of a widespread world recession emphasized how Bilbao’s lack of diversification, technological dependence, and its unmodernized infrastructures worsened its situation. Bilbao’s traditional industrial concentration was in iron and steel manufacturing and shipbuilding, sectors that were deeply affected by the world recession and restructuring.


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The Basque Country, and especially Bizkaia, had an economy exclusively based on metallurgy and basic manufacturing: furnace and steel production, metallic transformation, mechanical engineering, and shipbuilding. The whole Bizkaian economy gravitated to the heavy engineering industry. As a result, all other economic activities in the province were dependent on it. “When the central element was destroyed, the whole provincial economic structure collapsed” (García Merino, 1977, p. 389; Gómez, 1998). Owing to the crisis, activity rates diminished sharply and unemployment climbed. This exposed the structural weaknesses of Bilbao’s industries, which were no longer competitive due to obsolete facilities and the technological lag in processes and products. Although the country as a whole suffered the effects of the crisis, Bilbao was struck more severely (García Merino, 1977, 1979). The process seriously affected Bizkaia’s economic position in Spain. In 1975 Bizkaia had occupied first place in per capita growth in Spain. Ten years later it ranked fourteenth among the 50 Spanish provinces. Productivity stagnated through lack of technical innovation. Selling the final product in an already saturated market was difficult. During the years of autarchy under Franco’s regime (the 1940s and 1950s), production was oriented almost exclusively toward the Spanish market (Chapter 3). “The relative security of the national market reduced the need both to search for new commercial outlets and seek industrial innovation” (Gómez, 1998, p. 114). While foreign investments played a crucial role in the early stages of industrialization (during the late years of the nineteenth century), foreign capital later lost its relevance to Basque industry (Etxebarría Kerexeta, 1993). The autarchic isolationism of Spain up to the late 1950s thus contributed to low levels of foreign investments. Moreover, the so-called Acción Concertada (the economic program that had fostered economic growth during the 1960s), despite its initial benefit to manufacturing activity, promoted an excessive level of production during restructuring. In contrast to the majority of Western European countries, which started to adjust their industrial structure in order to prevent the effects of the crisis, Basque firms expanded and modernized their “Fordist” plants. The loans and tax credits offered by the Spanish government contributed to this expansion, thus increasing public debt. In fact, domestic policies were almost completely disconnected from global trends. The 1970s crisis in steel manufacturing originated in a worldwide decline in demand. This crisis was coupled with the rising production power of “new” countries such as Brazil, Venezuela, Korea, and Iran, which could produce at a lower cost. The productive capacity of the Basque steel sector was already well above demand due to huge investments in the 1960s. Companies consistently experienced losses, with the province of Bizkaia most critically affected. For some years, exports delayed the effects of recession. However, the serious structural problems in steel manufacturing, such as excess productive capacity, technological lag, and heavy dependence on foreign raw materials and energy could not be abated permanently. The economic measures adopted by the Spanish government in 1978 were never sufficient to solve the situation. It was clear that a process of industrial restructuring was necessary. However, the social costs of the process offered formidable reason for inaction (BBV Foundation, 1997). Shipbuilding also suffered from an enormous lag between productive capacity and demand. When demand lessened, errors committed in the expansionist years resurfaced with more serious consequences. The shipbuilding industry was technologically inferior to that of other European countries and


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could not compete with the lower prices offered by less-developed countries such as Korea, Brazil, Singapore, Hong Kong, and Taiwan. The situation triggered a restructuring plan that began in 1978 and resulted in a 57 percent reduction in industry capacity and the direct loss of approximately 3,000 jobs (Escudero, 1981). Other sectors such as machine tools, chemical, electrical components, and textiles also suffered. In sum, the traditional productive system and the “iron culture” came to an end in Bilbao and the Basque Country. The only sector that remained largely unaffected by the crisis was the financial sector. Throughout the 1970s and 1980s, Basque banks registered large sums of new income. In the context of the restructuring of the Spanish financial sector, the two largest Basque banks — Bilbao and Bizkaia — announced a merger in 1988. The crisis had important demographic consequences. The 1990 census revealed that fewer people lived in the Basque Country than 10 years before — an unprecedented phenomenon in the twentieth century. In the period 1981–1991, the metropolitan area of Bilbao lost 29,850 inhabitants — 3.1 percent. Between 1981 and 2001, the city of Bilbao lost 11.1 percent of its population (EUSTAT, 1986, 1996). In spite of recent economic rebound since 1994, slightly downward population trends in the Basque Country and Bilbao continue (Table 4.1). At the beginning of the twenty-first century, the region remains a poor immigrant attractor in the midst of significant growth of the North African and Latin American immigrant population across Spain. As we know, the crisis not only affected the Basque economy but the economies of Western Europe as well. As the world economy underwent a structural transformation, production shifted from the advanced capitalist center to the Third World periphery. In this process, the traditional industrial regions lost their position in the new spatial organization of production as a result of changes in the international division of labor. The globalization of capital, affected by transnational corporate expansion throughout the world, brought about a process of de-industrialization in the advanced capitalist countries, especially the United States. As Echaniz (1999, p. 123) comments: Industrial restructuring applies to changes in finance, production, employment, and organization of work. In order to rationalize production, factories are closed down, workers laid off, automation increased, and the labor force is reorganized according to the principle of flexibility instead of stability. Industrial decline and decay result, in addition to rising unemployment and growing inequality.

Table 4.1: Population changes in the Basque Country and Bilbao, 1981–2001.

Basque Country Bibao Metropolitan Bilbao

1981

1986

1991

1996

2001

2,141,800 393,800 952,400

2,136,100 381,500 942,700

2,140,000 369,800 922,500

2,098,000 358,900 905,900

2,082,600 350,000 865,800

Source: EUSTAT (Census of 1981, 1986, 1991, 1996, 2001).


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As Bluestone and Harrison (1982, p. 12) point out “… de-industrialization does not just happen. Corporate managers make conscious decisions to move a factory from one location to another, to buy up a going concern or dispose of one, or to shut down a facility altogether”. In other words, the de-industrialization process emanates “… from corporate decisions to maximize profits through the employment of cheap labor in the Third World, which leads to plant closings and the loss of jobs in advanced capitalist countries”. Faced with this problem, “… the State seems unable to solve worsening unemployment and underemployment, or to direct the re-industrialization process” (Echaniz, 1999, p. 136). The de-industrialization process in Bilbao took place over a short period of time and the spectacular rise of unemployment was the most visible and dramatic consequence of the economic crisis. Between 1979 and 1985, 94,700 industrial jobs (24 percent) were lost in the Basque Country. In only four years (between 1982 and 1986) various manufacturing sectors registered severe employment losses which indicated a bleak future for the industries: “42.1 percent in shipbuilding; 24.4 percent in mechanical engineering; 23.2 percent in the iron and steel industry; 20.8 percent in other electrical material; 16.1 percent in foundry; and 13.9 percent in metal manufacturing” (Gómez, 1998, p. 119). Between 1973 and 1983 the Basque Country lost 123,000 jobs (Echaniz, 1999). The unemployment rate, which had remained low both in Spain and in the Basque Country during the 1960s, started to soar in the 1970s, from 3 percent in 1973 to 14.2 percent by 1980 — one of the highest in Europe at the time. In 1965, for example, Basque unemployment was negligible (some statistics show a 0.5 percent unemployment rate for those years). By 1985, however, the unemployment rate had increased to 21.1 percent of the active population. Among the Basque provinces, Bizkaia, which was the most industrialized province at the time, sustained the highest unemployment rate (15.1 percent), followed by Gipuzkoa (14.7 percent) and Araba (8.5 percent). Unemployment particularly affected the youth (over 50 percent of those under 25 were unemployed) and women. In 1982, the female unemployment rate was 10 percentage points higher than their male counterparts. During 1978, 51,000 Basque workers were affected by economic restructuring. Some lost their jobs, others suffered temporary layoffs, and the rest sustained a reduction in their working hours. By 1980, some 115,000 workers had experienced some change in their working status through this restructuring process (Caja Laboral Popular, 2001, p. 21). Despite an improvement in economic performance during the second half of the 1980s — which meant a decrease in unemployment rates — the early 1990s brought another period of recession for the Basque economy. The unemployment rate registered a further increase up to 1994 when it peaked. It subsequently fell until 2005 as a result of the positive economic cycle and the economic policies developed by the Basque government (Graph 4.1). The labor market structure significantly changed, however. A considerable proportion of newly created jobs are not secure or permanent. Unemployment triggered labor conflicts and struggles, in which higher wages (to balance a spectacular inflation rate of nearly 25 percent in 1977) and the defense of jobs threatened by the industrial crisis were the fundamental issues. A tragic moment in labor mobilization took place in Vitoria in 1976 when three strikers were killed by police. This event triggered a wave of protests in the Basque Country and the rest of Spain.


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Bilbao: Basque Pathways to Globalization 40 35

PERCENT

30 24.3

25 19.9

18.8

20

16.2

15

12.85

25

23.8 22.4

21.1 21 21.7 21.6 17.3

21.1 17.8 15.5 13.7 11.1

10

8.2

5 0.46 0.74

1.76

0 1965 1970 1975 1980 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Graph 4.1: Unemployment rates in the Basque Country, 1965–2002. Source: Fundación BBV and EUSTAT.

Economic Restructuring The Bilbao industry’s structural crisis required extensive State-led industrial restructuring (reconversión), which sought to make industry more competitive by adjusting to existing demand. This resulted in a major transformation of the labor market, including a large number of layoffs, and the whole process required a specific “politics of economic crisis” (González Ceballos, 2005) as a means to overcome it. In Bilbao, restructuring deeply affected the two main manufacturing sectors in the city — steel manufacturing and shipbuilding. In 1982, Spain’s steel industry appeared to have weak prospects. The future integration in Europe would undermine the two axes of domestic steel production since 1939, namely, State protection and State export subsidies. Two main factories, Altos Hornos de Bizkaia (AHB) in Bilbao, and Ensidesa in Asturias, operated at a loss due to excessive labor and productive capacity. Toward the late 1990s, however, Spain overtook the UK as the fourth steel producer in Europe, while annual growth rates in production placed it second to Germany (Etchemendy, 2001). The steel sector became the model of State-guided industrial restructuring for the rest of the manufacturing sectors in Spain (Saro Jaúregui, 2000; Barrutia, 1998; Smith, 1998). However, the basic steel production sector in the Basque Country, well represented in Bilbao by AHV, the flagship steel manufacturing company, suffered a different fate. Through the Ley de Reconversión y Re-industrialización (Law of Restructuring and Re-industrialization) of 1983, the socialist government extended the restructuring process. The law established that a governmental commission would decide which sectors to restructure and provide a system of subsidies to support firms. A State agency was created to administer the subsidies and monitor their use. Another agency was created in order to


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promote joint ventures between private enterprises to improve efficiency and prepare for future mergers. A third agency was created to award unemployment benefits or find alternative employment for laid-off workers. The socialist government offered 80 percent of their former salaries for three years to downsized workers. Given the concentration of declining industries in a few regions, the government created Zones of Urgent Re-industrialization (ZUR), such as Metropolitan Bilbao. With the ZUR plan, first administered by the central government and later managed jointly with the Basque regional development agency (Sociedad para la Promoción y la Reconversión Industrial, SPRI), the government provided tax incentives and other assistance to firms opening in the declining areas. The unions played a significant role in the restructuring process. The socialist government invited the unions to help negotiate restructuring plans for each sector. The socialist union (UGT) participated in the negotiations. The communist union (CC.OO.) did not. Rather than the unions themselves, factory committees organized worker resistance in various cities including Bilbao. These committees requested temporary suspensions of contracts rather than full redundancies. This protected the worker from complete job loss if another job was not found in three years. In this case, the government had a contractual obligation to find the worker another job. The government invited the unions to negotiate but was ready to pass the law in Parliament even if a consensus was not reached. Unions forestalled reconversión under the centrist UCD government in the 1970s, but they could not prevent it under the socialist government. Nevertheless, protest over the modernization program for the steel and shipbuilding sectors lasted 20 months. In 1985, government and workers finally reached an agreement over employment reduction (Table 4.2). Although the socialist government made it clear from the outset that it would not nationalize the firms in crisis, they implemented a plan that left control of the restructuring process in the hands of the State. Thus, “although nationalization was not on the government’s agenda, neither was privatization” (Etchemendy, 2001, p. 22). Much needed subsidies were given to firms under strict rules for investment and management. State officials became

Table 4.2: Employment lost due to industrial restructuring in Spain, 1982–1987.

Shipbuilding Carbon-based steel Specialty steel Home appliances Textiles Electrical equipment Electrical components Standard-ITT Others Total Source: Ministerio de Industria (1974).

Initial workforce (1982)

Target reduction

Actual reduction (1987)

37,350 42,800 13,700 23,900 108,800 6,700 3,700 16,100 27,200 280,400

13,100 20,000 8,700 12,600 9,900 1,300 1,500 8,400 7,300 83,000

13,850 15,700 7,000 11,500 9,900 1,450 1,400 2,800 6,800 70,600


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board members for restructured companies. In the steel sector, the government merged AHV and Ensidesa to form Corporación Siderúrgica Integral, which would later become Aceralia and be completely privatized by the Popular Party after 1996. The Basque plant was the clear loser in the merger because its capacity was reduced more severely than Ensidesa (and would close altogether in the 1990s). A recent argument suggests that AHV was politically marginalized by both the central government and the Basque Nationalist Party (PNV) in the Basque Country, and that there were no sufficiently compelling technical reasons for reducing or closing AHV (Barrutia, 1998, p. 123). The shipbuilding sector was similarly restructured through subsidy distribution and employment adjustments. As in other manufacturing sectors, the government could have pursued alternative liberalization paths. Nonetheless, to benefit traditional producers and maintain a national industry, it chose the least liberal or deregulatory approach. To be sure, restructuring was not limited to Spain and the Basque Country. It was, indeed, a global phenomenon. According to Organization for Economic Cooperation and Development (OECD) data, in the European Union the number of jobs in industry fell close to 1 percent per year in the 1970s and 1980s, and more than 3 percent in the 1990–1994 period (OECD, 1996, p. 12). Job losses were concentrated in old industrial areas and port cities such as Bilbao. If we consider an extreme case of downsizing in the West, employment in the shipbuilding sector dwindled in the United States and Europe, painting a bleak future for the industry, as shown in Table 4.3. Among the countries selected, employment increased significantly only in Korea. In fact, more than half of the ships ordered in 2000 were built in Asia, with 50 percent of them in Japan and Korea. These two countries accounted for about 80 percent of the deadweight tonnage under construction. The trend away from Europe was clear in the shipbuilding industry. In this context, and despite the employment loss which occurred especially in Bilbao, the Basque Country managed to modernize its shipyards. It maintained an important manufacturing sector and provided employment for 15,000 people (about 65 percent of them in the auxiliary and suppliers industry). An example of a successfully restructured company was Izar. Located in Metropolitan Bilbao, Izar was the product of the merger between two former shipbuilding companies, Astilleros Españoles and Bazán. During the first decade of the twenty-first century it became the leading company in Spain and the ninth largest shipbuilding group in the world. The company owns the largest shipyards in Spain. Specialization in niche markets and technological development has allowed Izar to successfully compete in international markets. Specialty vessels are now built there. Bilbao is the only shipyard in Europe with a building program for natural gas carriers capable of competing with Japanese and Korean shipyards. Bilbao also builds high-tech vessels such as the so-called “shuttles”. These ships are designed to carry crude oil from underwater oil fields to coastal refineries, thereby helping oil companies avoid the need to build expensive pipelines. Despite these recent positive developments, however, the period 1975–1985 was characterized by intense plant closures and de-industrialization in Bilbao. Only at the end of the 1980s did local industry enjoy some of the anticipated benefits of the industrial restructuring process. Between 1986 and 1992 foreign trade registered an important increase in exports, while imports did not decrease. Among Bilbao exports, iron and steel occupied a special place, followed by non-electrical machinery. Crude oil was the main commodity imported via the port of Bilbao (Freire Rubio, 1991, p. 22). New jobs were created by 1986


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Table 4.3: Shipbuilding workforce, 1975–1998. Country France Germany Netherlands Spain United Kingdom Poland Japan Korea United States

1975

1998

40,400 73,200 39,900 47,000 60,000 42,800 151,000 35,000 171,600

6,700 22,500 9,100 9,200 8,500 26,700 38,700 51,000 107,200

Change ⫺33,700 ⫺50,700 ⫺30,800 ⫺37,900 ⫺51,500 ⫺16,100 ⫺112,300 ⫹16,000 ⫺64,400

% Change ⫺84 ⫺69 ⫺77 ⫺81 ⫺86 ⫺57 ⫺74 ⫹46 ⫺38

Source: International Labor Organization.

and the regional GDP grew by 5 percent in 1987 and 1988. Foreign direct investment accelerated and inflation seemed to be under control. The economic recovery was not uniform, however. While business profits grew significantly, unemployment continued to soar to around 18 percent of the active population. Euphoria in the Bilbao Stock Market did not help to modernize the local industry during the 1980s. Far from a “post-industrial” area, the Basque Country continued to be a European region where manufacturing dominated in terms of value-added production. It accounted for 48.3 percent of regional GDP in 1986. While the restructuring of old industries — which in many cases meant dismantling them — happened at a fast pace, the government started projects to re-industrialize and modernize the manufacturing industry. An important and ambitious initiative was the socalled ZUR initiative for Metropolitan Bilbao. It was approved by the Spanish government in 1985 in agreement with the Basque government. The public investment planned in the ZUR was intended to encourage new life in the heart of industrial Basque Country while relocating some of the workers who had lost their jobs. The projects approved in ZUR had an uneven outcome. Some of the new companies introduced technological improvements. However, they created few jobs and could not compensate for the huge loss of traditional industrial employment. As time passed, it became clear that the Basque government was managing the re-industrialization process and attempting to stimulate a recovery from the recession (Recio & Roca, 1998). By the late 1880s, the Basque Country was again registering positive rates of economic growth. Although the Basque economy grew steadily during the years between 1986 and 1989, the industrial decline was not over (Agencia de Desarrollo Económico y Empleo, 1992). The period of sustained growth halted in 1991. The same kind of problems reemerged that highlighted the deceptive character of the previous recovery. In terms of actual employment, the industrial sector experienced a 34 percent decrease between 1975 and 1992, whereas the tertiary sector achieved a 40 percent increase, with a GDP share of 51.4 percent in 1992. Nevertheless, this did not indicate a solid service sector. The modest process of tertiarization during the 1980s might have demonstrated the other side of the industrial decline — the service sector had not produced enough jobs to redress the impact on the unemployment caused by the closure of industrial plants. The Basque phase of


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expansion and growth between 1985 and 1990 happened in the context of economic growth in Spain as a whole. As in the rest of the country — and in spite of the recovery — unemployment in Bilbao and the Basque Country remained high. Economic recovery was based on productivity gains. However, economic progress during the second half of the 1980s did not trigger sufficient restructuring in manufacturing, nor did it help economic diversification. Thus, a second wave of restructuring took place during the early 1990s. In 1986 Spain joined the European Community, which forced the Basque economy to adapt to a new free trade environment. The local economy was challenged to expand between 1969 and 1975 when the European Community’s share of Basque exports increased from 31 to 40 percent. Indeed, the integration of Basque commerce within the European Community is superior to that of Spain as a whole, since the Basque Country is more industrialized and possesses infrastructural advantages, a specialized labor force and ancillary industries. A significant portion of foreign investment in Spain is in the Basque Country (in third place behind Madrid and Barcelona). European investment in the Basque economy has been substantial, particularly in the rubber, chemical, plastics, and electronics sectors, with France as the leading investor. In historical terms, the Europeanization of Basque economy meant that Bilbao’s importance in the world-system developed through trade with “old partners” from the late Middle Ages and early modern period. The relationship of Bilbao (and Spain) with the EU had two main phases: first, an “adjustment” phase (1986–1993), in which trade liberalization affected many companies in Spain that could not survive; and, second, a phase of expansion and integration (mainly after 1993) during which Basque exports to the EU soared, finding niche markets and exploiting an advantageous currency exchange rate set by the monetary union. It is widely perceived in the Basque Country that joining the EU benefited Bilbao and the region because the increased competition challenged former strategies and large sums of public money were obtained from the EU “structural funds”. In addition, the political climate encouraged the PNV’s Basque nationalists to propose a “Europe of the Regions” in which national states would shrink and regions expand their powers. With membership of the European Community, the Basque productive system adapted to a new situation that suppressed trade barriers and increased competition from Europe. This challenge was not easy because of relative industrial decline and the deficiencies in Research and Development (R&D)in the Basque Country as well as other structural deficiencies in the Basque economy. The Basque government approved the plan Europa-93 in order to meet the European challenge. Started in 1989, the plan sought to improve transport infrastructure, modernize telecommunications, and foster social solidarity with special attention to situations of social emergency. It created the so-called “social salary” for the poor and unemployed. Despite these efforts, Basque industry suffered further deterioration as it entered the European Community (Etxebarría Kerexeta, 1993, p. 67). While exports diminished, imports from Europe intensified. In order to adapt to European regulations, Spanish markets were liberalized and export subsidies eliminated. Some firms merged with larger, foreign enterprises to better operate in the European market. This meant, however, that the decision-making apparatus of the enterprises were moved away from the region, to the detriment of local development (Gómez, 1998, p. 119). Membership in the European Community has not affected all sectors of Bilbao industry equally. Processing industries actually benefited from access to raw materials at cheaper prices, whereas basic industries


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found themselves in direct competition with more efficient providers of their products. In addition, it was necessary to redefine a business mentality that previously privileged the domestic market over exports, viewing competitiveness in terms of wage scales alone. In the new arena, competitiveness is more a function of efficiency derived from specialization and economies of scale in producing goods for an expanded market (Muñoz Varela, 1999). A new crisis period started at the beginning of the 1990s. This decade saw the closing of AHV, the flagship steel company in the Basque Country that employed 25,000 workers at its apogee. It was replaced by the Acería Compacta de Bizkaia (ACB) which never employed more than 500 workers. This example summarizes the series of crises and restructurings that the steel sector experienced in the Basque Country. Similarly, the Euskalduna closing (the flagship shipbuilding company) in the 1990s exemplified the loss of a traditional pillar in Basque industry. Attempts at negotiation by the workers, protests, marches, and mobilizations did nothing to reverse the failure of the old industrial structure. In 1994, 70 percent of total industrial employment in the Left Bank was concentrated in just a few factories: AHV, Astilleros Españoles, Babcock & Wilcox, Petróleos del Norte, ABB, and Productos Tubulares. These factories laid off 20,000 workers between 1977 and 1994. In 1993 alone, nearly 13,000 workers lost their jobs in three factories — AHV, Babcock & Wilcox, and Productos Tubulares. AHV, the emblematic iron and steel industrial complex that at one point employed 25,000 workers, closed down in 1995. In 1988, the legendary Euskalduna shipyards were closed down. In the years that followed, many auxiliary industries, such as Celaya Shipbuilding, Asua Fundición, and Marítima de Axpe closed as well. Euskalduna’s closing contributed to the direct or indirect loss of 40,000 jobs (Cámara de Comercio de Bilbao, 1990, p. 83). In conjunction with the provincial governments, the Basque government tried to remedy the consequences of the crisis with several initiatives. The plans and projects that emerged during those years included the creation of technology parks that could serve as seedbeds of innovation for new Basque industry. The catchphrase in economic policy of the period was technological development, and the Basque administration invested a substantial amount of public money in measures that could increase productivity and improve competitiveness. It also gave special attention to the export capacity of the local industry. Infrastructure works were also important in the policies of the Basque administrations, especially highways and the new Bilbao subway. However, unemployment continued to be the worst aspect of the economy. After the crisis in the early 1990s, unemployment spiked again to nearly 25 percent of the active population in 1994. In the Basque Country it grew during the early 1990s from 19.2 percent in 1991 to 23.3 percent in 1996. In Bilbao, unemployment rose from 21.5 to 26.7 percent during the same years (EUSTAT, 1996). A slight improvement was registered after 1995, but the new jobs created were mostly based on temporary contracts and part-time labor. The inability of the Basque economy to generate enough jobs was caused by economic inequality, poverty, and marginalization, which particularly affect the urban areas. The labor market improved from 1994 onward. Unemployment dropped from 25 percent in 1994 to 17.8 percent in 1998. The political authorities seemed convinced that these improvements would continue. Nevertheless, unemployment was still very high compared to other European countries. In 1996, it was 12 percentage points above the European average. The rate of unemployment was worst in Bizkaia and especially in Bilbao’s metropolitan area


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(Martínez & Vicario, 1997). Because of its industrial tradition, Bilbao suffered the largest job loss during the 1980s and 1990s. An example of the difficulty securing a job can be seen in 1996, when 37.9 percent of the unemployed in Metropolitan Bilbao (or 11 percent of the economically active population) never worked before. Youth and women were most affected. In 1996, 31.5 percent of the women were unemployed in the Basque Country. Youth unemployment rate was even higher: 47.7 percent of the population below 25 years old was jobless in 1996 (EUSTAT, 1997). Sector-oriented Basque government initiatives have attempted economic revitalization within Metropolitan Bilbao. However, while these policies were effective in terms of workers’ relief resulting from manufacturing closures, efforts to generate new industrial activity and create new employment had mixed results. The latest example in this respect has been the recent construction of a small steelworks plant (acería compacta) in Sestao, near Bilbao, which somewhat ironically has been presented as a complete success. With 380 jobs created, the new factory will satisfy half of the whole Basque demand for steel without giving rise to any other ancillary industry. An unexpected proof of the city’s recent fate and a striking literary tribute to its glorious industrial past, Bilbao is already included in the 1992 Blackwell Encyclopedia of Industrial Archaeology. In it, the old “impressive industrial landscapes”, the factories, bridges, railway stations, and other symbols and sites of local industrial might be described with an evocative romanticism, as appealing sites for visitors to contemplate with a tourist gaze: La Arboleda, a late-nineteenth century iron-ore mining village seven miles West of Bilbao is one of the most evocative industrial landscapes in Europe. The settlement is approached from the banks of the Rio Bilbao either by a sinuous mountain road which passes the water-filled remnant of a huge opencast working, or by a two-mile funicular dating from 1921. […] The landscape all around has been contorted by iron ore workings. La Arboleda was the birthplace of the Spanish Communist Party, and the bar where La Pasionaria (Dolores Ibárruri, 1895–1988) discussed Marxism with miners still serves peppery sausages and dispenses soup from brown enamelled pots on a tiled range. Iron-ore mining has ceased and the area has been declared a conservation area. Calcining kilns for iron ore, of several types, survive in the surrounding mining areas. (Trinder, 1992, p. 83)

Toward a Socio-Spatially Fragmented Service Economy The general shift to a service economy in more advanced capitalist countries has also manifested in the Basque and Bilbao economies. Over the last two decades, severe manufacturing decline, a shrinking economic base, falling employment levels, demographic decline and loss of central functions have turned Metropolitan Bilbao into an archetype of industrial decline. As elsewhere in the Western world, manufacturing has lost economic primacy in the Basque region. However, it remains important in terms of output, value added, and jobs. Manufacturing still employed 27 percent of the Basque labor force in 1996 and, although it lost relative weight in the Bilbao metropolitan area, it grew in some semi-rural areas of the province of Bizkaia, and especially in the neighboring province of


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Araba. In spite of tertiarization, Metropolitan Bilbao and the province of Bizkaia at large remain important urban industrial centers in Spain and the largest in the Basque Country. The area still remains an industrial heartland, highly specialized in heavy manufacturing, notably steel and shipbuilding, metal products and basic chemicals, together with a strong specialization in financial services. This shows that the label “post-industrial” is not accurate when applied to some metropolitan areas. Recent Basque re-industrialization, the current manufacturing strengths and the international trade output of the city-region as manifestations of global reach will be discussed in Chapter 7. The share of the service jobs in the urban economy rose from 41.7 to 65.2 percent for Metropolitan Bilbao between 1975 and 1996. The proportion of manufacturing employment dropped from 45.5 to 26.9 percent during the same period (Table 4.4). In terms of value added, manufacturing dropped from 43 to 35 percent between 1979 and 1991 (EUSTAT, 1996). Conversely, the services sector’s contribution to regional value added grew by 7 percent during the same period. More than half (55 percent) of service sector employment in the Basque Country and 83 percent of all tertiary employment in the province of Bizkaia is located in Metropolitan Bilbao. In spite of the growth of service-level jobs and a short recovery phase between 1986 and 1991, the metropolitan area’s total employment in 1996 remained below the 1975 level. This meant that unemployment was still very high — close to 26 percent of the active population — for the metropolitan area as a whole, higher than in the province of Bizkaia and the Basque region. Working conditions deteriorated substantially. The adoption of new technologies, new organizational forms, and new contractual legislation contributed to flexible labor conditions. In practice, this means that employers do not guarantee long-duration jobs. Temporary and part-time jobs proliferated. Workers subcontracted through temporary labor agencies became a new form of employment offered by many enterprises. By doing so, firms reduced their tax liabilities. These conditions intensified the loss of stability in the labor market and dropped the workers’ wages (Alberdi Larizgoitia, 1988). In short, a dual labor market emerged. Table 4.4: Employment distribution, by sectors (in %) 1975–1996. Agriculture

Manufacturing

Construction

Services

1975 1986 1996 1975 1986 1996 1975 1986 1996 1975 1986 1996 Basque Country

5

3.8

2.5

48

41.3

31.7

9.6

Bizkaia

4 3.1 0.8 0.6

2 0.5

46.3 45.5

38.9 37.1

29.4 26.9

10.4 11.3

0.4 0.2 0.3 0.7 0.2

— — — — —

44.4 28.7 30.2 39.7 50.4

30.2 21.9 22.3 29 33.4

— — — — —

Metropolitan Bilbao Barakaldo Bilbao Getxo Santurtzi Sestao Source: EUSTAT.

— — — — —

0.25 0.23 0.6 0.92 0.4

6

6.9

36.6

48.9

58.7

6.6 6.8

7.2 7.2

38.7 41.7

51.5 55.5

61.4 65.2

8.1 5.6 4.8 10.3 9

8.9 6 4.3 11 9.6

— — — — —

47 65.4 64.1 49.1 40.2

60.3 71.5 72.9 59.2 56.7


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On the one hand, competitive enterprises achieved a niche within the new economic order through investment in state-of-the-art technology. On the other, many firms were marginalized and relegated to residual activities with unstable working conditions. According to EUSTAT, 107,210 new employment contracts were created in 1996 under a job promotion program sponsored by the Basque government. Whereas only 6 percent of them had undefined duration, the rest were signed for a specific period of time and in many cases were not renewed. The majority of contracts were part-time (EUSTAT, 1997; Ortega, 1995). Tertiarization has not yet provided a solid counterbalance to the decline of manufacturing as quality of jobs is concerned. Manufacturing decline and employment redistribution moved in tandem with rising unemployment levels and a dramatic reorganization of labor market dynamics and income opportunities. High unemployment rates, which began to subside in a sustained way only after 1996, were only the most visible effect of a more profound dynamic associated with increasing deregulation and flexibility of the labor market. Unstable employment conditions, evidenced by the proliferation of weakened labor relations (part-time, temporary, and intermittent contracts) concealed the dramatic impact of this dynamic. In this sense, it is important to highlight that the tertiarization of the economy is running parallel to the degradation of labor market conditions. Changes in overall and sector employment, and job losses in particular, have not been homogenous within the metropolitan area, as Rodríguez has documented. Economic restructuring affected localities of the urban region differently, and was followed by a pattern of “uneven redevelopment” (Rodríguez et al., 2001). Municipalities on the Left Bank, a traditional enclave for heavy manufacturing activities, large firms, and workingclass neighborhoods, suffered more severely from manufacturing decline. As a result, they not only sustained the highest levels of unemployment, poverty, and marginalization, but also physical decay, environmental degradation, and housing problems. A case in point was Barakaldo, the second largest municipality within the metropolitan area and one of the key industrial locations. During the 1980s, this locality lost 75 percent of its industrial employment. Remarkably, more than half of these losses occurred between 1985 and 1993 — a period of relative economic recovery in the region and in Spain as a whole. Furthermore, service employment during the same period also decreased by 12 percent, in contrast to the aggregate performance for the metropolitan area. As a result, between 1981 and 1993, Barakaldo lost 56 percent of its total employment (Rodriguez et al., 1994). By 1996, seven of the 10 Left Bank municipalities had unemployment rates above 30 percent. In Sestao, which was most severely affected by economic crisis and industrial restructuring, unemployment reached 36 percent. Services were strongly concentrated in the municipalities of Bilbao and Getxo, where the sector employed over 70 percent of the total population. Tertiary employment represented a significantly lower share of total employment for other municipalities within the metropolitan area. Moreover, the concentration of tertiary investment and employment was even more skewed for advanced producer and specialized services. Thus, “while economic tertiarization has, overall, compensated the loss of manufacturing employment decline at the metropolitan level, this is not the case for a large number of municipalities, especially those on the Left Bank” (Rodríguez et al., 2001). It would be a mistake to assume that socio-spatial polarization is a new phenomenon triggered by the recent wave of globalization in the Bilbao metropolitan area. Indeed, the


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industrialization of the 1950s and 1960s generated a strongly polarized social structure within Metropolitan Bilbao, reinforcing the spatial unbalance that existed since the days of industrialization in the late nineteenth century. This process materialized in the formation of two differentiated and antagonistic socio-economic spaces physically separated by the river: on the one hand, the Left Bank, industrial and working class and, on the other, the Right Bank, residential and bourgeois. During the 1970s and 1980s, this traditional pattern of social and spatial segregation was reproduced as a result of the uneven impact of industrial decline and the dynamics of suburbanization. On the Left Bank, industrial restructuring was accompanied by massive job loss and firm closures and a weakened economic base — due to high specialization in traditional manufacturing and heavy industries. As a result, living conditions in the area worsened dramatically, making the area vulnerable to economic crises. In contrast, the Right Bank (especially the largest municipality of this area, Getxo) continued its considerable demographic and urban growth. Better physical conditions and social status in this area contributed to attract the better-off sectors of the new middle classes. At the same time, it became a desirable location for service sector firms. In fact, the decentralization of tertiary activities became one of the key factors of functional change for Metropolitan Bilbao. Indeed, while the residential function was continuously strengthened, over the last decade the Right Bank also became an important tertiary pole within the metropolis. Data show that between 1982 and 1991, Barakaldo and Sestao, two of the most characteristic municipalities of the Left Bank, had the smallest increase in average income compared to the rest of the metropolitan area, specially the municipality of Getxo or Bilbao. In 1982, the average income in Barakaldo and Sestao was well below the average for the metropolitan area, 88 and 85 percent, respectively. In 1991 their position worsened significantly: the average income in Barakaldo was barely above 80 percent and Sestao did not reach 75 percent of the metropolitan average. In contrast, the average income in Getxo, which in 1982 was 128 percent of the metropolitan average, was 141 percent in 1991, according to tax statistics from the provincial government. This socio-spatial dualism (Rodríguez et al., 2001) also appears when confronting poverty indicators for Left Bank families. A significant number of the population living below “poverty thresholds” corresponds to families, which are suffering from massive income reductions from job loss. Nonetheless, poverty is particularly acute among mono-parental families, single and divorced households, and female-headed households (Gobierno Vasco, 1996). While on average per capita income for the urban region almost doubled during the 1970s and 1980s, an accentuation of intrametropolitan differentiation occurred. Right Bank municipalities as a whole maintained and strengthened their comparative advantage and increased their income inequalities with Left Bank municipalities. These, in turn, lost positions in relative and absolute terms during this period. As a result, one finds a pattern of strong polarization within the metropolitan area (Rodríguez et al., 2001). Despite a substantial increase in social welfare initiatives and plans, poverty remains one of the most urgent problems in the Bilbao metropolitan area. The main causes of poverty include persistently high unemployment, the rise of the flexible labor market, and the insufficiency of unemployment compensations. Currently, poverty conditions are intertwined with long-time unemployment because of the extremely low unemployment and welfare benefits. Unemployment levels and extremely temporary labor contracts are also


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highly concentrated among women (female unemployment rates double male unemployment rates) and youth of both sexes (unemployment rates above 45 percent), and generate specific problems for these groups. For youth, unemployment and unstable labor conditions provoke dependency and make it difficult to leave home. In this case, “it is possible to refer to a situation of hidden poverty” (Rodríguez et al., 2001). Rising social exclusion inevitably accompanies manufacturing decline, job losses, and the reorganization of the labor market. Increasing poverty and marginalization show a highly differentiated spatial distribution within the urban region. In sum, the variables discussed above show that, as Rodríguez argues, socio-spatial polarization dynamics operate within Metropolitan Bilbao to reproduce and exacerbate earlier patterns of differentiation between the Left Bank and the Right Bank. Globalization forces do not act unmediated but rather play in a local–regional context in which the structure of housing and the labor markets, as well as specific policies developed by regional and national governments, produce the most influential factors. Over the last two decades, industrial decline and economic restructuring have generated new forms of social and spatial exclusion. Demographic decline, rising unemployment, and increasing poverty levels are distributed unevenly throughout the metropolitan area. A selective process of suburbanization has widened the gap between a declining Left Bank and an expanding Right Bank. The demographic growth and greater per capita income increase of the Right Bank contrast sharply with the population loss, high unemployment, and socio-economic stagnation of the Left Bank, reflecting polarization processes at work in Metropolitan Bilbao.

Conclusions Chapter 4 examined the structural changes that occurred in Bilbao during the period of crisis of the Fordist model and restructuring and tertiarization of the Basque economy during the 1970s and 1980s. It showed that restructuring was not a direct, unmediated byproduct of globalization, although a close relationship existed. Specifically, a variety of local, domestic factors influenced the outcomes during the attempt to make Bilbao a service economy. The political atmosphere in the Basque Country and the overall industrial policy implemented by the socialist government in Madrid greatly influenced the fate of Bilbao’s steel manufacturing and shipbuilding industries. Because local plants were not adapted to the environment of lower industrial demand and had to be downsized or closed, the global restructuring of these sectors also contributed to Bilbao’s decay. The specific ways in which restructuring took place, however, were matters of political choice at the national and regional levels. The chapter also sought to demonstrate that globalization (as a causal mechanism) and economic restructuring (as a local response) are not linked in a necessary and direct way, but rather mediated by regional and national dynamics, with the politics of developmentalism playing a very active and fundamental role in the shaping of globalization in cities and regions. Economic crisis and restructuring have scarred Metropolitan Bilbao. As a result of such historic transformations, the city became deeply changed. In retrospect, one can see that


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Bilbao’s strengths (autonomy, entrepreneurship, Fordist industrial power, and linkage in the world-system) made the city more vulnerable to world trends. Local and regional authorities were slow to react to the changing economic framework and circumstances. When they reacted in the late 1980s, they proposed a number of restructuring measures, which we discussed above. Bilbao essentially became a rust belt city, but one with great autonomous power and State support that — unlike most rust belt cities elsewhere — would give the city the resources and control to overcome a crisis situation. Determined to reposition Bilbao as a rising metropolis among global cities, the local authorities also developed an ambitious revitalization plan similar to other struggling urban economies in the United States and Europe. The critical, most visible piece of such plan became the Guggenheim museum (see Chapter 6). Before exploring the Guggenheim, however, we must turn to the making of the Abandoibarra megaproject, which is one of the most significant developments in post-Fordist Bilbao. Chapter 5, therefore, focuses on Abandoibarra’s development — a piece of industrial land in downtown Bilbao being transformed into a new Central Business District, which exemplifies the global aspirations of the new Bilbao.



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Abandoibarra (1998)


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Pelli Design for Abandoibarra (2002)


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Chapter 5

The Making of an Urban Megaproject

Introduction In the previous three chapters of this book, we have seen the city of Bilbao taking part in global circuits of trade almost since the beginnings of its history (Chapter 2) and have assessed the impact of such global relationships in local economic development. We have also reviewed Bilbao’s industrialization in the late nineteenth century as an export-led structural transformation leading to new economic and political partnerships with the nation-state (Chapter 3). Such instances of globalizing Bilbao have significantly shaped the evolution of the urban economy up to the crisis of the Fordist period in the 1970s, when the city-region was exposed to global pressures which, together with domestic policies, deeply transformed the local economic foundations and resulted in Bilbao’s shift to an emergent service economy (Chapter 4). Although the non-economic dimension of globalization may have become apparent by now in our analysis, this chapter explores the essentially political nature of strategies developed by urban and regional elites reacting to the ebbs and flows of world markets. In Bilbao, local, regional, and national authorities have crafted a massive revitalization plan. Its most fundamental purpose is to assure urban regeneration through repositioning the city in the context of world cities — another instance of Bilbao’s pathways to globalization. In an era marked by the shift in urban governance from managerialism to entrepreneurialism (Harvey, 1989) and in which cities are thought of as nodes in a global network of relationships, urban elites often perceive linkages to the global economy as fundamental to assure sustained local economic development. As explained in Chapter 1, regaining global visibility is not only a quintessential economic strategy — it also serves the purpose of symbolic or representational transformation, which is especially useful for regions and cities with distinct political identities, such as the Basque Country. Both objectives — the material and the symbolic — are present in Bilbao’s recent, concerted attempt to regain status as a globalizing city through urban revitalization. Revitalization itself is a political strategy that questions approaches stressing the exclusively economic and financial character of globalization. As discussed in Chapter 4, Bilbao has undergone dramatic restructuring, initially through global industrial changes that contributed to the elimination of about 40 percent of industrial jobs in the area over a single decade. Following this ill-fated transformation, Bilbao undertook its own revitalization program in an attempt to turn the city into “… a modern, competitive, service metropolis able to meet the challenges of the twenty-first


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century” (Bilbao Metrópoli-30, 2001a). Using strategies common to other revitalized cities in Europe, the program proposed: • transforming the city-center waterfront — Abandoibarra — into a service/business/cultural center (including the 1997 Guggenheim Museum Bilbao); • developing port and airport capacity; • building a new subway system; • constructing new highways and railroad paths, together with a new downtown, intermodal transit station; • developing a new convention center; and • developing a new technology park, which includes the headquarters of the European Software Institute. Four key features stand out in this planning program. First, it has been a State-led revitalization project, almost fully funded by Basque and Spanish institutions. The estimated $2 billion budget (in 1991 dollars) amounts to a significant portion of the Basque GDP in 1996, for investment in a metropolitan region occupying 5.7 percent (412 km2) of the Basque Country’s land area in which 45 percent (nearly 1 million people) of the Basque population resides. Second, and as a result of its scale, it has been a long-term program: most of the infrastructure projects have started or are already finished, although some important initiatives — such as the waterfront revitalization project — have yet to be completed. The overall execution of the program covers about 15 years. Third, the program has specifically sought to diversify the local economy. By combining productionand consumption-oriented revitalization strategies the program attracts large and small firm investment in different sectors of the economy. For example, the local industrial base has been selectively regenerated through investment in steel production and shipbuilding, while the high-tech sector has benefited from diversified, consumption-oriented investment. In addition, enhancing the city’s qualities as both a middle-class residential and tourist destination metropolis is aimed at maximizing consumer activity. Fourth, considerable emphasis is placed upon the city’s internationalization, which in practice means fostering foreign trade flows and attracting cultural tourism. Like most revitalization programs, Bilbao attempts a comprehensive and integrated vision and action which leads to the resolution of urban problems, and which seeks to bring about a lasting improvement in the economic, physical, social and environmental condition of an area that has been subject to change. (Roberts & Sykes, 2000, p. 17) The revitalization scheme’s centerpiece is the transformation of the city-center waterfront (Abandoibarra) into a service/business/cultural center. Abandoibarra, “… the jewel of the crown in the revitalization plan” (Rodríguez & Martínez, 2003), is located near the city’s northwest border between the river and the Ensanche, an industrial area developed in the late nineteenth century. The site covers over 3,750,000 square feet in the form of an elongated half-moon. Until recent years the site had been occupied by sparsely used port facilities, by the TECO (container) station of the national railroad company (RENFE, Red Nacional de Ferrocarriles Españoles, Spanish National Railroad Network), and by the


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Euskalduna shipyards — a public sector firm that closed in the early 1990s (Abalos & Herreros, 1999). During the 1990s, both public perception and the marketing of Abandoibarra shifted dramatically. With little physical transition, “a dilapidated and devalued part of the city was suddenly rediscovered as a lucrative waterfront development opportunity” (Rodriguez, 2002). The site became the critical focal point not only for the revitalization of the city and its metropolitan area, but also for the whole Basque region. Radically transforming the local landscape and, more importantly, symbolizing an emerging post-industrial, innovative, and competitive Bilbao, the Abandiobarra project is an exemplary urban megaproject. While the project’s immediate objective is to reclaim a derelict site and turn it “into a new functional node capable of attracting local and international capital investments with key command and control functions”, its representational content is also significant. Indeed, in relation to both external project goals and internal legitimization, remaking Bilbao’s image from a declining industrial city into a revitalized post-industrial metropolis has been a critical factor. Producing a new image of dynamism and success is seen as “enhancing the city’s capacity to attract competitive international capital investments and activities, which in turn is regarded as essential for economic recovery and growth”. Image renovation is important to the extent that the area becomes an emblem of the city’s revitalization process, providing the basis for a new model of collective identity that incorporates the lifestyles and aims of both the urban elite and emerging power groups (Rodriguez, 2002). This chapter outlines and explains the development of the Abandoibarra megaproject, focusing in particular on the key role of the Bilbao Ria 2000 — an innovative cross institution, public–private partnership, responsible for coordinating the transfer of land between public and private agents. Rodriguez (2002) and Rodríguez and Martínez (2003) have provided detailed accounts of these issues, which we follow here. The chapter also examines the many modifications to the Abandoibarra plan since its inception, based on Esteban’s (1999) comprehensive report, and showing how “the anatomy of ambition” (Flyvbjerg et al., 2003) by urban elites often faces severe grassroots challenges and structural obstacles (Beauregard & Pierre, 2000). It is argued that both urban megaprojects and urban development corporations are by-products of the new political climate started in the 1980s, in which neoliberal policies were developed as a significant part of — and as a response to — economic globalization processes (Brenner & Theodore, 2002). Paradoxically — and as Eckardt (2005) has recently argued for Berlin — globalization has a limited effect on urban development outcomes in the case of Bilbao’s Abandoibarra because (i) the urban elites’ initial vision for the site had to be modified due to significant internal strife during implementation, and (ii) Abandoibarra’s global reach — as a connecting node for Bilbao and the global economy — has not been realized.

Abandoibarra Abandoibarra’s industrial development dates back to the final decades of the nineteenth century with the construction of railroads and quays. By the early 1900s, various wood-processing firms and a shipbuilding firm (Astilleros Olaveaga) were also operating from the port. The industrial uses present until the 1990s — a container station and port


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warehouses — had only emerged during the 1940s and 1950s. At the peak of its activity, “… two-thirds of the area was devoted to factories and sea transport services” (Rodriguez, 2002). Access to the area was limited, however, due to a sharp 30 feet drop between the Ensanche and the site, which limits its industrial appeal with physical and socio-economic barriers (Ayuntamiento de Bilbao, 1989a, 1989b; Areso Mediguren, 1989). During the 1980s and 1990s, Abandoibarra’s Euskalduna shipyards closed, sending port activity to outer-port locations. As a result, the area declined, suffering from abandonment and dereliction. In response, the railroad company RENFE initiated new infrastructure plans to eliminate the physical barrier created by the railways, allowing better integration of Abandoibarra with the surrounding neighborhoods. Renewal projects in Abandoibarra began in the mid-1980s during preparation of the new Bilbao General Urban Plan (PGOUB, or Plan General de Ordenación Urbana de Bilbao). The Plan’s first draft recognized the area’s derelict status but also saw it as an opportunity to alter the existing “dysfunction” between its centrality to Bilbao and the low value-added characterizing its traditional use. Indeed, for the PGOUB, Abandoibarra provided a unique opportunity to create a new Central Business District — a new center that would allow the city to “join in the competition among European and world cities to lead technological and economic development through the restructuring of derelict sites” (Ayuntamiento de Bilbao, 1989a, 1989b, p. 45). The PGOUB “established basic parameters for Abandoibarra’s physical development and provided the legal framework for land uses permitted on the site” (Rodriguez, 2002). The original industrial zoning was revised to allow for commercial and residential uses — removing legal constraints being a necessary pre-condition for development. The PGOUB defined its goal broadly as the creation of a unique area of mixed-use development modeled on the examples of other European cities, featuring public and private office space, commercial development, tourist-related development (hotel and related activities), and other uses such as a convention center and entertainment facilities. Residential areas and basic physical infrastructure, such as a bridge connecting to the Right Bank of the city and other transport facilities, were also considered. The area’s identity would be further enhanced by two prestige projects, located at each end of the site — a music and conference auditorium and the Guggenheim Museum (although the original plan contemplated construction of a Museum of Science and Technology). Integrating Abandoibarra with the surrounding neighborhood would be achieved through a series of other projects linked to the redevelopment scheme (Ayuntamiento de Bilbao, 1989a, 1989b). The PGOUB stressed Abandoibarra’s unique and emblematic character by restricting the activities located within it. Moreover, it prioritized the development of a service/cultural/business center in order to extend its reach beyond mere metropolitan influence. The new center’s role would be regional and even international. Although the PGOUB does not refer specifically to international competitiveness, implicit in the approach was the idea that Bilbao should compete with other regional metropoli such as Lisbon or Bordeaux for the leading position in the Atlantic Arch — the area encompassing Normandie in France and Galicia in Spain. The PGOUB also highlighted the fact that almost 95 percent of land in Abandoibarra already belonged to public sector institutions or firms — the Spanish National Railroad Network (RENFE), the National Institute of Industry (INI), the Port Authority, and the Bilbao City Hall (Ayuntamiento de Bilbao).


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The land was subsequently transferred to Bilbao Ría 2000, an urban development corporation, where a range of stakeholder constituencies is represented on the board of directors (Ayuntamiento de Bilbao, 1989a, 1989b, p. 65). From the beginning, Bilbao’s political leaders invited international attention and solicited proposals from well-known international architects to prepare designs for the site. The PGOUB described only broad outlines for interventions in Abandoibarra leaving specific projects to be defined in a special plan called the Plan Especial de Reforma Interior (PERI) de Abandoibarra (Ayuntamiento de Bilbao, 1999). The drafting of the PERI was based upon the winning design in the International Competition of Ideas for Abandoibarra held in 1992 by Bilbao City Council in collaboration with the promoters of the strategic plan, Bilbao Metropoli-30 (Bilbao Metrópoli-30, 1992, 1999, 2001a, 2001b). The competition was held in two phases and attracted more than 50 entries. The first was open only to local architects and received proposals from 48 participants. The winners of that competition entered the second phase, together with three foreign teams specially invited by the City Council, securing a high-profile competition between locally and internationally renowned designers. Although the selection committee argued that none of the secondphase proposals adequately resolved the planning of Abandoibarra, the proposal presented by the Italo-American architect, César Pelli, addressed these concerns more than the others and he was selected in 1993. Pelli’s proposal abided by the PGOUB’s general guidelines, especially in relation to a preference for mixed-use development and recognition of the area’s emblematic function. His project incorporated a series of specific projects to “structure” the area — two large skyscrapers with 860,000 square feet for office space (a considerable reduction on the 2,150,000 square feet originally allowed by the municipality), a shopping mall of 323,000 square feet, a hotel, a residential area for 800 dwellings, a Music and Conference Auditorium, and a Museum of Modern Art. The project also included an estimated 1,313,000 square feet of green and open areas stretching along over half a mile of the riverside, extending the existing Parque de Doña Casilda. Pelli’s proposal was considered a “standard” planning of the area based on previous experience developing Battery Park City in New York. But the project also demonstrated considerable flexibility, separating Abandoibarra into various functional areas with interchangeable elements in order to minimize the financial risks involved in such a large urban renewal project (Bilbao Metrópoli-30, 1999, p. 32). Pelli’s proposal was criticized for its similarity to other cities in the international urban circuit and the lack of specificity to Bilbao. Serial reproduction among revitalization projects has substantial drawbacks, especially for cities arriving later in the series — one can question the economic effectiveness of commodification and repetition in physical planning. This criticism did not, however, prevent Pelli’s proposal from providing the basis for the drafting of Abandoibarra’s PERI. The PERI, initially formulated by the Municipal Office for the General Urban Plan (PGOUB) in close collaboration with Bilbao Ría 2000, was reformulated to coordinate with Pelli’s proposals. Reconciling differences between the municipal architects and Pelli’s office has been challenging. After considerable debate and adjustments, the first version of the plan was approved in 1995 with final approval being granted in 1998. Yet, the specifications contained in this blueprint remain under discussion and subject to further alteration (Esteban, 1999). The 1995 PERI proposed the


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redevelopment and construction of 2,000,000 square feet of high-level mixed-use facilities. The land uses proposed were residential, commercial and cultural, university and tertiary infrastructures as well as green and open areas, as follows: office space (616,500 square feet); shopping center (301,500 square feet); hotel (89,500 square feet); university uses (75,500 square feet); housing (780,000 square feet); and commercial space in residential buildings (154,000 square feet) (Bilbao Ría 2000 Annual Report 1997). The Plan defined a new green area called Parque de la Ribera (852,000 square feet) and extended the Parque de Doña Casilda, adding two open areas of 286,500 and 435,000 square feet. In addition, the PERI also designated a series of planning projects around the Plaza-Paseo Puerta de la Paz (248,000 square feet), the Plaza del Museo de Bellas Artes (46,500 square feet), the vicinity of the Museo Guggenheim (57,000 square feet), the area surrounding the Concert and Congresses Hall (45,000 square feet), and the university and the office towers (39,000 square feet). Sites were also reserved for two prestige projects — the Music and Conference Auditorium (82,500 square feet) and the Guggenheim Museum (175,500 square feet) as well as for the Universidad de Deusto Library (51,000 square feet) and a Maritime Museum (247,000 square feet). In total, the Plan proposed more than 2,153,000 square feet of green and open areas, plus a further 2,017,000 square feet for buildings (Ayuntamiento de Bilbao, 1999, p. 121). By the end of 2006, the Abandoibarra project is in the midst of implementation and its basic features are well established. The key actors in Bilbao’s urban development present Abandoibarra as the flagship of a massive restructuring operation affecting the whole metropolitan area. From this perspective, targeted physical renewal not only provides the grounds (literally) to create a new center in Bilbao, but also aids image reconstruction, aligning Bilbao with creativity and success, which are seen as critical associations to strengthen a city’s competitive position in the European urban hierarchy. Prestige — or emblematic — projects symbolize a city’s commitment to providing a modern, attractive, innovative, and entrepreneurial environment for business, encouraging the free-inflow of capital (Loftman & Nevin, 1995, 1996). Yet, while the promotion of economic and urban growth through the creation of a “good business climate” is the ultimate aim of each initiative, results are not always assured. Whereas urban elites seem to believe that economic recovery follows from physical renewal and critical shifts in land-use designation, large infrastructure developments — the construction of massive office/commercial space and emblematic structures — “may be developed with only a limited awareness of their impact on economic restructuring and growth processes” (Rodriguez, 2002). Social welfare and redistributive results are expected to “trickle down” but often without any mechanisms to ensure that they do, thus disregarding the latent social and spatial exclusion effects of property-led regeneration (Turok, 1992). While speculative investment in property development may succeed in boosting local growth rates in the short term, “it is more debatable whether it is a sufficient basis for medium- to long-term recovery” (Rodriguez, 2002).

Bilbao Ria 2000 — An Urban Development Corporation The management and governance of the revitalization process in Abandoibarra is of particular significance. As formal government structures were subordinated to new


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quasi-private institutions and agencies, Bilbao’s new planning instruments demonstrate significant changes in the urban governance system — changes that partially follow previous models elsewhere (Wolf, 1970; O’Toole, 1996; Imrie & Thomas, 1999; Deas et al., 2000). Championing greater flexibility and efficiency, these quasi-private, autonomous organizations compete and often supplant local and regional authorities as key protagonists and managers of urban renewal (Urrutia & Areilza, 2000). This section therefore focuses on Bilbao Ría 2000, an urban development corporation responsible for the revitalization of degraded areas in the metropolitan area. The Abandoibarra implementation plan had been initially inhibited by fragmented land ownership. While most of the land was in the hands of the centrally administered public sector, conflicts between decisive political parties at the local, regional, and central administration level, in addition to the high cost of relocating rail lines, frustrated early progress. In November 1992, therefore, Bilbao Ría 2000 (hereafter, Ría 2000) was created to facilitate better coordination and cooperative working between development partners and stakeholders. Its main objectives were (i) concentrate efforts and carry out coordinated actions toward revitalization in Bilbao; (ii) resolve land management difficulties related to the ownership structure of the sites requiring intervention and high operating costs; and (iii) meet the demand for financial self-sufficiency as a feasibility requirement for renovating metropolitan Bilbao (Bilbao Ría 2000, 1999). Formally established as a private firm but in practice with exclusively public shareholders, Ría 2000 operates as a quasi-public agency — a planning and executive body whose objective is to manage the development of a series of urban renewal projects in the metropolitan area of Bilbao. The partners in Ria 2000 (and their shareholding) is as follows — Basque Government (15 percent); Diputación of Bizkaia (15 percent); Municipality of Bilbao (15 percent); Municipality of Barakaldo (5 percent); SEPES (INFOINVEST S.A.) (25 percent); Port Authority of Bilbao (10 percent); RENFE (Central Administration railroads) (10 percent); and FEVE (Basque railroads) (5 percent). Ría 2000 was charged with implementing the modified PERI of Abandoibarra, with César Pelli’s proposal fully incorporated. Modeled on the French Sociétés d’Economie Mixtes and the Urban Development Corporations set forth by the British conservative governments in the 1980s, Ría 2000 has become a crucial planning agency, negotiating the redevelopment not only of Abandoibarra, but also of Bilbao and possibly the metropolitan area. In fact, Ría 2000 has gradually displaced the municipal planning office as the key decision-making authority in Abandoibarra. The agency “… defines the program of intervention, organizes the financial structure of the projects, prepares the frame of reference for the selection of developers, architects or engineers in charge of the projects, adapts the responses to the local context, and controls development activities in the area” (Rodriguez, 2002). The agency functions as the executive and operational agent for the Abandoibarra project and several other planning projects under development in the city. It maintains positive relations with all participating developers and promoters in addition to the Diputación (the provincial government) and Basque Government Offices. Despite the proprietary commitment to the municipality of Bilbao, Ría 2000’s territorial remit is much greater than that of the municipality, sometimes problematically so. Its activities also extend to Barakaldo, in the broader metropolitan area (Bilbao Ria 2000, 1999).


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Ría 2000 frames its intervention around three basic functions. First, the agency is responsible “for devising a political strategy for the project”. In its role as a developer, it must coordinate a political consensus among participating institutions — “… the achievement of consensus is seen as a necessary precondition for engaging in any project affecting multiple interested parties across the public and private sectors”. Second, it directs the financial management of redevelopment. After restructuring, “… it oversees the sale of land lots to private developers. Revenue from land sales is then redirected to cover the costs of redeveloping other lots under Ría 2000 management”. For example, Abandoibarra’s railroad infrastructure was financed from a project in Ametzola, the new modal station in downtown Bilbao. Third, Ría 2000 generates new forms of urban governance through the managing of offices integrating programming, planning, and implementation. Despite all the partners in Ría 2000 being public sector firms or institutions, the agency has the status “of a private firm” — a status that effectively frees it from the political procedures required of public institutions. This status is also considered to permit greater flexibility and efficiency (Rodriguez, 2002; Rodríguez & Martínez, 2003).

Financing The Abandoibarra project generally responds to the logic of large-scale urban renewal projects of the 1980s, but in design and implementation it relates to a different macroeconomic context, mainly because the recession of the early 1990s, combined with new restrictions on the control of public deficits imposed by the European Monetary Union, compromised public sector financing options. Moreover, in the case of Spain, Bilbao was a latecomer — coming after high-profile projects in Barcelona (the Olympics) and Seville (the World Fair) had generated massive operational expenses and deficits. As a result, the revitalization of Abandoibarra was required to be a largely self-financing project — “… a mandate that justified the reinvestment of revenues from land sales into redevelopment costs” (Rodriguez, 2002). Ria 2000 started with a limited budget of $2 million and has been able to self-finance the project without public subsidies, with the exception of European Union funding amounting to 14 percent of total investment. Ría 2000 is the decision-maker for land and property holdings of several institutional bodies. It manages decisions for strategic intervention. Although the projects are developed through standard planning procedures, Ría 2000 retains considerable powers with respect to priorities for intervention, disposal of land and other property, building characteristics, and the management of public funds for redevelopment. While regulatory planning instruments are still a core legal reference, their significance as guiding tools has diminished considerably. Indeed, by assuming an increasing number of powers related to urban revitalization, including the management of the more emblematic, flagship projects in the city and the metropolitan area (Esteban, 1999, p. 134), Ria 2000 has gradually reduced the local municipalities’ planning departments to a secondary role (Table 5.1).


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Table 5.1: The 2002 Abandoibarra plan. Square feet Total floor area Area being built Parks Office space Shopping mall Residential Hotel University buildings Commercial

3,751,000 2,267,000 1,484,000 791,000 274,500 845,000 140,000 161,500 59,000

Source: Bilbao Ria 2000.

Project Development and Modification Despite the global ambitions present in the Abandoibarra project, the original concept has been subject to several modifications (see Figure 5.1). This demonstrates, inter alia, the considerable contradictions inherent in megaprojects envisioned by urban elites — in this case the political leaders of the Basque Nationalist Party. Ría 2000 has had exclusive management authority, yet consensus solutions have sometimes been difficult to secure. Although the design competition jury awarded César Pelli first prize in June 1993, it had also rejected the most emblematic building in the project (a 40-story-high tower), unless it could be devoted to public use. In addition, Bilbao City Hall emphasized that the construction process would be slow and, due to financial obstacles, would need to be undertaken in phases. Since 1993, Pelli’s proposal has undergone significant modifications and has met with diverse problems. Despite the initial intention to complete at least part of the development by 1998, development did not begin until the Fall of 1999. Further, public statements by Bilbao officials in 2001 forecast that development in Abandoibarra would not be completed until 2005 — an objective that has yet to be met. In 1994, implementation difficulties led to a new “commercialization plan”, which attempted to find private sector investors for the office, residential, and commercial elements of the project using attractive models and displays of the different projects at various exhibitions in Madrid and Brussels. Contacts were made with real estate companies, although no binding agreements were signed. Some private investors were deterred by anticipated delays in construction. The problems encountered in the plan’s early commercialization led Ría 2000 to explore various formulas for project financing in order to avoid bankruptcy. The calculated deficit, which no public institution seemed willing to cover, was over 6,000 million pesetas (about $48 million) (Salona & Cenicacelaya, 1994). In order to undertake the Abandoibarra project, Ría 2000 agreed to incur debt whenever necessary. Owing to these financial constraints, Ría 2000 decided not to limit Abandoibarra solely to office development. The alternative, formulated around 1994,


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1989—First Draft of Bilbao General Urban Plan (PGOUB, Plan General de Ordenación Urbana de Bilbao). 1992— International Competition of Ideas for Abandoibarra. 1992 (November) — Creation of Bilbao Ria 2000. 1993 — César Pelli wins the International Competition of Ideas for Abandoibarra. 1994 (February) – Final approval of PGOUB 1994— Shopping Mall proposal. 1995 (April) – Final approval of PERI 1995 (March) — Peter Coleman design for shopping mall. 1995 — First version of Pelli’s plan approved. 1996 — Athletic Club Stadium proposal (later discarded). 1996 — Changes in the composition of the Board of Bilbao Ria 2000 put the project on hold. 1997 — University of Deusto buildings proposal. 1997 (March) — First version of Pelli’s plan reformed. 1997 (June) — Creation of Ciudadanos por Abandoibarra. 1997 (July) — Pelli announces withdrawal from design plan. 1997 (Fall) — Ria 2000 gives Pelli full control of the plan and he accepts to stay. 1997 (October) — Opening of the Guggenheim Museum Bilbao. 1998 (Spring) — Pelli’s re-design, including Diputación tower. 1998 (Fall) — Peter Coleman withdraws from the Shopping Mall project. 1999 — Second PERI for Abandoibarra. 1999 (May) — Starwood/Sheraton wins the bid to become the hotel operator. 1999 – Opening of Euskalduna concert Hall and Convention Center. 2002 — New Abandoibarra Plan, new distribution of land and spaces. 2003 (March) — Modification of PGOUB 2004 – Opening of Sheraton Hotel 2005 (January) – Modification of PGOUB

Figure 5.1: Abandoibarra: Chronology of events. substituted residential development and a commercial center, integrated at least partially with the Pelli design. Despite the initial plan for Abandoibarra as an emblematic new business center for Bilbao, “the new shopping mall was considered to have better prospects for revitalizing the area and generating consumer activity. In addition, local real estate developers’ evident interest in developing residential space seemed to confirm the new plan’s commercial viability” (Esteban, 1999). The proposal for a shopping mall in Abandoibarra triggered numerous studies, debates, and reports. The initial project proposed space for fashion outlets, sportswear, and games, as well as nearly 20 movie theaters, in order to enhance the leisure activities already set into motion by the Guggenheim Museum and the Palacio Euskalduna de Congresos y de la Música. The office towers would give the area a much needed business character.


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But, once again, the need to secure private developers willing to invest frustrated the project’s realization (Rodríguez, 1995). In March 1995, architect Peter Coleman presented a design for the Abandoibarra shopping mall, called “Ría 21”, setting out its leisure and commercial potential. The four-storey building included underground space for parking and required an investment of between 5,000 and 6,000 million pesetas (between $40 and $48 million). The new mall would not be a standard conventional commercial center, but rather a high-design building. Bilbao’s mayor, Josu Ortuondo, declared, “We do not want to do a mall, although there would be demand for it, but rather something high quality, carefully designed and leisure-spirited” (Ortuono in Esteban, 1999, p. 139). The opening was planned for the end of 1997, around the time of the Guggenheim and Palacio Euskalduna openings — although this never happened. The new mall was presented as a regional center with a potential market of 5 million consumers. Ría 2000 wanted a single developer to acquire the 243,000 square feet site and handle both the building and management of the mall. Local businesses and their associations were briefly considered as potential developers of the site, but rapidly discarded. In order to promote the mall to potential investors, the project was previewed at the Real Estate International Fair in Cannes, France in 1995. Some companies appeared interested in the project but could not meet the demands — proposing either to double the mall’s floorspace or to only develop one part of it, such as the movie theaters. “When the project was formally announced in December 1995, it attracted a flurry of early activity from many companies, but only one demonstrated undeterred interest — the entrepreneur Max Center, an international property development and investment firm based in France” (Esteban, 1999). The proposal to build a mall in Bilbao’s center triggered opposition from local business associations — supported by the Chamber of Commerce, the local Society of Architects, and some political groups. The groups argued that sufficient commercial space already existed in the city. The associations, in particular, criticized a project that “… would have a clearly negative influence on the retail sector” and were appalled that public institutions seemed to be promoting a center that would cause major distortions in the market. Ría 2000, however, considered the mall necessary to “give life” to Abandoibarra, insisting that only a single, high-quality project such as Ría 21 would match the status of the Guggenheim Museum and the Palacio Euskalduna and attract “people from abroad”, generating economic activity, employment, and wealth (Esteban, 1999). Despite this opposition, Ría 2000 moved ahead with its plans. During 1996, it came to an agreement with Max Center for the construction and management of the new mall, which was now intended to open in September 1999. In step with this agreement, the local business associations accelerated their efforts to prevent the mall from opening. With support from a local political association led by former Bilbao Mayor José María Gorordo, “the businesses filed suit against Ría 2000 for not conducting the traffic and environmental impact study of the area required by the Bilbao General Urban Plan (PGOUB)” (Esteban, 1999, p. 143). In addition to the mall, despite a number of studies that suggested the Bilbao office market was already saturated, Ria 2000 advocated the development of three office towers, totaling 720,000 square feet. In February 1996, it contracted a private consulting firm for the office space. Instead of reopening the question of office space, Ria 2000 opened a search for investors interested in a “new philosophy” that saw Abandoibarra as an ideal location for new international office space. The new space would help establish


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Bilbao’s credentials as a center for the Atlantic Arch (from Galicia to Normandie) and, more specifically, would appeal to companies looking for locations in northern Spain or the south of France. Such initiatives multiplied as new proposals came from public bodies, private agencies, and associations. The president of the local soccer team suggested a new stadium next to the Guggenheim Museum. But, faced with strong opposition, the Athletic Club Stadium proposal shifted to another site within Abandoibarra, next to the Deusto Bridge, on land allocated to the new mall. Despite the designs presented for the new stadium being commissioned from famed international architects Norman Foster and Santiago Calatrava, Ria 2000 and Bilbao mayor Josu Ortuondo responded firmly by rejecting the proposal: Abandoibarra is an important opportunity area for the city and the creation of wealth. This is the best land in Bilbao and it is not a good idea to use it for a stadium that will be open forty days a year (…) No matter how you look at it, a soccer stadium is a giant building and it would become an extraordinary urban barrier preventing Bilbao from contacting the river again. (Ortuondo in Esteban, 1999, p. 143) Another proposal suggested developing a central administrative building for the University of the Basque Country, “containing the office of the president and the higher administrative units as well as a museum for the history of medicine and science”. In mid1997, Ría 2000 accepted the University proposal, on condition that the land designated for the building be bought by the University or the Basque Government’s Department of Education. In response, “the University sought to secure financing from three local banks (for 1,400 million pesetas, about 11 million dollars)”. The banks would own the new building, but would lease it to the University free of charge. This idea lost its footing “with the election of a new mayor, Iñaki Azkuna, whose vision for Abandoibarra differed from that of his predecessors. More interested in the expansion of parks, in Azkuna’s vision there would be no room for the University administration building” (Esteban, 1999, passing). At about the same time as these developments, Ría 2000’s governing board faced changes in its composition, largely due to shifts in the tenure of board members at each of the governing institutions. Representing the recently elected conservative national government, 10 new board members joined Ría 2000 in 1996. The new situation caused Basque nationalists to criticize Madrid’s disproportionate influence in the governing body. In addition, new and unexpected developments put the Abandoibarra project on hold (Bilbao Ría 2000, 1998). In October 1996, the Ministry of Public Works in Madrid challenged the procedural legality of the transfers of land owned by public companies, such as RENFE and the Port of Bilbao, to Ría 2000. Although the transfer had been approved by the juridical services of the previous, socialist-run Ministry of Public Works, the new ministry requested another assessment, which threatened to delay the development of the Ría 21 mall for more than a year. “The legal procedure transferring the land to Ría 2000 was shown to be faulty. New requirements demanded the land be returned to its private owners before proceeding with expropriation”. In May 1997, RENFE announced it would return the Abandoibarra land it controlled to its former owners. In the case of the land already ceded to the Guggenheim


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Museum, by then under construction, Ría 2000 “had to face the possibility financial demands for compensation from previous owners” (Esteban, 1999, p. 146). In March 1997, Ría 2000’s Vice President commissioned César Pelli for yet another revision of the initial design for Abandoibarra. The intention was to adapt the original design to the city’s actual needs, which seemed unable to absorb the 720,000 square feet of office space initially projected. Pelli’s return implied that some of the projects already accepted would again be subject to modification. In this new round of revisions, Ría 2000 attempted to revise the whole plan. “Fearing that the proposed design of Abandoibarra would prevent their residents from having a view of the most compelling buildings in the design, pressure from neighboring areas, such as Abando and Deusto, stimulated a reappraisal of the plan”. Considering the office buildings and the mall inappropriate for the area, “they supported a new version of the plan incorporating more open space and less high-rise development”. The local Society of Architects also supported the residents’ position (Esteban, 1999). In mid-1997, small businesses, residents, and local architects coordinated their opposition to Ria 2000 proposals for Abandoibarra, forming a coalition called Ciudadanos por Abandoibarra (Citizens for Abandoibarra). Lobbying for alternative plans intended to achieve “sustainable urbanism”, the coalition achieved some notable victories. In June 1997, the majority of board members in Ría 2000 (mostly members of the conservative Popular Party) withdrew their support for the shopping mall. By their reasoning the project was wholly unpopular, with a very aggressive design and little respect for the sustainable development of Abandoibarra. Ría 2000 responded by allowing a three-month period for Ciudadanos por Abandoibarra to present an alternative to the mall. This concession to the lobbyists, however, did not prepare Ría 2000 for a more fundamental shift in the basis of its plan. In July 1997, César Pelli announced his intention to withdraw from the project because decisions made by City Hall and Ria 2000 since 1993 had imposed too many limitations, constraints, and compromises, especially the change in location and number of office towers. Political strife and citizen opposition probably influenced the architect’s decision. Pelli’s announcement triggered a new demand for consensus within Ría 2000 over the initial design concept. Pelli was the architect of choice and considerable efforts were made to retain his services, particularly because local officials knew it would be extremely difficult to find another prestigious architect willing to carry out a project designed by someone else. In September 1997, Pelli accepted an offer giving him full control of the project (Ayuntamiento de Bilbao, 1999, p. 66). The then mayor, Josu Ortuondo — a prominent defender of the shopping mall only a few months earlier — declared that “… the current Ría 21 project does not fit in Abandoibarra and therefore the investor will have to be subject to the limitations imposed by the architect. Pelli’s spirit will influence all the area, including the shopping mall” (Esteban, 1999, p. 148). Under such circumstances, Max Center, the investor in the shopping mall, warned the local authorities that it could abandon the project, unless agreement was reached. Agreement came in October 1997, when Ría 2000 decided to assign the shopping mall project to Max Center, with the condition that its design be subject to the César Pelli’s architectural overview. “Although Max Center accepted these limitations, the fact that the shopping mall seemed likely to go ahead continued to disturb the coalition of local businesses, residents and architects”. In the meantime, several studies commissioned by local institutions questioned the financial viability of the whole Abandoibarra development and its basic


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pillars — the leisure and commerce center and the real estate developments. “The studies also indicated that the Bilbao’s office market would be saturated for at least five years if the Abandoibarra towers were constructed. Serious questions were also raised about the financial situation of Filo, the most important partner in Max Center” (Esteban, 1999). Uncertainty about Abandoibarra’s future and continued delays in almost all the projects envisioned by Ría 2000 and its partners caused the European Union to withhold all its financial support for the development of Bilbao (consisting of about 1,200 million pesetas, or about $9.4 million) until the local authorities clarified the prospects for completing each of the projects. This circumstance forced Ría 2000 “to engage in a decision-making process to advance all pending projects in order to remain eligible for the European fund”. As witnesses of short-lived plans and revised projections at every turn, local citizens shared the administrative uncertainty. As the City Hall member in charge of Urbanism, Ibon Areso, declared, “… the institutions are conveying an image of total lack of efficacy. … our way of behaving and the uncertainties we have generated have conveyed more confusion to the public than information” (Esteban, 1999, p. 150). When the Popular Party ceased to be a partner in the municipal government at the end of 1997, the political consensus collapsed. The Popular Party representatives again expressed their reservations about the shopping mall, suggesting that the site should be used for leisure rather than commercial purposes. Lacking political agreement, it was hoped that César Pelli would generate the necessary consensus to progress the development, which had been halted without alternatives. In the end, the shopping mall debate isolated two fundamental revitalization concerns — financing the project and the need for (and lack of) political consensus.

César Pelli’s Redesign Between March and May 1998, César Pelli presented his new design for Abandoibarra. Now including more park space, the area reserved for services was reduced to a single office tower of 495,000 square feet, with two smaller office buildings each of 180,000 square feet. The administrative building of the University of the Basque Country and a library building for the Deusto University constituted two cultural facilities. Four residential buildings and a luxury hotel covered the dominant real estate space in the area, while the shopping mall was redesigned as an open air shopping area (Ayuntamiento de Bilbao, 1999, p. 81). The new design did not meet with Ciudadanos por Abandoibarra’s immediate approval, which considered Pelli’s project merely “… a variation on an old theme”. The new design, however, “… exacerbated the differences of opinion and the variety of interests within the citizen’s movement”, triggering the small businesses association’s — the Asociación de Comerciantes del Casco Viejo — withdrawal from the movement. The association opposed the movement’s “overt politicization”, which caused it to constantly seek confrontation without also providing any room for compromise. The small businesses association, however, did not want the shopping mall anywhere in the city, while the movement’s official preference was for it to be located in downtown Bilbao, in the building called La Alhóndiga. The citizen’s movement found further support from Herri Batasuna, the party of Basque radicals and pro-ETA, “which rejected the shopping mall without


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qualification and proposed instead the construction of more popularist buildings such as a library, a big park, and a Jai-Alai (Basque popular ball game) facility” (Esteban, 1999). César Pelli’s new design did not affect Max Center’s commitment to building the shopping mall. The investor was “flexible regarding the design of the building”, provided that it did not render the project unviable. Despite the controversy that Peter Coleman’s initial design had generated among urbanists, political parties, small businesses, and residents, Max Center “continued to support the British architect and considered that he would be able to create a new design according to Pelli’s specifications”. Coleman and Pelli were unable to come to agreement, however, and Ria 2000 found itself with two designs on the table. Ultimately, “… after seeing the weight of institutional support for Pelli and citing irreconcilable differences between the architects”, Max Center dispensed with Coleman’s services. Max Center commissioned another architect, Robert Stern, who came to an agreement with Pelli’s team about the shopping mall’s design (Esteban, 1999, p. 141). By mid-1998, and after five years of proposals, Abandoibarra seemed to be just another unbuilt vision. The final proposals presented personally by Pelli to the Board of Ria 2000 was unanimously supported. At that time, Bilbao’s mayor confidently announced that construction would start in 1999 and that the whole project would be fully realized within six years. “But Pelli’s design did not generate similar enthusiasm in other sectors of local society. Ciudadanos por Abandoibarra continued its criticism of the project, while political opposition within the municipal government insisted that Abandoibarra would merely become an elite area ripe for private speculation”. Critics proposed more than 250 amendments to the proposals. Nevertheless, “Pelli’s design for Abandoibarra was finally approved by Bilbao City Hall with the support of 80 percent of council members” (Esteban, 1999). Publication of Pelli’s revised plan also brought to light some negotiations that had been happening behind the scenes regarding the financing of the office element of the development. During the summer of 1997, it had been announced that one of the two towers then projected for Abandoibarra could become the headquarters for the Provincial Government (Diputación). Under these plans, the Diputación would consolidate all its offices spread throughout Bilbao and “… would occupy 495,000 square feet of space”. According to the mayor, this would establish Abandoibarra as a fully functioning business center: “He also suggested that the two towers of 360,000 square feet each could become two towers of 495,000 and 180,000 square feet respectively”. “Successfully mobilizing companies and public institutions toward Abandoibarra would also generate income needed to finance other projects” (Esteban, 1999). The Diputación project would affect 14 buildings in downtown Bilbao, making them available for possible conversion to residential use. In any case, the Diputación would only consider the project if it could exchange its buildings in Bilbao for space in the new tower — a transfer that would reduce the cost of the project for the Diputación. When the Pelli’s new plan was announced, the Diputación also made the details of César Pelli’s tower project public, which, for the city council member Ibón Areso, was “… the flagship project of business Bilbao”. Reasons for the move varied. Concentrating local government departments within a single building significantly lowered maintenance costs (security, cleaning, and transportation) while improving administrative efficiency — citizens would no longer have to travel between buildings to complete business.


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The estimated cost of the new facilities was 11,000 million pesetas (about $86 million), while the estimated price of the Diputación real estate in Bilbao was 9,800 million pesetas ($77 million). It was therefore necessary for the Diputación to release additional buildings in other towns in Bizkaia. “The risks of the project were evident. Introducing large amounts of office space into the market could lead to saturation, causing real estate values to decline — including those of the Diputación buildings — and compromising the real estate exchange’s financial viability” (Esteban, 1999, p. 141). The project was further complicated by subsequent estimates that costed the new tower at 15,000 million pesetas (about $120 million), which would force the Diputación to sell 19 (rather than 14) of its buildings. The Diputación’s intention was to find a real estate company interested both in acquiring all its buildings and committed to building the new Abandoibarra tower. “But the prospects for this scale of commitment were limited, and the pressure to sell the buildings individually rather than as a single purchase complicated the outcome of the exchange” (Esteban, 1999). The Diputación was looking for an investor from the end of 1999 and expected to be able to occupy the new tower, next to the Guggenheim, by 2004. As of May 2005, the construction of the tower had not begun. Although initially all political groups in the provincial government agreed that moving the Diputación to its new location was advantageous, criticism mounted due to the project’s complexity. While all representatives continued to support the unification of public services, the risk of financial stress would increase if the selling prices did not achieve the values set out in Diputación’s viability study. The study had been premised on a relatively a risk-averse scenario — a 10 percent decrease in the selling price of the Diputación’s buildings and a similar increase in the costs of the new tower. Given this scenario, the possible downside losses were estimated at 4,200 million pesetas, or $32.7 million. Cesar Pelli’s revised plan for Abandoibarra proposed the development of a new luxury hotel in the area. This attracted the interest of important international hotel chains such as Hyatt, Sheraton, and Sol Meliá — who each proposed larger hotels than that proposed by Pelli. The prospect of building new hotels in Bilbao triggered protests from local hotel businesses, who perceived a threat to their interests and insisted that demand would not meet such a significant increase in supply. They feared being disadvantaged due to competition from new hotel projects promoted as part of larger urban regeneration projects in Bilbao (Chadoin et al., 2000). The conditions under which the hotel project turned into an international competition demonstrated the commitment of local authorities to ensuring financial stability and a global image for Bilbao. Thus, in Fall 1998, the bidding process for the hotel concession was initiated with specific stipulations. The bidders had to accredit their presence in at least five countries, including the United States. In addition, they had to guarantee an international customer base and project-finalization within 30 months of acceptance of the bid. The hotel project would also solve conflicts with the previous owners of the land. Ría 2000 would select the first round finalists among all bidders, but the owners of the land would select the winner. Ría 2000, however, retained rights of veto over the landowners’ decision. Moreover, these conditions were also intended to reestablish positive relations with the local Association of Architects. Although the bidders had to present a list of three internationally known architects for the hotel, the selected architect would have to work with a local architect on its design and construction (Esteban, 1999). When Ría 2000 revealed the


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names of the bidders, it was clear that Bilbao represented an attractive city for the hotel chains. The seven bidders included Sofitel (France), Hyatt (USA), Inter-Continental (UK), Marriot (USA), Sol Meliá (Spain), Starwood/Sheraton (USA), and Tryp (Spain). Unwilling to let the outcome of this competition determine their presence in (or absence from) downtown Bilbao, and in case their initial proposal was not selected, the bidders also looked for other development opportunities in the city. In May 1999, Starwood/Sheraton won the bid to become the hotel operator. This is a 6,000 million pesetas project (about $48 million) in which the landowners retain a profit share (Esteban, 1999).

Project Impacts Given that it is still in progress at the end of 2006, evaluating the impact of the Abandoibarra development project on the surrounding neighborhoods and the locality can only be provisional. Nonetheless, some observations are possible. In terms of neighborhood impact, the project is bound to have significant effects on the adjoining districts of Abando and Deusto. In general, “it is reasonable to expect that the elitist character of the Abandoibarra project will reinforce the centrality of the Abando area both in functional as well as socio-economic terms. Functionally, the concentration of high-level commercial infrastructures and office space provisions will enhance the area’s capacity to attract service sector investments and activities”. From a socio-economic perspective, Abando’s centrality is reinforced by limited access to Abandoibarra’s facilities and infrastructures by lower income sectors of local society (Rodriguez, 2002). The effect of the Abandoibarra project on the neighboring districts’ real estate market is still uncertain but some patterns of change are identifiable. In relation to the housing market, local real estate agents agree that prices in the adjoining areas have increased and are increasing, especially in the most expensive locations. “This perception is supported by observations of the housing sector in 1998. While the housing prices in the city increased by 10–15 percent on average, in Abando they increased by between 30 and 40 percent” (Gobierno Vasco, Departamento de Urbanismo, Vivienda y Medio Ambiente, 1989). Limited supply relative to demand combined with raised expectations created by the Abandoibarra project account for this. According to experts, the construction of 800 luxury-housing units on the site will only add to this trend. However, the housing market in the Abando district “… might be affected by the release of part of its current office stock as a result of firms transferring to the new office facilities in Abandoibarra — the vacated office stock might be converted to residential use”. Other housing market areas affected by the “Guggenheim effect” include the Campo Volantín, the area opposite the riverbank facing the Museum, Deusto, and Indautxu (Rodriguez, 2002). The market for office space is also strongly affected by the development of almost 969,500 square feet in Abandoibarra. “Almost 60 percent of this supply is already committed to the administrative offices of the Diputación. The transfer and concentration of the Diputación’s departments and services to Pelli’s distinctive, fifty-story skyscraper will release over 430,500 square feet of prime office space in the center of the city”. Selling that stock to one or more promoters is a precondition to finance the costs of transferring the facilities to Abandoibarra, estimated at approximately 15,000 million pesetas


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($120 million) (Gobierno Vasco y Diputación Foral de Bizkaia, 1994). Release and circulation of that stock is considered to be the most important real estate market event in Bilbao’s history. The scale of the operation has led the Diputación to participate in recent Real Estate Fairs in Cannes and Barcelona to attract the interest of international developers. Yet, there is also a risk of clogging the market with a sudden increase in the supply of office space and a subsequent reduction in values and rents. Moreover, “the impact on the office market is also mediated by competition from the development of alternative projects in nearby locations — the Uribitarte Building located in the riverfront area next to Abandoibarra and the Intermodal Station in Abando, for example, both incorporate the construction of significant office and/or commercial space” (Rodriguez, 2002). The submarket for retail space is also affected by the development of over 323,000 square feet in Abandoibarra. Indeed, this new retail space has been the source of significant contestation from local retailing associations, who view the development as a severe threat to the viability of the center’s commercial areas, notably Casco Viejo, Abando, and Indautxu. Despite the threat that increased competition poses to small retail shops, it is not clear that the creation of a new shopping area would significantly erode the advantage of the highly consolidated commercial areas of Bilbao. It is too early to assess the potential shifts and displacements on either side of the supply and demand equation. So far, the most visible impact on this subsector is a 30 percent increase in the value of commercial spaces in the area next to the Guggenheim as well as the emergence of fast-food franchises and tourist-oriented shops.

Conclusions Over the past two decades, many large-scale interventions by government, in partnership with private interests, have taken place outside the ordinary planning framework in a form of concerted but strategically focused planning. One example is urban megaprojects such as Abandoibarra, in which one sees the influence of globalization in bringing about major changes in the institutional structure, processes, influence, and scope of planning (Friedmann, 2005). One of the central issues in urban megaprojects is the financing mechanism, especially due to the high upfront costs involved in the early phases of clearing, decontaminating the land, removing physical barriers, and setting up necessary infrastructures. Moreover, high investment costs, low expected returns, and considerable risks incurred during these early phases, make private sector involvement highly unlikely. The public sector, therefore, often has to reclaim and prepare sites for redevelopment. And yet, given limited financial capacity and budget constraints, for many local or regional authorities the search for the necessary resources to carry out these large-scale operations is often highly problematic. The obligation to demonstrate financial viability for all redevelopment work in Abandoibarra was particularly inflexible because it followed closely on the tracks of the urban renovation projects associated with the Olympic Games in Barcelona and the World Fair in Seville, both of which had received massive public investments prior to 1992. Bilbao not only arrived late, but in the midst of budget constraints as a consequence of previous projects, making national or even regional State financial support highly


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unlikely. The project’s feasibility rested on redeveloped land sales at or above development costs. Whether or not self-financed revitalization is achievable is still open for debate. So far, the Guggenheim Museum, which opened in 1997, and the Conference and Concert Hall, which opened in 1999, have required considerable public subsidy — $110 million for the Guggenheim and $50 million for the Hall. Most of the funding comes from the Diputación (the county-level administration and tax-collecting and fiscal authority) and from the Basque Government. Regarding the Guggenheim, the Basque Government and the provincial Government of Biscay (Diputación) are committed to financing the Museum’s annual operating deficit. The impact of these investments on local public budgets is presumably high and there is an obvious opportunity cost associated to these investments. Abandoibarra remains the centerpiece of Bilbao’s revitalization scheme. In order to connect the Basque region to the global economy, local politicians have invested heavily in the project’s potential. The planners’ global rhetoric and image renovation aimed at generating investment in Bilbao offers one approach — but the city’s ability to secure foreign investment capital is still largely unproven according to Bilbao’s developments to date. Abandoibarra remains a global megaproject confined by local reach, thus exemplifying the contradictions inherent in most property-led urban regeneration schemes (Fainstein, 2001). Megaprojects’ risks and flagship projects’ lack of financial feasibility severely limit the prospects for successful development and implementation, and often force planners to continue negotiate and change initially ambitious projects. This chapter has outlined and explained the development of the Abandoibarra megaproject, focusing in particular on the key role of Bilbao Ria 2000 — an innovative cross institution, public–private partnership, responsible for coordinating the transfer of land between public and private agents. The chapter also examined the many modifications to the Abandoibarra plan since its inception, showing how “the anatomy of ambition” (Flyvbjerg, 2003) by urban elites may often face severe grassroots challenges and structural obstacles (Beauregard & Pierre, 2000). It was argued that both urban megaprojects and urban development corporations are by-products of the new political climate started in the 1980s, in which neoliberal policies were developed as a significant part of — and as a response to — globalization processes. Megaproject development constitutes a prominent political strategy in the “entrepreneurial” city aiming at raising global visibility of a particular city in the context of world cities, and connecting local economic development to the shifting fortunes of world markets. The development and implementation of Abandoibarra is, therefore, a clear example of globalizing Bilbao in an era when localitybased international initiatives are widespread (Beauregard & Pierre, 2000; Moulaert, Rodríguez, & Swyngedouw, 2003). The dreams and ambitions of urban elites, attuned to the hegemonic discourse of forcefully competing for apparently footloose capital, are spatially reflected in a new architecture for the city — one that captures the inherent contradictions of capitalism in our global era. Paradoxically, it has not been the carefully planned Abandoibarra megaproject that has raised global visibility for Bilbao, but rather a piece of the whole revitalization scheme that was not initially included in the plan — the Guggenheim Museum Bilbao. In fact, the Museum can be said to have significantly contributed to the symbolic reassertion of Bilbao in the global map of world cities — in the “world consciousness”, according to


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Peter Hall. Widely acclaimed as a successful project turning Bilbao into a tourist city in the avant-garde of world architecture, the Guggenheim Museum poses intriguing questions about the role of architecture in urban revitalization, the significance of culture and tourism for urban economies, and the ability of local and regional administrations to actually yield economic development for their citizens. It is to these questions that we turn to in the next chapter, which tells the story of the Guggenheim Museum Bilbao.


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Guggenheim Museum Bilbao (2004)



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Chapter 6

Architecture, Globalization, and the Guggenheim Project

The country needs a challenge and this is going to be it. (Juan Antonio Vidarte, Basque negotiator) The word is out that miracles still occur, and that a major one is happening here. Frank Gehry’s new Guggenheim Museum won’t open until next month, but people have been flocking to Bilbao, Spain, to watch the building take shape. ‘Have you been to Bilbao?’ In architectural circles, the question has acquired the status of a shibboleth. ‘Have you seen the light? Have you seen the future?’ (Herbert Muschamp, The New York Times Magazine, September 1997) With the Guggenheim in Bilbao, Spain, Frank Gehry has transcended the future and taken us into eternity. (A reader’s letter to the editor, The New York Times Magazine, October 1997)

Introduction In Chapter 1, it was argued that “pathways to globalization” consist of various economic and political strategies developed at the regional level to establish flows and transnational connections with the world economy, and of local developments to cope with changes triggered at the global level, together with structural and territorial adjustments to position the city in the context of world cities. Chapter 6 explains the Guggenheim project as the latest of Bilbao’s globalizing efforts and therefore as a prime pathway for Basque globalization. The motives of Basque political leaders in bringing the museum to Bilbao, after a negotiation process in which coincidences played an important role, were not shaped primarily by “cultural” concerns, but, instead, are better explained by two factors, one global and the other domestic: (i) recognition of the need for regional image change and urban regeneration in Bilbao under conditions of contemporary globalization — which in practice meant participating in a global venture for iconic architecture, and (ii) the long historical instance on the part of the Basque Nationalist Party leaders toward political emancipation from Spain, reflected in this case in the realm of cultural politics. In this way, the Guggenheim project was not an isolated case of urban boosterism. Instead it is the latest and most


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successful example of how Basque leaders managed to bypass Madrid and conduct their own independent international affairs. The project’s political overtones are clear, but its economic dimension is also important. Although the museum has been hailed by the international press as the icon that has turned Bilbao’s economy around, this chapter questions the strategy’s long-term feasibility and shows that an urban economy, the size of Bilbao, cannot rely simply on a museum for economic development. Nonetheless, as a State project fully funded with public money, the Bilbao Guggenheim will remain an urban icon independent of financial pressures. The role of architecture in globalization has not been comprehensively studied until very recently (Ibelings, 1998; Satler, 1999; Tzonis, 2001; Krause & Petro, 2003; King, 2004; Umbach & Huppauf, 2005; Saunders, 2005; Easterling, 2005; Knox & Taylor, 2005; McNeill, 2005; Sklair, 2005, 2006). This chapter demonstrates how iconic, spectacular architecture — driven in this case by the ambitions of entrepreneurial politicians and cultural managers — plays a fundamental role in the worldwide deployment of contemporary globalization and the creation of large-scale social spaces as capitalism’s transnational strategies because it has the power of rescaling the significance (local into regional into national into global) of specific buildings and the cities where they are built. While we are far from a globally legible world from an architectural perspective — a world which is instead populated by vernaculars and critical regionalisms — the Guggenheim Bilbao ignites the debate about commodification, commercialization, and replicability of spectacular buildings (Saunders, 2005). In the increasing discourse about architecture’s surrender to capitalism’s commercial goals — where architects are stressing the political side of their practices and social scientists are exploring architecture’s social nature — the Guggenheim Bilbao is repeatedly and mistakenly portrayed as the “catalyst” for the city’s positive economic performance since the mid-1990s. This chapter shows how a city, the size of Bilbao, cannot rely on a spectacular building to achieve sustained economic development. The chapter begins with an introduction that explains the context previous to the Guggenheim project, and then it examines the project development, implementation, and the controversies it triggered. It continues with an account of the museum’s impact on Bilbao’s economy and of the so-called “Bilbao effect’s” impact around the world.

A Global Venture for Bilbao More than 10,000 press articles about the Guggenheim Bilbao have been written all over the world since the museum opened in 1997 — 8,500 of them only in the first two years, 60 percent outside Spain, making the story one of the most globally circulated cultural news of recent times. Just to name a few, articles about the museum appeared in The Economist, Architecture, Artforum, ARTnews, Art Newspaper, Metropolis, Domus, Werk, Bauen and Wohnen, Time, Newsweek, Metropolitan Home, Esquire, Art in America, The New York Times, The Architectural Review, Flash Art, New Art Examiner, Art Press, L’Architecture d’Aujourd’hui, Beaux-Arts Magazine, Blueprint, Landscape Architecture, Astragalo, A&V, Arquitectura Viva, Architects’ Journal, Drawing, The Burlington Magazine, Spectator, Casabella, Progressive Architecture, Abitare, House Beautiful, New Yorker, Modern Painters, Lotus International, The Wall Street Journal, RIBA Journal, Connaissance des arts, Europe, Art Text, Art and Antiques, Kobie, Blueprint, Croquis,


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Harper’s Bazaar, Travel and Leisure, Euromoney, Vanity Fair, Museums Journal, Baumeister, Salmagundi, Raritan, and others. Most American and world press have implicitly portrayed the story of the Guggenheim Bilbao as a “Cinderella” story in which an American institution and a world-class architectural building came to save a ruinous city. But that is just one side of the story and perhaps not the most important or the most accurate one. In fact, before the museum and Bilbao acquired their current status as a global pilgrimage destination, it was the wealthy Basque government that powered a Guggenheim foundation in financial difficulty at a time when many European cities had already rejected the expansion projects of Foundation Director, Thomas Krens. And it is Bilbao’s success that made possible the beginning of Krens’s dream for a global museum franchise, as reflected in the fact that, immediately after Bilbao, numerous cities around the world were actively bidding for a Guggenheim designed by Frank Gehry. The Guggenheim Museum has “put” Bilbao on the global map, to the benefit of the city and the Basque region, and has played an important role in the city’s entrepreneurial strategies (González Ceballos, 2003) and the possibility of thinking about a global transnational museum (Guasch & Zulaika; 2005; Fraser, 2005). It surely constitutes global Bilbao’s best known – and, for most people, the only — example. In fact, the museum and its impact represent only the latest instance in Bilbao’s globalizing process, though undoubtedly the most spectacular in terms of image. As shown in the previous chapters, Bilbao has a global tradition many centuries old — the city having been founded as a node in trade flows between Castile and the world. The making of globalization in Bilbao owes as much to the city’s urban and economic development in the context of evolving world markets as to the politics of local relationships with the Spanish State, the city’s contribution to Spain’s global expansion, and its persisting defense of local commercial and political rights and privileges in the face of the State’s centralizing policies throughout history and up to the present time. This arrangement of forces shaping Bilbao’s globalization in the past is also visible in the case of the Guggenheim Museum. With the Guggenheim project, the Basques sent the clear message that the region would link itself to global circuits without Spain’s mediation. In this globalization episode there was an added element — the local recognition of a need for image-making through the construction of cultural artifacts, or “flagship projects” — a recognition that came late for Bilbao in the overall scheme of revitalization. Culture was never predicated as the centerpiece of Bilbao’s revitalization plan, as the city was never thought of becoming a cultural center in its own right. Furthermore (perhaps paradoxically), “culture” and “art” were always on the sidelines in the Guggenheim project. Local planners and politicians, however, were very well aware of the important role that culture and tourism were playing in the various revitalization schemes of European cities (and, in fact, of cities around the world) at the time when the Bilbao revitalization plan was crafted. As a “strategic plan” encompassing all relevant areas, the revitalization plan also included the need to restructure the city’s culture and tourism sectors. Bilbao was heralded in the plan as a “new service metropolis” able to attract culture and tourists — although the development of the local high-tech industrial sector, the maintenance of the financial dimension of the city, the overhauling of communications infrastructure, and the enlargement of the port constituted the key revitalization projects.


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All in all, the discourse on cultural planning and revitalization became well known locally, thanks in part to the activities of consultants and writers on the topic who influenced policy decisions (especially Franco Bianchini — see Bianchini & Parkinson, 1993), to the networking efforts of local officials worldwide, and to the recent experiences in image reconstruction of Spanish cities such as Barcelona (with the Summer Olympics), Seville (which hosted the World Fair), and Madrid (which was declared Cultural Capital of Europe) during 1992, the so-called “year of Spain” in the world. The Basques were conspicuously absent from the 1992 events, which symbolized the international presentation of “a new Spain” in opposition to which the Basque political elites wanted to develop a specific political agenda. From the viewpoint of revitalization, the Basques followed a model that had been applied elsewhere, although with not much success in economic terms. From a political stance, the Guggenheim represented the Basque Country’s own 1992. Bilbao planners clearly set out a number of projects in their revitalization plan — a set of goals that should be accomplished in order to regenerate Bilbao culturally, but, because they did not consider or control the financial means by which the projects would take place, the plan never constituted an executive, binding document with practical effects. What the plan revealed was that planners had learned the prevailing discourse on urban and cultural regeneration and were applying it to Bilbao. “Cultural centrality” was one of the eight areas covered in the revitalization scheme, strategically linked to another of the areas, urban regeneration. For the plan’s authors, “… infrastructure and collective equipment, various emblematic buildings … contribute to foment social and cultural centrality of the metropolis and to improve its external image and appeal”. The plan aimed at attaining a cultural dimension for Bilbao by rendering it “a point of reference in cultural circuits and industries which are developing at an international scale” (Bilbao Metrópoli-30, 1998). None of the planners who authored this plan, however, participated directly or indirectly in the Guggenheim project, or had any influence whatsoever on those who participated in it. The Guggenheim “miracle” was not in sight when the planners crafted the revitalization plan, nor could the local planning organizations have financed it. Efforts at creating a Basque museum of modern and contemporary art in Bilbao go back to the prosperous 1960s. Bilbao boasts a number of museums, among them the important Museum of Fine Arts, which is renowned in Spain and abroad. But the building does not constitute a “flagship” — it stands inconspicuously off the Deusto bridge, behind a busy road, and is an elegant but modest construction, whose identity is only defined by a sign reading “Museo” and a few banners advertising the temporary exhibitions. The building is not visually stimulating and does not function as an emblem of the city. Further, it has a collection of Old Masters, which is not characteristic of the museums of modern and contemporary art that have opened in recent years to mark the revitalization of cities around the world. And most importantly, the museum is considered in Basque Nationalist Party and nationalist circles as an expression of the dominant cultural style of the Spanish-oriented oligarchy of the beginning of the twentieth century. In this context, the reality of an increasingly competitive international cultural arena rendered the prospect of the involvement of a big name in the art world in the city’s plan very appealing (Baniotopoulou, 2001, p. 5). The Guggenheim project was, in fact, considered by Basques to be a regional project (negotiated by Basque government representatives, not by Bilbao’s municipal authorities)


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and its development was due to many different circumstances: inter-city and inter-regional competition within Spain and the possibility of re-opening up the Basque Country to the world with a new image were crucial factors, as was the ruling Basque Nationalist Party’s (PNV) regional vision of an increasingly independent Basque Country vis-à-vis Madrid, based on ethnic identity, political autonomy and financial independence. Local/regional politics also played a role — the ruling PNV’s loss of hegemony in Gipuzkoa in the regional elections of 1986 and loss of control of the cities of Vitoria and San Sebastian, rendered Bilbao “a matter of political urgency” (Juaristi, 1997). Although the economic impact of a flagship project such as the Guggenheim museum was not discussed at the time of the negotiations, the Basques were convinced they needed an icon that could change the image of the city and the region abroad. Basques, indeed, are very well aware of their negative image abroad. Terrorism had plagued the news about the region for decades, becoming for most outsiders the only issue associated with the Basques. Iñaki Zabaleta studied the coverage by The New York Times of Basque-related news between 1950 and 1996 (Zabaleta, 1999). In his work, he sets out to “… address the role mass media play creating, maintaining and transforming the images and stereotypes of social groups and nations, as that of the Basques” and asks himself “… how much should [the Basques] be worried about the media emphasis on conflict and ‘bad news’” (Zabaleta, 1999, p. 78). After speculating about the emphasis that the media in general put on negative news and the possible effects that bad news coverage may have on the audience, he presents a set of extraordinary (although not unexpected) findings. Between 1960 and 1996, Basque coverage in The New York Times totaled 674 news items, unevenly distributed throughout the years. The period when most news about the Basques was published by the paper was 1975–1981, precisely the time frame of highest terrorist activity and political conflict in the Basque Provinces, immediately following the death of Franco. The New York Times averaged 53 items per year in that period of time. Between 1982 and 1987, the flow of news decreased significantly, but one could still find in The New York Times an average of 28 items per year related to the Basques. However, the most significant finding is that, regardless of historical period, almost all news articles (over 90 percent) about the Basques between 1950 and 1996 had to do with conflict, including what the author terms “socio-political conflict” (strikes, crimes, trials), “terrorism” (ETA activities), “torture”, and “other” (accidents, disasters). Most news having to do with conflict refers to the activities of ETA (65 percent). It is not difficult to understand why regional politicians were most interested in embarking on an effort to reverse or at least change the Basque image abroad, especially once the Basque Country became an autonomous region in Spain with its own financial means. For the Basques, the Guggenheim project became a unique opportunity to accomplish these ends.

The Guggenheim Project Beyond the recognition that urban regeneration could and would come in a cultural package, extraordinary concern with regional image change did not necessarily imply a specific interest in culture and art. Cultural criteria, such as discussions about the specific works of art the museum would exhibit, did not enter into the Guggenheim negotiations. No one on


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the Basque negotiating team had the expertise to discuss such matters, and they never sought advice from art experts. Tellingly, the main Basque negotiator was the Secretary of the Treasury, not the Secretary of Culture. In addition, the negotiation process was kept secret and was carried out by a few politicians of the Basque Nationalist Party (the main and governing party in the region), with the final approval given by the party’s chairman (Xabier Arzalluz), not the Basque government’s president (José Antonio Ardanza). The Socialist Party (which governed the Basque Country in coalition with the PNV at the time) and the public were informed only after matters had already been decided, giving rise to important controversies. Urban planning criteria were left aside. A feasibility study for the museum, commissioned from a well-known consulting firm, did not influence the course of negotiations, since it was prepared in 1992 after the parties had reached an agreement the previous year, and thus it became a legitimizing technical document for the project. The Basques were convinced that the project was good for Bilbao, and the fact that they were negotiating transnationally and directly with a well-established American Foundation, which gave them additional impetus. The entire project was carried out by Guggenheim foundation director Thomas Krens as a global expansion project, and by the Basques as a foreign investment project. The Basques treated Krens as equivalent to the chair of a global corporation or as a head of State who had to be persuaded that investing in the Basque Country was a good opportunity (except that in this case all the investment would come from local, Basque money). The Basques saw themselves as representatives of a sovereign nation conducting international affairs. Coincidence of interests, and similar views about the type of project they were handling, greatly contributed to the final success and the signing of an agreement. Indeed, the Basque representatives (just like Krens himself) embodied the entrepreneurial type of politician/negotiator rather than the administrative, bureaucratic type (as shown in Chapters 3 and 5, there is a tradition of this overlapping between business and politics in the Basque Country). The negotiations took place between parties with a shared vision on how to conduct business, with a similar Weltaanschaung on business matters and with similar self-perceptions about the role each party was to play in the negotiations. But this could only happen after Krens and the Basques got to know each other, an unlikely outcome in itself. The main link between the would-be parties turned out to be the Spanish State and, more specifically, two individuals (one of them Basque) serving the Spanish administration in Madrid. The story of the negotiations between the Basque administration and the Guggenheim has been meticulously narrated by Basque anthropologist Joseba Zulaika in his Crónica de una seducción (Chronicle of a Seduction) — a book published in Spain in 1997, the year the museum opened to the public. The book has not been translated into English, although a shorter version of the author’s theses can be found in Zulaika (2001a, 2001b, 2001c). Zulaika gives a highly critical account of the Guggenheim project, describing the project as a “strategy of seduction” unleashed by Thomas Krens, and portraying the Basques as provincial dopes who willingly surrendered to the wishes of the Guggenheim director. Perhaps impressed by the museum’s spectacular success worldwide, Zulaika has subsequently softened his critique of the museum’s value for Bilbao. Although he still defends his scathing account of the negotiations themselves, he now acknowledges that the museum has been very important for recovering the city’s local civic pride. A group of journalists from Bilbao’s main newspaper, El Correo, provided a more sympathetic narration of the project in a book also


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published in 1997, El Milagro Guggenheim. Una ilusión de alto riesgo (The Guggenheim Miracle. A High Risk Hope) — a title that captures the operation’s extraordinary character. Two officials in Madrid initiated the contacts between Bilbao and the Guggenheim — Carmen Giménez and Alfonso Otazu. With their mediation, a visit to Bilbao was suggested to Krens, who requested $20 million for the Guggenheim Foundation to start negotiating. During the opening of an exhibition of the Guggenheim collection in Madrid, Otazu and Giménez started to talk with Basque representatives about the Guggenheim’s interest in opening a museum in Europe. At the time, Krens was negotiating with Salzburg to open a museum there, but the negotiations did not culminate in an agreement because the Salzburg authorities were unconvinced by Krens’ terms. A local survey among the city’s population revealed that the citizens would not especially welcome a new museum in a place already visited by millions of people every year. In this context, Otazu and Giménez thought that Krens could be interested in Bilbao. They knew of the interest and previous efforts by Basque authorities to establish a museum of modern and contemporary art in the city, and knew Krens and his expansion plans well. Giménez had been the Director of the Spanish National Center of Exhibitions under the Socialist government and an art curator for the Guggenheim Foundation. Otazu, a Basque historian (with a published work on Basque egalitarianism), had worked as an executive assistant to the Spanish socialist Minister of Culture and was close friends with Giménez. Both became key figures in the Spanish art world during the Socialist years of the 1980s. And both facilitated Krens’s first visit to Bilbao. The Basques had discussed the project, and key political figures in the Basque Nationalist Party, including its chair, had agreed to push for it. The Basques were absolutely serious about the project from the beginning and had decided to impress (and even seduce) Krens at any cost in his first visit to the region in April 1991. They took the initiative in the process showing conspicuously the attributes of Basque autonomous power in international negotiations. Krens was received at the Bilbao airport with a red carpet, introduced to the representatives of the Basque Treasury, and immediately conducted to a helicopter for a trip to the city of Vitoria (40 miles away) to meet the President of the Basque Government. The Basques offered Krens the $20 million that he had requested as franchise for the museum. In addition, the hosts did not let Krens see Bilbao directly, but rather kept him in various places of historical importance for the region, such as Gernika (the town of Basque fueros, Hitler’s carnage, and Picasso’s painting), showing the visitor the symbols of Basque power and educating him about the historical importance of the Basque Country in Spain, Europe, and America. Although Krens was not shown Bilbao, his hosts told him about the many revitalization projects developing in the city, in order to convey the impression that despite the current urban crisis, the Basques had the resolve and the means to overcome it. The objective was clear — Krens had to be persuaded that Bilbao was a good place for his museum. The Basques had studied the man in advance and left nothing to chance. The main instruction was clear: treat him as if he were a head of state. So first there was a visit with the lehendakari or President of the Basque Country … But there was a second no less important provision: he had to travel there by helicopter. The airport is close to downtown Bilbao but a direct car ride could prove fatal for the visitor’s first impressions of the city. The grim view of the


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Bilbao: Basque Pathways to Globalization city’s closed industries in ruins could make him jittery; and it was not uncommon that the road be (sic) blocked by traffic, public works, or perhaps a labor protest, any of which might place the entire visit in jeopardy. Airlifting him over the beautiful Mundaka estuary and the green hills of the interior countryside was a far safer proposition. And there was an added symbolic factor of which the hosts were very conscious: the aerial overview of the panorama reinforced by the helicopter’s sound track would give the visitor a sense of almost imperial power. (Zulaika, 2001a, 2001b, 2001c, pp. 101–102)

“Why would you want a museum like the Guggenheim in Bilbao, precisely in Bilbao, which does not seem to be the most appropriate place for such a museum”? Krens questioned the Basques (according to Zulaika). Juan Antonio Vidarte (a high official in the Basque Treasury, who later became the first and so far only Director of the Guggenheim Bilbao) replied: “The country needs a challenge and this is going to be it”. Krens apparently got the message — the Basques were serious and he would consider Bilbao, although no decision was made in that first meeting. In fact, Krens did not show any special enthusiasm for Bilbao at the time, probably still having in his head other, more glamorous European cities for his museum and not really knowing anything about the Basque city. Zulaika facetiously says that at the time Krens was confused between Bilbao (the city) and Bilbao (the bank). Later, after the agreement was finally concluded, Krens had already learned that, after all, “Bilbao is Iberia” and “a window to Latin America”. Back in Madrid, Krens made it clear that Bilbao was not the type of city that he had envisioned for his global museum, but Alfonso Otazu did not give up. He set up a meeting between Krens and the Duke of Soria, the Spanish king’s brother-in-law, in the Duke’s palace in Madrid. Once again, it was Spanish mediation that facilitated the negotiations and now, in a critical way, one that would turn out to be decisive: ‘Do you know how many Treasuries there are in the European Union?’ asked the Spanish king’s brother-in-law, putting Krens on the defensive. ‘You are likely to think that there is one Treasury for each of the twelve European governments [we are in 1991]. Well, there are sixteen Treasuries. The twelve of the European nations, plus those of the Basque provinces of Araba, Bizkaia, Gipuzkoa, as well as Navarra.’ Krens eyes opened up. … This was Spanish royalty in Madrid telling him that, given the centuries-old custom, the Basques had obtained the right to levy their own taxes and run their own Treasury. This was the State prerogative that really mattered for Krens. ‘So, could I trust the Basques?’ asked Krens. ‘I think so — absolutely,’ replied the king’s brother-in-law. ‘Moreover, let me tell you something else. The Basque Country is the only region of the kingdom that is not organizing anything for 1992. It might be the last train in Europe to carry your stupendous projects.’ The touch was perfect … Anyone who reads the Guggenheim’s newsletter knows the use Krens makes of European aristocracy to choreograph his sense of power. Wall Street money and New York hype is one thing; blue blood European royalty is something else! The following month Krens was back in Bilbao with Gehry. (Zulaika, 2001a, 2001b, 2001c, pp. 104–105)


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Once Krens accepted Bilbao as the site for a new Guggenheim, despite the fact that the city was not the center of Spanish cultural life, and after he had been assured that the operation would be financially underwritten in its entirety by the Basques, the negotiations focused on where to locate the new museum. The Basques had first proposed the rehabilitation of an old wine warehouse in downtown Bilbao (called La Alhondiga) as their favored site. This had been the site planned to host a new museum for the city even before the Guggenheim appeared as a prospect for Bilbao. But Krens ruled out this possibility — according to him, the building was inappropriate and the location was terrible. From Zulaika’s account, it was Krens himself who, after suggesting to the Basques, with the assistance of Gehry, that the new museum required a new building, selected the location on the riverbanks of the Nervión River, on a derelict area next to old port facilities called Abandoibarra (Zulaika, 2001a, 2001b, 2001c, pp. 105–106). The Basques, who suspected what world-class architecture could do for their city and were more than ready to take on a big project (a “challenge”), enthusiastically accepted the idea. From that moment on, Krens played the leading part in the meetings, discussions, and agreements that preceded the museum’s creation. Gehry’s selection as the architect to design the new museum was suggested by Krens, but the Basques demanded that there be an international competition (a competition among world-renowned architects Frank Gehry, Arata Isozaki, and CoopHimmelblau). Unsurprisingly, Gehry won. The Guggenheim project was always approached by the Basques as a project able to change the region’s image abroad. A museum in the post-Fordist period could symbolize what Altos Hornos de Bizkaia (the flagship steel manufacturing plant) had embodied for Bilbao in the Fordist age — a place’s symbol and an epoch’s symbol as well as the region’s economic engine. The Basque Country was relying on a foreign franchise to produce a new image for the region. What might appear to be a contradiction may not be so in times of globalization. In fact, as shown in previous chapters, globalist strategies are not at all new in Bilbao. The Guggenheim’s global, transnational character was in total consonance and perfectly coherent with the aims of local State officials and the business elite, as reflected in the international history of Bilbao and more recently in the new internationalization of Basque economy. From this viewpoint, the Guggenheim is a powerful statement about the traditional global vocation of the Basques, despite the fact that the specific process of bringing the museum to Bilbao was the result of coincidences, chance factors, and substantial “gambling”. Zulaika’s portrayal of the negotiations focuses on the symbolic interaction (the seduction) between Basque negotiators and Krens, but does not specifically provide the structural context that led the Basques to want a first-class museum with such persistence. In his account, agency on the part of the Basques is downplayed to the point of exaggeration. On the contrary, the Basques knew perfectly well what they wanted and how to obtain it (and from whom). And they were prepared to pay for it: “One hundred million for the building, that’s what we can afford”, Vidarte had said. This may explain why, once Krens accepted the possibility that the museum could go to Bilbao (the Basques’s ultimate goal), Basque negotiators accepted almost all of his conditions thereafter, including the specific financial terms of the operation. The Guggenheim Foundation’s financial situation at the time when Krens became its director was one of extreme difficulty. In 1988, the museum had embarked on a project to expand the facilities on Fifth Avenue, costing $25 million — a very expensive figure if one


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considers that the institution’s liquidation value was just $20 million. Rather than trying to finance the debt, Krens pushed forward with more expansion plans in order to find new space for the art works kept in storage at the Guggenheim. In 1990, Krens suggested issuing bonds for a total of $55 million and raising funds for $70 million in order to cover the debt. In addition, he auctioned three of the collection’s masterpieces (Chagall’s Anniversaire, Modigliani’s Garcon a la veste blue, and Kandinsky’s Fuge) in order to pay for his recent purchase of the Panza collection, a series of minimalist works. Further, he had to pay for the museum’s operating deficit, which was close to $10 million in 1992. He was desperately in search of money that he could not find in New York, where most people in the art world criticized both his expansion plans and his aggressive attitude. The solution seemed to be to try to find funds abroad. Considering that, before Bilbao, the Guggenheim had established unsuccessful contacts with Boston, Venice, Salzburg, Lyon, Vienna, Osaka, Graz, Tokyo, and Moscow, and knowing how dire the Foundation’s financial situation was, one understands both Krens’s favorable disposition toward Bilbao and his critics’ initial surprise at the favorable financial terms that Krens obtained from the Basques. Under the signed agreement, the Basque administration committed itself to pay the full cost of the new Gehry building (about $100 million in 1992) as well as the yearly operating costs of the new museum indefinitely (about $10 million, equivalent to 80 percent of all Basque funding for cultural activities in 1992). In addition, the Guggenheim Foundation would have “the exclusive right to determine the planning, development and operating policy, standards of operation, content and art programming and all other matters affecting the management and operation of the museum” (Zulaika, 2001a, 2001b, 2001c, p. 110). The Basques agreed to pay for the museum but surrendered its control to the Guggenheim. In exchange, they expected that the new flagship would change the region’s image abroad and would attract tourists to the city — an equation that was not clear to many people at the time. Although following the spectacular success of the museum, worldwide criticism was muted (or had been disregarded), between 1992 and 1998 many observers in the Basque Country strongly and openly disagreed with the Guggenheim project.

The Controversies One of Spain’s most influential architectural critics, Luis Fernández-Galiano, wrote that as a franchise museum, the Guggenheim is an unusual cultural experiment, based on a terrible agreement, and for which the expected economic benefits are uncertain. That the most important Spanish effort in the arts should be an office of an American museum is simply grotesque; the agreement is so disadvantageous for the Basques that it can only be understood as an outcome of hasty and ignorant decisions. The benefits coming from investments and tourism depend so much on Basque political stability that they are uncertain. (Fernández-Galiano, 1997, p. 3) In fact, the Basque political and economic situation was not optimal to receive the new museum. When the model for the new Guggenheim was presented by Gehry, Krens, and


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the Basque authorities at the Bilbao stock market, the attendees had to reach the building’s entrance through a group of unemployed workers shouting: “Thieves! Fewer museums and more jobs!” (Zulaika, 1997a, 1997b, p. 231) — a dramatic voice by those left behind in the city’s industrial crisis of the 1980s (see Chapter 4). In addition, a few days before the museum’s inauguration, in October 1997, the Basque police uncovered a plot by ETA to blow up the building during the opening ceremony to be presided by King Juan Carlos of Spain. One member of the Basque police was shot dead after he suspected that a “group of municipal gardeners” (in fact, ETA activists) had hidden 12 anti-tank grenades within ornamental flowerpots next to the museum. The news circulated around the world. Basque political instability could not be dispatched. The separatist group Herri Batasuna, considered the political arm of ETA and feared because of its influence in ETA’s terror campaign, sent a letter to Krens’ New York office in which the group conveyed their fierce opposition to the Guggenheim project, requesting that to be suspended until there was an open debate in Basque society about the terms of the agreement and the project’s overall implications. The letter and the continuous news about killings and kidnapings coming from the Basque Country made the people at the Guggenheim in New York uncomfortable. Krens and his wife had to listen to continuous recommendations from friends not to go to the Basque Country, thereby avoiding the risk of being kidnaped or killed. The Basque government felt compelled to buy multi-page advertising space in The Washington Post and other American newspapers and journals such as the Harvard Business Review to promote the museum, highlight investment possibilities in the region based on local financial and industrial power and tax incentives, and stress the idea that ETA was not a real risk because its activity was very limited and the organization was close to its end (Tellitu et al., 1997, pp. 61–64). Also explosive was the diatribe around the Gernika, Picasso’s 1937 famous painting that Guggenheim representatives and Basque authorities wanted in Bilbao for the museum’s inauguration. Xabier Arzalluz, the President of the Basque Nationalist Party, complained bitterly about Madrid’s rejection on technical grounds of the proposal to move the painting from the Reina Sofia Museum in Madrid: “… for the Basques the bombs and for Madrid the art”, he said (El Pais, 1997). Arzalluz’s words were interpreted by most as an expression of the latent rationale that led Basques to want the Guggenheim in the first place — the creation of a Basque cultural icon that reinforced Basque emancipation from Spain in the cultural realm. To these ends, exhibiting a painting that so tragically portrayed one of the darkest episodes in Basque history in the new Basque State museum, would have been a spectacular coup. Basque artists, who would suffer from the significant reduction in funds and subsidies used to pay for the Guggenheim, also protested vigorously against the new museum. About 400 people (writers, actors, and journalists included) formed the pressure group Kultur Keska, which pointed out the outrageousness of a project that would absorb 80 percent of all cultural monies invested yearly in the Basque Country. The group opposed Basque Nationalist Party’s cultural strategies because it favored an approach based on tourism, place marketing, and the culture of spectacle over the needs of grassroots groups and local artists. They did not oppose the creation of a museum of modern art in the Basque Country, but favored a Basque Cultural Center instead of the Guggenheim. Among Basque artists, the most significant voice of protest was that of the late Jorge Oteiza — a Basque cultural icon, introducer of the avant-garde in the Basque Country in the 1950s and,


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together with Eduardo Chillida, the most world-recognized Basque artist today. Krens and Gehry wanted Oteiza to collaborate in the Guggenheim project, but he refused to donate his valuable legacy of works to the museum or to have them exhibited there. For Oteiza, the project represented the very negation of his lifelong work of explaining to the Basques the discourse of art in the twentieth century. Oteiza wrote an open letter to the President of the Basque government, characterizing the project as “… authentic double-dealing, something worthy of Disney, totally anti-Basque, and which will cause great damage and paralyze all the cultural activities that could be produced in our country” (El Pais, 1992). Art critics never approved of the fact that an art program for the new museum had hardly been discussed, and that control over the permanent collection of the Guggenheim Bilbao and its exhibitions was exclusively in Krens’s hands. Leading Spanish art critic Francisco Calvo Serraller compared the museum to a car without an engine: “… a museum is an art collection, not the building in which it is exhibited … the Guggenheim Bilbao does not have its own collection”. In his influential column in El Pais, the main newspaper in Spain, Calvo Serraller furiously criticized the philosophy of the art museum as conceived by Krens, based on franchises paid for by the satellite museums. In addition, he considered that the paintings lent for the inaugural exhibition on “The Guggenheim Collection and the Art of this Century” were not really representative of twentieth century art and that the New York Guggenheim had not been generous to Bilbao for the occasion. He seriously doubted that the Basque authorities would know how (or would want) to make the Guggenheim Bilbao into a real art museum because their purpose in the operation did not go beyond constructing a flagship building for Bilbao (Calvo Serraller, 1997). Among the critics, the work of Joseba Zulaika must also be mentioned, especially the previously mentioned Crónica de una seducción — a highly critical account of the negotiations between the Basques and the Guggenheim, whose publication the same year the museum opened was intended to alert Basque and Spanish public opinion about what the author viewed as an uncertain operation. It is evident that Zulaika saw the project as an unwarranted foreign intervention in Basque culture, the imposition of cultural flows from the core to the periphery (in other words, American cultural imperialism), and that he expressed the opinion of many in the Basque Country. But to see globalization as synonymous with Americanization, as a one-way flow of cultural and financial influence and power, is misleading (Berger & Huntington, 2003). McNeill (2000) quotes Appadurai (1996) to highlight the fact that foreign cultures become “indigenized” in the process of globalization. In the Basque case, the appropriation of the Guggenheim project by the Basque nationalist elite to advance their own political agenda of cultural and political emancipation vis-à-vis the Spanish State was a very clear and prominent feature. As discussed earlier, there was a local context prior to the Guggenheim project that helped the Basques rationalize the high cost and high risk of the museum: “The Guggenheim offered a Basquecontrolled flagship which advertised Basque difference (and financial autonomy) to the world, yet which represented the Basque Country not as a primordial backwater but as a society at ease with global modernity” (McNeill, 2000, p. 487). The Guggenheim project, therefore, needs to be understood within the framework of the post-Franco attempts by the regional political elites to regain political and economic identity vis-à-vis the Spanish State. This is not only a quest of the past 20 years, but one of historic dimensions. The international arena has in many cases tended to be an arena for Basque re-identification.


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The Museum’s Success As the critics were pointing out, the success of a highly controversial project did not guarantee the project’s success nor its ability to become a new symbol for the city and attract tourists, although even before construction was finished, art and architecture critics and the public were visiting Bilbao to admire Gehry’s work — as this author did in 1995 and 1996 during construction and several more times after the 1997 opening. In 1996 (one year and a half before the museum opened to the public), one could already find articles about the project in art and architecture magazines and journals in the United States and Europe. One such article, by British architect Piers Gough, highlights the point that the very parties involved in the project already savored an upcoming success: They [Krens and the Basques] invited us to go immediately [to Bilbao] and see even the half-built building. They simply could not hide their feeling that they had a work of genius on their hands. It was palpable. I couldn’t even begin to imagine any part of the scenario in reverse: lunch in Madrid, for instance, to announce architectural fabulousness in London. We may have the Lottery but we don’t have Frank O. Gehry. (Gough, 1996, p. 50) The main deciding factor in the Guggenheim’s world success was the perhaps-predictable international acclaim of a new Frank Gehry design. But before turning to explain why “a Gehry” was likely to become such world news in 1997, one should say that there was a local context that provided the rationale for the decisions made regarding the choice of architect for the project. Most commentators stress the point that Krens imposed both a new, spectacular building for the new museum, and the selection of Gehry as the architect for the project. They convey the impression that the Basques quietly accepted decisions forced upon them. On the contrary, the Basques did not accept the idea quietly but enthusiastically, and for a reason. The Basques welcomed Krens’s idea precisely because it was perfectly coherent with their vision for a new Bilbao symbolized by world-class architecture. In fact, for its revitalization plan, Bilbao had hired numerous world-famous architects — Gehry being just the last one in a series. Nor did Bilbao select a local architect to build a new subway system for the city — it commissioned the project to Norman Foster, one of the world’s leading architects. For the expansion of the airport it selected the equally famous Santiago Calatrava, who also designed a new suspension bridge in the city. James Stirling, a famed British architect, designed a new intermodal transportation station in downtown Bilbao, while César Pelli (the Argentine-American architect who designed Battery Park City in New York) designed the new central business district in Abandoibarra, in downtown Bilbao. There was therefore a local sensitivity toward urban regeneration based on architectural symbols. Thus, it was not difficult for the Basques to resonate with Krens’ proposal for a spectacular building designed by Frank Gehry. When he suggested the idea, the Basques took it as one of their own. Whereas Krens, the fund-raiser, had mainly a circumstantial, interested relationship with the city of Bilbao, Gehry, the artist, fell in love with the city’s “incredible toughness” immediately: “I am attracted to industrial hardness in the midst of a green valley” (in Zulaika, 2001a, 2001b, 2001c, p. 104). Indeed, Gehry managed to satisfy both the Basque


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aspirations for an emblematic building with a great market potential and Krens’ vision for a construction with effects analogous to that of the Chartres cathedral in the fourteenth and fifteenth centuries (Jodidio in Baniotopoulou, 2001). His creation was one of what Giovannini describes as “… the stellar buildings which will help to define the cultural pecking order in a unified Europe where cities are becoming increasingly more important as nations are receding” (Giovannini, 1997a, 1997b, 1998a, 1998b, 2001). The same critic offers the picture of world cities emerging in the global economy “… powered by worldclass architecture” in a 2001 article that he tellingly titles “The Bilbao effect”: The rust belt city, Spain’s Pittsburgh, needed a postcard image comparable to the Eiffel Tower and the Sydney Opera House to symbolize its emergence as a player on the chessboard of a united Europe and a globalized economy. It needed a monument. One building and $110 million later, Bilbao is now a contender as a world city, and many of the world’s secondand third-tier cities have called Mr. Gehry’s office, hoping for a comparable Cinderella transformation. (Giovannini, 2001) Although Giovannini’s main thesis about the emergence of city-states to the detriment of nation-states is only conjectural, his recognition of the role that architecture plays in remaking a city’s image, and Bilbao’s in particular, is straight to the point. Unlike in most other cases, however, the museum’s immediate worldwide success would prove critical to make the Guggenheim a money-generating machine for Bilbao. But what are the factors that determined the almost unanimous acclaim of Gehry’s design? One finds both purely architectural and extra architectural factors as the answer to that question. Among the first, we have to consider both Gehry’s high standing in the architectural profession and specifically the absolute originality of his design for Bilbao, its “refreshing unconventionality vis-à-vis for example the rather stiff Getty” in the words of Anthony Vidler, a leading American architect (Vidler, 2002). Although Gehry was already a wellestablished architect when he created his design for Bilbao, the new Guggenheim in the Basque capital has arguably made him a truly global architect. Among non-architectural factors, we have to think about the novelty of Krens’ idea of global museum franchises, and also about the apparently strange marriage, at least for American observers, between a prestigious (yet broke) American cultural foundation and a city with a reputation for political conflict and terrorism. the story of events in Bilbao turned out to be journalistically viable; in fact, it was a good story. Drawn to Bilbao by reports of an extraordinary building, journalists found numerous other elements of narrative interest: a down-and-out city attempting a comeback; a volatile political situation; a multinational museum … . (Rauen, 2001, p. 293) The whole project, thus, had the potential to attract press attention, but it was Gehry’s design that has been attracting millions of people to Bilbao. Gehry himself has said about the Basques’s wishes: “They were very explicit. They wanted a Sydney Opera House. They wanted the thing to bring people to Bilbao and put the place on the map. I tried to do it”


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(Gehry in Esterow, 1998). Krens, who closely participated in the development of the design, wanted a Guggenheim building that could compare in fame and extravagance to the Frank Lloyd Wright building on Fifth Avenue in New York. “I love the interaction with the people I work with. That’s why the Bilbao thing came out so good, because Thomas Krens … and the Basques were terrific” (Gehry in Bell, 1998). Critic Jayne Merkel points toward some of the factors that explain Gehry’s building’s innovative style: “the goal of much museum architecture today is to stun” … “museums are no longer just repositories of treasures or ‘cabinets of curiosities’; they have become objects in their own right” ... “museums today do not merely conserve; they entertain, feed patrons, sell wares, host parties, and make displays” (Merkel, 2002). One way to aesthetically mark this new era for the museum (a new era that Victoria Newhouse expresses well in her book Toward a New Museum (1998), which includes, of course, a chapter on the Guggenheim Bilbao) and make an extraordinary impact is to present a building which is a fluid enactment of process, rather than a stylization of it. How could a building be made to look like it’s in process? asked Gehry to himself in 1985. A literal way, of course, is to ‘unfinish’ it, as Gehry ‘unfinished’ the tower, its exterior partially clad, its skeletal structure exposed. [Another way] is by introducing a metaphor of natural process. … For the Guggenheim he designed the metallic flower … Gehry’s curves may seem private inventions but, according to Charles Jencks, they ‘certainly come from nature, and are close to the lessons of chaos and catastrophe theories’. (Pops, 2000) Another of the factors that explain the awesome and widely shared attractiveness of Gehry’s Bilbao building in aesthetic and experiential terms seems to be the architect’s ability to fuse both local and global discourses. As Judith Bell has said: “With his building in Bilbao, the language that once seemed idiosyncratic has taken on a new, universal meaning” (Bell, 1998). “Flowing and at times vertiginous, this explosion of undulating spaces crafted of titanium and glass … speaks not only to and of its immediate surroundings and this particular moment, but of the future and the shape of things to come”. The Building’s local embeddedness, on the other hand, has to do with Gehry’s knowledge of the city’s industrial past and his evocation of it with a building shape that has been compared to that of a vessel. Art critic Paul Goldberger explicitly states that “Gehry’s genius has been to create buildings that seem to be arbitrary and irrational but in fact are deeply responsive to their surroundings and to the need of their users” (Goldberger, 1997, pp. 48–49). And Gehry himself has said about the local context of his creation: There’s a river, there’s a huge bridge. There’s a nineteenth century city (sic), and it’s at a higher level than the river. The city has a green valley surrounding all this, which makes it all kind of palatable. I was fascinated with the big bridge and the dynamics of the city, which was vibrant in terms of traffic, energy, and everything going on. … I had so many elements to resolve: how to make a connection to a nineteenth-century city, how to bring people down to the river’s edge, how to engage the bridge, how to deal with the Basque culture, their interests, their roots. (Gehry in Bell, 1998)


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Although the international press has in general portrayed the process as one-sided, insisting that Gehry’s museum exclusively relies on Gehry’s design, there is a story to tell from the Basque side of things, concerning the actual construction of the museum from Gehry’s design, not an easy feat in itself. In fact, nobody was sure that the design was buildable until Gehry’s use of CATIA (a specialized software package originally developed for the aerospace industry) presented the design in three dimensions, and the Basques confirmed they could build it: “The complexity of the construction task, though even more difficult than anticipated, grows into a welcome challenge. It becomes a dare to be met in the Basque Country, which has a ‘culture of metal’ […] and ‘contractors who are proud of their work’” (Stein, 1997, pp. 77–78). The extremely complicated process of construction did not require professional expertise from the United States or from anywhere else. A Basque engineering and construction company, with Basque capital, Basque engineers and architects, and Basque workers, accomplished it. The company was IDOM and it participated in the project meetings that took place every six weeks during the design phase, together with Gehry, Krens, and the Basque administration. IDOM designed the impressive steel shell that provided the building’s skeleton. They made the creative decision, which proved essential for the completion of the project, to modify a stone mill machine in order to make it work with undulated metallic surfaces. In fact, Gehry himself has modestly acknowledged: “I believe that the true miracle is not to design buildings, because I can have some talent and all; the miracle is to get them built. But I don’t think people truly realize the revolution this building represents in the construction sector” (quoted by Caicoya, 1997 p. 32, author’s translation).

The Guggenheim Effect in Bilbao The Bilbao public’s response to the museum was overwhelming. “Surprising, magnificent, impacting, and expensive”. These were the most repeated words by the first visitors to the museum in October 1997. Thousands stood on long lines to enter the building on its opening day, in which 4,502 people visited the museum. Long lines have become a common feature of the Guggenheim up to today. “You need an open mind to acknowledge some of the things exhibited as works of art” said one of the visitors. Others thought it was expensive to pay 700 pesetas (five dollars) to see the museum and its art collection. Visitors used to attending art exhibits were uncomfortable with the continuous warnings from the museum’s personnel about the distance to be kept when looking at a painting (El Pais, 1997). Foreign visitors seemed to have an even better opinion of the building than the Basques, according to a poll conducted by Bilbao newspaper El Correo during the first two days after inauguration. The local public questioned the artistic value of the exhibited pieces and the museum’s cost, but they valued the building’s architecture and the fact that the museum “would contribute to give a positive image of the city, although a museum is not something we need in our everyday lives”. According to the poll, 97 percent of Basque residents and 100 percent of foreign tourists thought positively about the Gehry building. However, only 54 percent of Basque respondents and 78 of the foreign tourists judged the works of art in the museum as “interesting”. Most respondents said they would come back


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(El Correo, 1997). One needs a certain cultural aesthetics to feel attracted to some of the art exhibited in the museum. However, the impact of the building is almost instantaneous. It is not only the outside spectacular shape that captivates, but also the interior configuration of curved galleries and elevated stairways that make the building function as a true cultural theme park. Certainly, one can feel tempted to enter the museum in order to admire the architecture, and leave the art in a secondary place.

Tourist Flows In 1997, critic J. E. Kaufman reflected on the Guggenheim’s possible success: Will the Guggenheim Museum Bilbao prove a success? A 1992 study projected annual income of $14 million, about half from private sources, and annual attendance of more than a half a million, about half from the region and the rest from Spain and elsewhere. It estimated the economic impact to reach $35 million per year, generating $4 million in taxes. Critics doubt the validity of the projections, citing the region’s underdeveloped art resources and audience, Spain’s lack of a tradition of private support, and the city’s poor tourist appeal. When the Guggenheim recently sent sample shows of twentieth-century art from its collection to venues in Bilbao (the SRGF received $1 million each for two shows), the surveys drew a total of barely 100,000 visitors, which may be an indication of the difficult road ahead. But the Basques are banking on the Gehry masterpiece and the prestigious Guggenheim name pulling in the crowds. In the management contract signed in 1994, they precluded the Guggenheim Foundation’s opening any other museum in Europe without Basque consent, except an Austrian proposal which was pending at the time. (Kaufman, 1997, p. 15) Kaufman’s skepticism was certainly justified. If one reads the literature on flagship projects, it is easy to realize the viewpoint of most commentators: flagship projects mark out change in image for a city, but are not feasible in financial terms. The Guggenheim Bilbao has refuted this major premise, or has it? According to museum sources, 5,383,062 people visited it during its first five years (October 1997 and 2002), and 83 percent of them (4,467,941) went to Bilbao exclusively to see the museum or extended their stay in order to see it. Based on a study by consulting firm KPMG Peat Marwick undertaken in 1998 and based on a survey taken to 1,208 visitors to the museum, museum officials state that visitors spent around 100,000 million pesetas (about $556 million), of which 35 percent was in restaurants, bars, and cafeterias, 26 percent in local stores, 23 percent in hotels, and almost 6 percent in transportation. The study calculates that such expenses have meant a generation of value-added and wealth for the Basque economy equivalent to $445 million. The study also suggests that about 4,000 jobs have been indirectly maintained by the economic activity generated by the museum. Finally, the Basque Treasury has collected about $84 million in value-added taxes, corporate taxes, and income taxes derived from the museum’s activity.


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Data for 2001 show that this trend has been maintained. Visitors during 2001 totaled 930,000, slightly down from 2000, and 851,628 during 2002 (see Table 6.1) — considered good results following the terrorist attacks in New York and Washington on September 11. Museum officials estimate that the economic impact on the local economy during 2001 was worth approximately $147 million (up from $130 million in 2000), which brought in about $23 million to the Basque treasury in taxes. This contributed to indirect maintenance of 4,415 jobs. Visitors spent $7.8 million inside the museum, $43 million on accommodations, $35 million in catering, $13 million in shopping, $9.5 million in transport, and $6.6 million in leisure (KPMG Peat Marwick, 1999). Beatriz Plaza, a Basque researcher, has calculated the influence of the Guggenheim in attracting tourism to the Basque Country (Plaza, 2000). She points out that, before the Guggenheim, tourism already existed in Bilbao. Leisure tourism constituted 8 percent of the total tourist flows in 1996, whereas visitors who came for professional reasons (business and exhibitions in the International Fair Center) constituted 60 percent of the total. She therefore seeks to determine how much additional tourism can be attributed to the museum following its opening in 1997. She rightly points out that tourist growth in the Basque Country “may be a result of the worldwide growth in tourism, the favorable business cycle, the dynamism of the International Fair Center of Bilbao, the increasing attractiveness of San Sebastian (previously the main leisure tourism destination in the Basque Country), or even the cease-fire declared by ETA in September 1998, which ended in December 1999. We must delimit the Guggenheim Museum Bilbao effect” (Plaza, 2000, pp. 267–268). She countered KPMG’s somewhat biased results and offered significantly different figures. For example, whereas KPMG established that 97,525 visitors were due to the Guggenheim in June and July 1998, her findings show that the Guggenheim influenced the inflow of only 35,655 visitors, or about a third the figure offered by the consultants. If we extrapolate this figure to a period of five years since opening, it would suggest that the museum has attracted 1,069,650 additional visitors to Bilbao (not the 4,317,190 estimated by the consultants). Plaza also showed (with statistical data from overnight stays in hotels) that occupancy indices in Bilbao and Basque hotels are considerably higher for the top-end range of the hotels (85 percent occupancy), whereas the average hotel level remains low (46 percent). This clearly indicates that the museum is attracting many business professionals who go to Bilbao, but not only to see the Guggenheim. Last but not least, we have to take into account that attendance to the museum has been steadily decreasing since 1998 — although the downward trend seems to have stopped by 2003. In 2001, for example, attendance was 29 percent lower than in 1998. It seems that the Guggenheim effect is receding, although the proportion of foreign visitors has been increasing steadily since 1998. How should we interpret these figures? It seems that the museum compares well in financial terms to similar cultural institutions elsewhere. The Guggenheim Bilbao is able to self-finance on a level of 75 percent, and the initial investment of $100 million by the Basque government has already been recouped. However, taken in a broader context, it is not easy to see the “miracle” in economic terms that some observe. The Basque region’s GDP amounted to $36.4 billion in 2000, and the GDP of Bilbao was about a third of that ($12 billion). From this viewpoint we see that the museum does not contribute significantly to the overall economy of the region or the city, although it is a positive addition.


Table 6.1: Flows of visitors to the Guggenheim Bilbao, 1998–2005. Percentages and totals Origin of visitors

975,000 54 12 2 4 5 10 20 46 6 13 5 4 3 7 1 7 100

930,000 52 11 2 4 6 11 19 48 7 12 5 5 2 8 1 10 100

2002 851,628 46 12 2 3 6 9 15 54 8 15 6 4 2 8 1 9 100

2003 874,807 41 7 1 2 5 10 16 59 9 16 6 6 3 8 1 10 100

2004 909,144 37 5 1 2 5 9 13 63 10 16 7 6 3 8 1 13 100

a It includes 1997 visitors (259,234 people) during the two months (November and December) the museum opened that year. Source: Guggenheim Bilbao Museum.

2005 965,082 40 7 1 2 5 10 15 60 8 16 7 7 3 6 1 12 100

Total 8.132,095a

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2001

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1,060,000 55 12 2 4 6 11 201 45 5 13 5 4 3 7 0 7 100

2000

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1,307,200 73 27 4 8 6 6 21 27 3 10 2 2 1 4 0 4 100

1999


Total Spain Bizkaia Araba Gipuzkoa Madrid Cataluña Rest of Spain Outside Spain Great Britain France Germany Italy Portugal USA/Canada Japan Other Total

1998

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The real positive externalities of the museum need to be looked at in terms of the consequences of image change for the Basque Country and Bilbao (the Basques, for example, have saved a large sum in free worldwide media exposure), and such consequences are hard to measure directly, among other matters because no major consequence is visible yet. The only local presence of international capital is a firm building a shopping mall in Abandoibarra, and to the Sheraton chain, which has built a hotel in the same area. The real positive externalities of the museum depend on contextual political and economic factors larger than the museum. Can the museum contribute to the development of a strong and dynamic cultural sector for the city of Bilbao, making the city into a cultural capital? Here there are obvious doubts. The museum was not conceived for such a purpose and its community activities are limited to programs for school children and renting out space for corporate clients. Local artists cannot have their work exhibited in the museum, and the Guggenheim takes up most of the funding for cultural projects developed in the Basque Country. Further, the Bilbao museum is not an autonomous institution, but one that depends on the New York “headquarters” for cultural planning, which highlights one of the aspects of globalization processes — a loss of local control and autonomy. The media impact of the new museum has allowed Basque officials to present Bilbao as a competitive city looking to the future, far beyond the mere cultural realm. A substantial change in the image of Bilbao abroad triggered by the museum’s media impact and the number of tourists flocking to the city is serving the purpose of local elites to advance their revitalization plan and present themselves as representatives of “a city of ideas”. Beyond the purely economic and image effects of the Guggenheim for Bilbao, one has to understand its political effects in the Basque Country as a whole. In fact, it is highly likely that museum operating deficits will not discourage Basque political elites, since the project was seen primarily as a State strategy with image impact and political consequences. It is these two dimensions (image and politics) that Basque politicians have cultivated most since 1997 both within and outside Spain. Paul Goldberger from the New Yorker has written that the new Guggenheim “stands as a metaphor for Basque culture and the relationship it aspires to have with the world; a thing apart, yet entirely willing to make a connection on its own terms” (Goldberger, 1997, p. 49). Such (re)connection with the world is the one that had been envisioned by the leaders of the Basque Nationalist Party: The new museum will be a landmark, a signature for our city that will be recognized across Europe and the world and a statement of the Basque region’s intention to play an active role in the cultural and commercial development of the European community. (Garmendia, 1997) Basque President José Antonio Ardanza said that “we are not insular but open to the world, strengthened by our relationship with an internationally renowned foundation” (El Correo, 1997). The Basque Nationalist Party leaders are very aware that the Guggenheim Bilbao’s success gives them a reinforced grip on power in the Basque Country. Now more than ever, they perceive themselves as empowered to act as the hegemonic and legitimizing source


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of a renegotiated Basque identity, even though many Basques do not support a nationalist program for the region and the PNV has never obtained the majority of the Basque vote. It may not be a coincidence that electoral support for the Basque Nationalist Party has grown since 1998 (although not to the level of absolute majorities), and that the strategy of the party has shifted to a more open soberanismo, or the open declaration of a nationalist attempt to negotiate a new political status for the Basque Country within (or outside) Spain. Not surprisingly, the globalist strategies of Basque managerial elites are closely connected with their own perception of the Basque relationship with the Spanish State — a question explored and discussed in the concluding chapter.

The “Bilbao Effect” in the World Sustained media attention keeps the museum and the city of Bilbao attached to multiple global discourses: “While the material processes of Bilbao’s revitalization plan make the space of flows visible insofar as they document the shift to a new economic model as well as the construction of an infrastructure to support it, it is the press coverage of events in Bilbao that position Bilbao within an international flow of consciousness” (Rauen, 2001, p. 293). But the Bilbao effect has transcended the discursive realm into the material world, since now many officials in cities around the world think it is possible to effect transformations in their cities similar to Bilbao’s. Specifically, many cities are bidding for their own Guggenheim museum designed by Frank Gehry. On the other hand, the Guggenheim foundation can now openly advertise itself as a global art organization with a new, successful vision for the museum of the twenty-first century. This was precisely the claim the Guggenheim made in its 2002 exhibition (February–April) entitled “The Global Guggenheim. Selections from the Extended Collection”, are presented as follows: With locations in New York, Venice, Bilbao, Berlin, and Las Vegas, the Solomon R. Guggenheim Foundation has come to define the concept of ‘global museum.’ … This concept of the ‘extended collection’ is a logical progression from the museum’s early history and subsequent development … From the beginning … the Guggenheim has placed great importance on reaching beyond local audiences in order to share its collection with a broader public. … Under Krens’s direction, the Guggenheim Museum Bilbao opened to wide acclaim in 1997. Since then, the New York museum has greatly benefited from this stunning architectural arena in which to bring its collection and special exhibitions to new European audiences. … by forging worldwide alliances, the Guggenheim has redefined the parameters of acquisition and ownership previously inscribed in the concept of the museum collection … this approach has generated a cutting-edge program of special exhibitions, breathing new life into the contemporary concept of the museum by putting fashion, design, multimedia, and non-Western art into dialogue with key works in the traditional Modernist canon. (Alsdorf, 2002)


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Forbes magazine published an article under the title “Museums Inc”. which reflects Krens’ explicit global approach to museum management after Bilbao. In 1988, when the then 42-year-old Krens came to the Guggenheim, the museum consisted of the famous Frank Lloyd Wright spiral on Fifth Avenue in Manhattan and a small subsidiary collection in Venice. Today the Guggenheim boasts a branch in New York’s SoHo district, a gallery in Berlin and the wildly successful new museum in Bilbao, Spain. Construction is under way for two Guggenheim branches in Las Vegas, Nevada [already open in 2002, and closed again in 2003]. Approval has been given for another, bigger museum in Venice. Two museums in Brazil —in Rio de Janeiro and in an unspecified city in the northeast of the country— are undergoing feasibility studies. A global strategic partnership with Russia’s venerable Hermitage may produce a Guggenheim on Palace Square in St. Petersburg. And now Krens has the approval of New York’s mayor Rudolph Giuliani for a 700 million megamuseum in lower Manhattan, south of the Brooklyn Bridge” [the plan was abandoned in the wake of September 11, 2001] … Krens ticks off the places he would like to install Guggenheims: ‘Two or three institutions in South America [including Brazil], East Asia, South Asia, the Middle East, Africa’. (Klebnikov, 2001) At times, the Guggenheim Bilbao is taken as the prime factor explaining possibly related events whose direct causal relationship with the success of Gehry’s building is not easy to prove. For instance, the Bilbao museum has been credited with the increasing wave of museum construction, extension, and reform in the United States during the past five years. Critic L. A. Wilson, in the Atlantic Monthly magazine, explains such museum activity in North America because the museum in Bilbao “was widely credited with having sparked an economic boom in northern Spain” [sic] which other cities aim to replicate. She quotes architecture critic and editor-in-chief of Architectural Record Robert A. Ivy, who proclaimed that “Gehry’s Bilbao has conflated cultural, economic, and political interests, alerting all to what a dazzling object in the cityscape can accomplish”. Bilbao’s building is also seen as the beginning of a new era in which museums are thought of “… as monumental sculpture — potentially the most important work in an institution collection”. The article notes museum plans and work all over the United States, including New York (a new Guggenheim by Gehry and the Whitney extension by Rem Koolhaas), Philadelphia by Tadao Ando, Hartford (CT), Boston, Bellevue (WA), San Francisco, Denver, Saint Louis, Milwaukee (WI), Cincinnati, Savannah (GA), Kansas City, Atlanta, Austin (TX), North Carolina … The mayor of Denver is quoted predicting that the jumble of metalclad, faceted geometric forms that make up architect Liebeskind’s design will “… put us on the map as a world-class destination city” (Wilson, 2001, pp. 85–88). And not only in America — two examples will suffice to illustrate the trend around the world. Taichung, a city in Taiwan, invited Thomas Krens in June 2002 to consider a future Guggenheim there, after the museum’s overtures to other Asian cities such as Tokyo, Hong Kong, and Singapore had failed. The mayor of Taichung made frequent comparisons to


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Bilbao and hoped that a local branch of the Guggenheim could help revitalize the local economy, as they assumed the museum did in Bilbao. The local press noted Krens’ comments that “… smaller cities often stood a better chance of winning bigger projects, due to available incentives and resources, and the fact that larger cities often already had their investments and plans”. However, the Guggenheim director apparently added that a big project such as a new museum “… would have to surmount a daunting number of nonartistic hurdles, including adequate financial backing”. The local officials, scholars, and architects had prepared a detailed proposal for Krens, but he remained uncommitted. Following closely every one of Krens’s moves, the paper noted with disappointment that “… the director reportedly skipped planned meetings with Taichung city councilors and a group of Taipei architects, opting to visit the National Palace Museum in Taipei instead” (Taipei Times, 2002). Geelong, in Australia, has also made a bid for a Guggenheim branch. Geelong is the 200,000-inhabitant capital of the province of Victoria, about 50 miles South-West of Melbourne. Predictably, the potential impact of the yet-to-be-built museum (there is not even a draft design of it) has already been compared to the Sydney Opera House. A local reporter stated that “while critics abound, the announcement of a pre-feasibility study this evening shows that Geelong is serious about chasing its dream to establish a Guggenheim museum”. He interviewed Jim Cousins, the chairman of the Guggenheim bid, for whom inspiration came from Bilbao, “… once considered a dying rustbelt town with no prospects of rejuvenation”. The article gathers opinions from other local prominent residents who had joined the bidding effort. All of them, including professors and scholars, believe that a Guggenheim museum is “… a big blockbuster business of building these buildings by famous architects, having big shows, moving around the world between them, and large numbers of people through the doors”. Acknowledging that Bilbao may be different from Geelong, one of the professors interviewed said that “… within an hour’s flying time of Bilbao you have many millions of people. Within a couple of hours flying time you have over 100 million people. You’ve also got Bilbao well on the routes, the tourist routes”. However, they remain confident: “I think that the only way we would be out trumped now is if someone came along with $200 million and said, ‘here you are, let’s go.’” In September 2002, Geelong’s bid seemed to intensify, with local plans to commission an extensive feasibility study practically approved (ABC Online, 2002). The Bilbao effect became commonplace in academic circles. Some used it to illustrate larger philosophical points. Leading American architect Peter Eisenman, a Professor at The Cooper Union in New York City, uses the Bilbao effect as a confirmation of his aesthetic viewpoint. According to him, in today’s media-mediated society, people have forgotten how to experience and appreciate the present: “The ‘Bilbao effect’ has reminded people that architecture has the potential to elicit unchoreographed responses that reconnect the mind, the body, and the eye. That is the role architecture traditionally played”. Eisenman believes that architects should aim to capture the “energy of the moment” in their designs. “It’s not the style of a building or the place where it’s located that matters. What matters is that there are moments in time which can live in the present, carried through literature, through art, through film and also through architecture” (Stanford Online Report, 1998). Yet, is there anything more media-mediated than the Bilbao effect before one can visit Bilbao personally?


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The Fading Away of the Bilbao Effect? The Bilbao effect also has its critics and skeptics. Chicago Tribune critic Blair Kamin notes that the rise of ‘starchitects’ “… begs a broader set of questions about the impact of globalization on an art that ultimately is local: Should 15 or 20 starchitects be designing all the world’s great buildings? What does it mean if every city has its Gehry, its Koolhaas, its Calatrava? Are the backers of these buildings simply seeking known commodities rather than taking genuine artistic risks? Can the stars tailor their style to a vast, cross-cultural array of functions and places”? The critic locates the beginning of the trend in the 1976 Houston Pennzoil Place, dubbed by the residents “the milk cartoons”, and notes that the fashion spread to other cities like Chicago in the 1980s, where architects were put in charge to “… design eye-catching creations that would enhance a building’s marketability”. “There is something […] to be gleaned from starchitects, but only if they are willing to look deeply at [a city] and to adapt their work to the city’s essence (and its economics)” (Kamin, 2002). Architecture critic Witold Rybczynski asks whether the cities commissioning new museums by star architects can become the new Bilbao in terms of visitor numbers. He notes that attendance at the Experience Music Project in Seattle, designed by Frank Gehry in 1996, was down by a third 18 months after the museum opened, while the number of visitors to the local art museum increased by more than a third during the same period. Rybczynski acknowledges, however, that, regardless of trends in visitors attendance, Bilbao has had a powerful effect on the way that clients choose their architects through selected competitions among world-famous architects (as it was done for Bilbao) resembling “beauty pageants”. Rybczynski is “skeptical that designing in the full glare of public competitions encourages architects to produce better buildings. The charged atmosphere promotes flamboyance rather than careful thought, and favors the glib and obvious over the subtle and nuanced”. He continues: The Pulitzer Foundation for the Arts [designed in Saint Louis by Japanese architect Tadao Ando, opened in 2001, and defined by its promoters as the “unmuseum”] is a small building that was not meant to attract a vast public. Yet it would be nice to think that the building signals at least an alternative, if not an end, to the Bilbao effect. The chief aim of architecture should not be to entertain, titillate, or shock viewers. After the third example of swirling titanium and colliding prisms, the effect begins to wear thin. Le Corbusier understood this, which is why he did not repeat the sculptural effects of Ronchamp in other buildings. Once was enough. … The ‘wow’ factor may excite the visitor and the journalist, but it is a shaky foundation on which to build lasting value. (Rybczynski, 2002, p. 139)

Conclusions It is evident that the Bilbao effect has, literally, been taken out of context. Cities and regions around the world obey in part their own specific logic of development; each has specific reasons that contribute to explain decline and each may need localized strategies


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for redevelopment. Applying some of the elements in the revitalization mix to most cities may be unavoidable due to rapid and acritical adoption of policy discourses from center to periphery, but expecting to replicate one city’s success in another context may prove extremely hard. Cities are not simply floating entities that can connect to each other and expect to resemble each other by means of powerful worldwide media discourses. Each city has a history, each has a region within which it develops, and each has a specific political make-up that influences the local decision-making processes. In the particular case of Bilbao, cities around the world should remember that it was not the local government, but the regional Basque government that backed the Guggenheim project, with substantial financial resources of its own and with complete freedom to make decisions about the use of their funds. In addition, Bilbao is located in a traditional tourist country (Spain), and this has been a factor in the museum’s spectacular ability to attract visitors. Further, the motivations of the Basque political elite to attract a Guggenheim museum go beyond the potential (and we might add, limited) urban regeneration benefits of a building, and can only be understood within the political context of the Basque Country and its relations with Spain. Can other cities around the world have their own Guggenheim? The prospect seemed more viable after Bilbao due both to the success of the project there and to the Guggenheim Foundation’s renewed global ambitions. However, not all cities may be well positioned to be “put on the map”, especially second- or third-tier cities (precisely those that may want it most) that compare themselves to Bilbao in terms of size but are off of main routes and flows of people and commerce, or lack a powerful metropolitan or regional government. Bilbao’s success has strengthened the leverage of the Guggenheim Foundation, which will agree to negotiate only in places with obvious locational and financial advantages. Yet these conditions are more likely to be found in bigger cities that are already on the map — but these are cities that have not yet shown much interest in getting a Guggenheim (Europe is out of the question due to the deal signed by the Basques with Krens.) Even if an agreement materializes, that does not mean that each city will have a yearly visitor’s attendance equivalent to the population of its metropolitan area, as in the case of Bilbao. In Bilbao, the museum became a spectacular worldwide image campaign due not only to a possibly irreplicable building, but also to local, contextual economic and political conditions. Far from being the trigger for and prime mover of revitalization, the museum postdated it. So far it has not generated substantial foreign investment in the Basque city, let alone had sizable positive consequences in the job market. Bilbao’s relatively good economic performance in recent years, which so many in the media attribute to the Guggenheim, began prior to its opening and it was due to both a reasonable regional economic policy developed by the Basque government and the positive phase of a long economic cycle, which came to an end in 2001 and seemed to rebound by 2004. Continued media attention preserves the Bilbao effect, but if tourist attendance to Bilbao starts to decrease (no one can guarantee that it will keep its current levels) and the architecture world begins to privilege alternative aesthetics in design and building, the star of Bilbao might begin to dim. The real consequences for the Basque city, however, would be relatively limited, just as the impact of the Guggenheim success was in the first place. Cities are complexly determined formations, and a spectacular media event, even projected on a worldwide scale, is not enough to shift their fortunes.


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If spectacular architecture does not suffice in turning a struggling urban economy around, how can cities and regions successfully implement globalization policies that bring economic benefit to citizens? The answer lies at the intersection of history, political economy and a reconsideration of urban boundaries as integrated in wider regional networks of production and trade. While globalization offers new dimensions tied to the development of megaprojects and flagship projects, it also reveals itself in the production of economic networks linking cities to the world economy. Thus, we need now to turn our attention to the economic globalization of the city-region in the Basque Country, as it is clearly seen in patterns of transnational finance and foreign trade. The pillars of this recent Basque move toward globalization show themes that were already present in the golden years of industrial Bilbao: industrialization based on exports and the reach of the local financial bourgeoisie and its banks. This recent globalization, therefore, is hardly a new phenomenon in Bilbao (except, perhaps, for its scale, scope, and complexity), but rather a new cycle in a centuries-old tendency by the city to join global circuits in the world-system.


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Chapter 7

The Economic Globalization of the City-Region

Introduction A book on Basque pathways to globalization — and one highlighting the political economy of Basque globalization — would be incomplete without a discussion of the phenomenon’s contemporary manifestations in the economic sphere. Whereas Chapters 5 and 6 have examined the spatial, political, and cultural dimensions of contemporary globalization in Bilbao, this chapter focuses on the economic dimension. Much has been said — and often exaggerated — about the role of architecture and culture in globalizing cities, and especially in (misleadingly called) “post-industrial” metropolises. Chapter 6, therefore, sought to contextualize architecture’s role in globalizing Bilbao, departing from iconic/consumerist approaches to globalization and showing the significance of cities’ embeddedness in broader social and economic forces at work in contemporary capitalism. This is a major lesson from the urban political economy pioneered by Manuel Castells (1972) and David Harvey (1973): the calling into question of urban analyses that neglect cities’ embeddedness in wider networks of social action and broader spatial scales of power. An analysis of Basque contemporary globalization such as the one presented in this chapter is therefore necessary for a fuller understanding of the shifting fortunes of Bilbao in contemporary capitalism after the crisis of the Fordist model. Bilbao is connected to international markets through its foreign trade and the global activities of the most global of its local banks — the Banco Bilbao Bizkaia Argentaria (BBBA). Chapter 2 offered evidence of the early globalization of the city in the sixteenth century by means of its participation in the iron and wool trade circuits between Castile and Northern Europe as well as in the American trade. Chapter 3 discussed exports in industrial, Fordist Bilbao when the city became the main supplier of iron for Great Britain up to the end of the First World War. This chapter deals with the globalization of Bilbao and the Basque region in the “post-Fordist”, current period of restructuring, in the context of the new internationalization of Basque economy. Special attention is paid to the foreign trade of the city and the region, as well as to the global activities of BBVA. The health of all these institutions as well as the restructuring of Bilbao’s port, may be far more important to Bilbao’s future than the success of the Guggenheim Museum or Abandoibarra’s revitalization project. This chapter, thus, has three main sections, each devoted to a major factor influencing the networks and commodity chains of Basque economic globalization today: (i) trade globalization, (ii) global connectivity via Bilbao’s port, and (iii) financial globalization.


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Basque Economy’s Trade Globalization It should be remembered that Basques exhibited a proclivity for trade abroad for centuries. Considerably before the Basque Country became an immigrant region during industrialization in the nineteenth century, and then again in the 1960s, Basque fishermen explored the routes to Terranove in search of whales, Basque traders participated in the centuries-old European commercial circuits and the expanding flows with the New World, and Basque shepherds and goldseekers left their homeland looking for better opportunities in California, Idaho, and Nevada. But, for Basques, “abroad” meant the Iberian Peninsula first, and specifically Castile and then Spain, the kingdom they joined in the twelfth century. In fact, Basques had actively participated in the development of modern Spain as bureaucrats in the Madrid court, as financiers and entrepreneurs. As the first region to industrialize in the country (together with Catalonia), the Basque Country and its business elites took part in the later industrialization of other areas in Spain and gained control over entire industrial sectors. This massive economic presence of Basque capital in Spain has also had its population counterpart. Today, there are some 4.4 million Spaniards of Basque origin living in various areas of Spain (a country of 44 million). Conversely, the population of the Basque Country is 2.1 million, with 25 percent of those born elsewhere in Spain. Less than 40 percent of the Basque Country’s population is of Basque origin (El Pais, 1999). Despite its deep and long historical connections with the rest of Spain, the Basque Country has remained independently linked to foreign markets. Especially after Spain became a member of the European Union in 1986, the Basque economy has significantly internationalized. Today, Basque exports to foreign countries — totaling $12.5 billion in 2001 — almost reach the value of the regional production destined to the rest of Spain — $14. 6 billion (EUSTAT, 2002). In terms of imports the situation is different, because the Basque Country is more dependent on Spain ($17.3 billion) than it is on other countries’ production ($9.1 billion). Both Spain and the Basque Country have “globalized” during the past 20 years, but the Basque economy is significantly more globalized today than is Spain as a whole. In fact, the “degree of openness” of the Basque economy in 2000 (the ratio of imports plus exports of goods and services over the GDP) was 128.7, whereas Spain’s was 52.5 (EUSTAT, 2002). The reasons for this huge international dimension of the Basque economy have as much to do with politics as with economics. Spain’s entry into the European Union was a catalyst for change in Basque industrial policy. With small- and medium-size companies accounting for about 90 percent of the Basque industrial base, another approach was needed to compete in the new European, open market. As discussed in Chapter 4, industrial restructuring took on significant proportions during the 1980s, especially in the oldest industrial areas, such as metropolitan Bilbao — the site of obsolete industries and facilities in the steel and shipbuilding sectors. It is still uncertain what the future will bring for the Bilbao metropolitan area in terms of industrial production, because the dismantling that took place was significant and the jobs lost have not yet been recovered. However, if we take the Basque Country as a whole, the past 15 years have been a story of industrial success for the region, which has made a dramatic comeback. The industrial fabric has been renovated and diversified, and the region (at least most of it) has been a major beneficiary of national economic growth. Although heavy industry still remains a main focus, the Basque Country is finding a place in the electronics,


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automotive components, aeronautics, information technology, capital goods, and machine tool sectors. In 1997, Basque production represented a significant portion of Spanish industrial production in certain sectors: hand tools (90 percent of the Spanish production), machine tools (80 percent), capital goods (75 percent), industrial electronics (70 percent), specialty steel (65 percent), electric domestic appliances (40 percent), automotive (30 percent), plastics (12 percent), and chemicals (6 percent) (Liston, 1997). Although some of this economic revitalization was due to European Union factors, without the conscious intent and policies of the Basque government it would not have achieved this goal. The Basque government, indeed, takes credit for the recent economic transformation of the Basque Country: The first great economic transformation, coinciding with entry into the European Union, was the move from an economic culture based solely on steel, the domestic market, the prevalence of price and maintenance of traditional technology, to a development plan to encourage industrial diversification and penetration of international markets, the principle of quality and technological innovation. The result is that per capita income has doubled between 1985 and 2001, unemployment has been more than halved and we now compete on a par with Europe in terms of earnings. As of the year 2001, the second great transformation proposed by the Lehendakari [the President of the Basque Government] is based on three aspects: construction of the Information and Knowledge Society; enhancing Total Quality as an international identity reference and making the Basque Country one of the best-known European names in terms of technology and research. (Imaz, 2001) Since the early 1990s, the Basque developmental government, in partnership with the main economic and institutional stakeholders, has sponsored a series of initiatives with the aim of promoting and improving the competitive position of Basque firms. These include two Industrial Policy Plans (1991–1995 and 1996–1999), an Industrial Technology Plan (1993–1996), a Science and Technology Plan (1997–2000), an Economic Promotion Plan (2000–2003), and an Internationalization Plan (2000–2003). A Competitiveness and Social Innovation Plan (2006–2009) and a new Science, Technology, and Society Plan (2006–2009) have been recently drafted. Pro-business attitudes among Basque political officials are not new (Chapter 3). After the return of democracy to Spain, Basque industrial policy (planned and executed by the Basque government) set the goal of internationalization for Basque companies and helped them to achieve that goal with the creation of SPRI (Society for Industrial Promotion and Restructuring) in 1982, and the more recent “Strategic Plan for Foreign Promotion” (1996). The fiscal autonomy that Basques enjoy allows them to set their policy priorities, and the Basque government has chosen to invest heavily in an innovative industrial policy, with high investment in Research and Development (that doubles the average for Spain), intense professional training, and good use of the region’s traditional industrial capacity. SPRI’s internationalization program, in particular, has helped many Basque companies to search for distribution channels and to establish agreements with foreign firms in order to develop


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joint projects both at home and abroad, especially in Latin America, often using members of the Basque diaspora in Cuba, Mexico, Chile, Argentina, Colombia, Venezuela, Peru as mediators and liaisons (e.g. the Basque-Chilean and Basque-Argentinian Institutes). A well-developed network of SPRI offices and agents is spread in several countries (in the United States, especially Chicago, and in Mexico, Chile, Argentina, Venzuela, and Cuba) and facilitates contacts among relevant parties. In 1997, joint ventures between Basque and foreign companies generated more than $60 million (SPRI, 2001). As a result of this State-led internationalization strategy and the positive phase of the economic cycle, many Basque companies have “globalized” and are now present in foreign markets. CAF (Construcciones y Auxiliar de Ferrocarriles, or Railroad Construction and Auxiliary, a major railway transport manufacturer) has three factories in Spain and has established branches in Mexico, Argentina, Brazil, Holland, Hong Kong, Great Britain, Portugal, and Finland. About 68 percent of the company’s orders come from international markets. Globalization has even affected MCC (Mondragón Corporación Cooperativa, or Mondragón Cooperative Corporation), the world leader in the cooperative movement and a Basque industrial icon. MCC is the largest industrial group in the Basque Country and the eighth largest in Spain, and is now present in Thailand, China, Morocco, France, Brazil, Czech Republic, and Britain. The internationalization of MCC is generating important business growth, but it has also contributed to changes in its internal management structure, and some of its traditional cooperative principles have been modified or lost (Huet, 1997). Basque machine tools are sold in over 100 countries, especially Germany, France, the United States, Portugal, and Argentina. At least 70 percent of the production is sent to highly industrialized countries. The Basque autoparts industry competes effectively against Japanese, French, and British suppliers. Gamesa, a major aeronautics company, is well known abroad as a quality supplier, and participates in several multinational projects in Europe and America. Sidenor, a leading steel company restructured from two old steel plants, was privatized in 1995 (with a significant loss of 2,300 jobs) and is now rapidly globalizing its operations, although the majority of the company’s business is in Spain. Basque presence in China, represented by over 40 companies, is growing rapidly. Basque investment in foreign countries was over $3 billion in 2000, with over 10 percent of that amount in the chemical sector (EUSTAT, 2000). However, about 75 percent of the total Basque foreign investment is attributable to the banking and insurance sector. About 80 percent of its investments occurred in countries other than the OECD, due to massive investments of the BBVA in Latin America (discussed in the next section). Foreign multinationals have also established themselves in the Basque Country, although terrorism may have interfered with this process — two Harvard researchers calculate the cost of violence in the Basque Country as 10 percent of the regional GDP (Abadie & Gardeazábal, 2001). The region’s highly trained yet relatively cheap labor force appeals to multinationals, although Basque business organizations complain that Basque workers are 22 percent more expensive than the Spanish. An important regional asset is a good communications network as well as an industrial tradition and close-knit networks of suppliers. Foreign investments have increased in the 1990s. Whereas in 1991 foreign investment totaled $128 million, just 1 percent of foreign investment in Spain, by 1997 it jumped to $929 million, 5.2 percent of Spain’s total. Germany and France each account for 20 percent of the total, followed by Italy and the United States with 10 percent each.


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Some multinationals present in the Basque Country are Daimler-Chrysler, Bridgestone, IBM, General Electric, Michelin, Mead Packaging, Chase Manhattan, ITT Hartford, Ericsson, Pepsico, and Elf Atochem. Foreign direct investment is still low compared to the Basque share of economic output in Spain (5.4 percent of Spain’s population and 6.5 percent of its GDP), and clearly lower than it was during the 1960s and 1970s. During those years, foreign direct investment (FDI) in the Basque Country was over 10 percent of Spain’s. Foreign investment in the Basque Country in 2000 almost reached $3 billion. Most of that money ($2.4 billion) was invested directly in the purchase of local companies and in corporate stock. The rest was dispersed in various industrial sectors such as machine tools, real estate, and transport and communications. Investment from the European Union reached $2.6 billion, with most coming from the Netherlands ($2 billion), followed by Britain and Luxembourg. Outside the European Union, the main investor was the United States with $235 million (EUSTAT, 2000). An important magnet for foreign corporations establishing a presence in Spain is the corporate-friendly tax policy set by the Basques. The Basque government’s corporate tax rate is lower than Spain (32.5 versus 35 percent). In addition, the government provides a vast array of compensations for foreign investors, such as tax credits for employee training, exports and employment, availability of fully developed industrial sites at advantageous prices, and R&D subsidies. This has generated significant political problems with the Madrid government, and even court pronouncements in both Spain and Europe. The central government has for years been trying to force the Basques to harmonize their tax regime with the rest of Spain, but the courts have consistently dismissed the case. In a recent ruling, the Basque high court upheld a decision by the Spanish courts to allow the lower corporate tax in the Basque Country. However, the court also abolished tax holidays and economic subsidies for companies setting up in the Basque Country. On occasion, Basque government’s political stances, especially its support of liberation movements around the world, have also damaged potential foreign investment. For example, in 1999, a Turkish delegation of entrepreneurs declined to visit Bilbao, for a closer look at its industry, after the Basque government hosted representatives of the Kurdish Assembly in exile in the Basque parliament (El Pais, 1999). Working hard to convey that a “good business climate” pervades the region, the Basque Country is part of a growing group of regions in search of international capital markets interested in cheap funds and self-promotion. Informing the outside world about the Basque Country’s economy is how the region’s treasury has accessed international capital markets. According to the Basque government, “we can raise money most cheaply by selling bonds to our own population”, due to the favorable regional law on interest-income tax (Walker, 1999, p. 72). But selling bonds internationally, even at higher interest rates, may enhance the international perception of the Basque Country. According to Basque officials, “a wave of media interest and a list of new contacts make it worth paying a premium over issuing in the local market” (Walker, 1999, p. 73). Accordingly, the Basques have issued bonds in France, Germany, Switzerland, the United States, and Japan, for a total value of $571 million in the past six years. Fiscal independence and strong economic performance are the arguments the government uses to convince credit agencies to give them a rate as high as the nation, but this strategy faces skepticism in most cases. Breaking through Spain’s credit rating would be just the kind of “propaganda coup” the Basque government


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needs. It would convey the region’s strengths to international investors, and it would be an example other regions in Europe could aspire to follow. Competition in Europe has become a political issue for the Basque government, which seeks direct presence in European institutions, to the point of blocking the most important agreements with Madrid. Independent fiscal policies are part of the Basque Country’s financial autonomy, set forth in a document called the Concierto Económico (Economic Agreement). The agreement was first proposed in the nineteenth century and reestablished in 1981 after the end of Franco’s dictatorship. When in 2001 the Basques negotiated with Madrid to establish a new agreement after the former had expired, the Spanish government did not concern itself with technical adjustments, accepting all the proposals made by the Basques. However, the Basque representatives pushed for direct representation in Brussels in fiscal matters, despite the opposition of Spanish officials. According to them, the fact that the Basque Country has its own Treasury makes the region an independent voice in the European context.

Imports and Exports As explained above, the Basque Country is an export region with considerable presence in various world regions, especially Europe and Latin America. Between 1990 and 2000, the overall balance of Basque foreign trade was 44 percent higher for exports than imports; put it differently, Basque companies exported on average 1.44 dollars for each dollar imported. During the decade, exports grew yearly at an average of 17 percent. The yearly average of Basque export value was close to $8,890 million, whereas the value of imports was of $6,112 million. This export drive is one of the highest in the Western world. If measured as a percentage of the Basque GDP, exports during the 1990s represented 28.9 percent. This figure placed the Basque Country above Germany (a high export economy) and also above the average for Spain. In the European Union as a whole, the value of exports as a percentage of the GDP is close to 20 percent, a figure that doubles the rate for the United States and Japan. About 10 percent of the value of all Spanish exports originate in the Basque Country, which has only 5 percent of the population of Spain (Diputación Foral de Bizkaia, 2001, p. 16). The situation is somewhat different if we consider the interval starting in 1980, given the periods of stagnation and expansion that have occurred since then. Clearly, the Basque economy (and the export–import flows), following international and especially national trends, passed through a recession period up to 1985, then again between 1991 and 1995. But the economy has boomed since then, accumulating growth rates well above Spain and the European Union. These have allowed the Basque Country to become the Spanish region with the highest per capita income and to surpass the European average in per capita income in 1999. Within the Basque Country, metropolitan Bilbao occupies a prominent place in the economic output, representing about 50 percent of Basque output (I am using data for the province of Bizkaia, of which Bilbao is capital; there has been a recent process of “rural” industrialization in areas of Bizkaia outside metropolitan Bilbao, but unfortunately there is no disaggregated data for each zone to compare industrial output in the metro area and the province as a whole). Although the value of its exports as a percentage of the city’s GDP


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(20.6 percent) is above the Spanish average, Bilbao is not the chief producer of the Basque Country. Only one-fifth of the city’s economic productivity is destined for export, compared with almost one-third for the Basque Country as a whole. In fact, the ratio between exports and imports for Bilbao is very close to one, which means that the value of imports nears the value of exports. Bilbao companies exported $1.03 for each dollar imported during the 1990s, compared to $1.37 exported per dollar imported for Gipuzkoa, and $1.60 exported for each dollar imported in the case of Araba, the other two Basque provinces (Diputación Foral de Bizkaia, 2001, p. 31). If we take into account the evolution of foreign trade in Bilbao since 1979, we find a negative balance, especially during the crisis years in the 1980s. In addition to the economic crisis, another reason why Bilbao’s balance of foreign trade is not favorable to exports (as that of the Basque Country as a whole is), has to do with the value of energy products shipped in the Port of Bilbao. If we take out energy products from the foreign trade balance sheet, we find that the ratio of export–import for Bilbao is 1.14, and clearly positive for the city in most years since 1987. All in all, the value of Bilbao exports during 1990 represented about 30 percent of all Basque exports. Bilbao exported on a yearly average $3,200 million. The value of Bilbao imports was 50 percent of all Basque imports, with $3,116 million imported on average per year during the 1990s. It is important to note the importance of Bilbao’s port for the city and the regional economy. About 85 percent of all foreign trade of the city circulates through its port, if measuring by weight of cargo. If taking the value of the merchandise into account, then we find that 47 percent is routed through the port and 48 percent is transported over land (EUSTAT, 1997). This figure already hints at the type of cargo that is shipped in and out of the Port of Bilbao. A specific discussion of these flows follow. Basque exports are highly concentrated in a few product groupings, with most of them sent to a relatively small number of countries. The Basque Country fills 77 of its exports with 10 percent of its products, and most of them destined for the European Union (about 64.6 percent of all Basque exports), especially France and Germany (see Tables 7.1 and 7.5). Inversely, Basque imports are more diverse and come from a greater number of countries, although the European Union still represents 65 percent of all imports (see Table 7.2). Automotive products, machine tools and other mechanical apparatuses, and steel-manufacturing products represent about 60 percent of Basque exports. This trend is more acute in Bilbao, the old steel-manufacturing city, where 75 percent of exports are intermediate goods having to do with the steel manufacturing, mechanical engineering, and machine-tools sectors. A signficant portion of the imports are energy-related products coming mainly from Russia and Iran, and shipped to the Port of Bilbao for local consumption and further distribution in the Spanish market. Tables 7.3 and 7.4 show the value of exports and imports for the Basque Country and Bilbao by technological content (or technological level) of the products traded since 1990. Whereas in 1990 Bilbao represented 46 percent of the value of all Basque products exported, in 2001 that figure dipped down to 36 percent. High-technology exports (such as aircraft and spacecraft, IT equipment, electronic and communication machines) represented 4 percent of all Basque exports in 2001, whereas it accounted for 3 percent of all Bilbao exports during the same year. Most Basque exports are classified as “intermediate technology”, both high and low. Products in this category include motor vehicles, electric


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Table 7.1: Geographic destination of Basque non-energy exports, in million dollars, 1993–2004.

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

World total

European Union

Rest OECD

Russia, Central and Eastern Europe

Developing countries

3,973 5,276 5,982 6,807 9,016 9,499 9,690 11,188 10,600 11,637 11,786 13,521

2,397 3,246 4,002 4,432 5,896 6,180 6,751 7,510 7,200 8,318 8,535 9,504

667 852 684 772 1,269 1,542 1,307 1,884 1,573 1,440 1,454 1,812

66 90 82 97 79 87 86 100 117 454 505 569

317 492 507 582 930 892 832 881 973 1,425 1,292 1,636

Source: EUSTAT, Foreign Trade Statistics, and author’s elaboration.

Table 7.2: Geographic origin of Basque non-energy imports, in million dollars, 1993–2004.

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

World total

European Union

Rest OECD

2,966 3,941 5,042 4,882 5,478 6,121 6,522 7,890 7,900 10,171 10,494 12,474

2,171 3,000 3,670 3,590 4,109 4,510 4,836 5,733 5,400 6,757 6,625 7,337

322 350 528 482 529 640 674 800 982 914 1,083 1,370

Russia, Central and Eastern Europe 90 132 230 172 201 252 209 247 274 859 1,110 1,645

Developing countries 176 187 240 254 196 266 313 400 341 1,641 1,676 2,122


machinery, chemical products, mechanical machinery, plastics, and oil-refined products. Some 36 percent of all Basque products traded in 1990 and 47 percent of those exported in 2001 were considered “high intermediate technology”, a trend that reveals the recent Basque investment in leading technology sectors. For Bilbao, the figures are 24 percent in


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Table 7.3: Value of exports, in million dollars, of Basque Country and Bilbao, by technological content. Basque Country

Total High tech High intermediate tech Low intermediate tech Low tech

Bilbao

1990

2001

1990

2001

3,650 27.7 1,336 2,000 285

11,233 451.1 5,379 4,347 1,056

1,680 5.1 407 1,158 216

4,068 125.9 1,433 2,192 316


Table 7.4: Value of imports, in million dollars, of Basque Country and Bilbao, by technological content. Basque Country

Total High tech High intermediate tech Low intermediate tech Low tech

Bilbao

1990

2001

1990

2,793 53 1,086 1,260 393

7,530 327 3,127 3,062 1,012

1,318 19 494 649 153

2001 3,390 171 1,166 1,630 421


1990 and 35 percent in 2001. Clearly, the Bilbao industry is less technologically developed than the Basque as a whole, although some progress appears during the 1990s. Bilbao’s share of Basque exports in high-technology products was 27 percent in 2001 (19 percent in 1990). Regarding “high intermediate technology”, the city’s share during the same year was 26 percent (30 percent in 1990). However, “low intermediate technology” Bilbao’s exports accounted for 50 percent of all Basque exports in 2001 (58 percent in 1990). In this division, we find metallic products, non-ferrous metals, vessels, and repair services. It is not necessary to analyze the data to exhaustion in order to capture the main trends: Bilbao’s share of Basque exports has decreased during the 1990s and the exports are not so much in the leading technology sectors as in sectors traditionally linked to the city’s economy, although a shift in the city’s exports is visible from low intermediate technology to high intermediate technology and high-technology sectors. Regarding imports, Bilbao continues to offer the primary point-of-entry for foreign products into the Basque Country. In 1990, Bilbao was the destination for 47 percent of all Basque imports, whereas in 2001 it dipped slightly to 45 percent. One reason for Bilbao’s relative stagnation in exports is that the rest of the Basque Country (the provinces of Araba and Gipuzkoa) have become more competitive due to a more diverse weave of industries. Metropolitan Bilbao


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has significantly dismantled old, obsolete industries but those that remain have not increased their value-added contribution to the local economy during the past 15 years. Energy products and minerals, chemical products, plastic and rubber, common metals and manufactured products, machinery and appliances, and transport material made up 89 percent of all exported goods from Bilbao in 2001, whereas in 1987 the share of these sectors in Bilbao’s exports was 91 percent. Is Bilbao globalizing more or less than the region? If we return to Tables 7.3 and 7.4 above, we can easily calculate the increase in value for imports and exports both in the Basque Country and Bilbao during the period considered. The Basque Country exported goods for a total of $3,650 million in 1990 and 11,233 million in 2001. This represents an increase of 207 percent during the decade. Bilbao, in turn, increased the value of its exports by 142 percent. On the other hand, the value of imports increased by 169 percent for the Basque Country and almost the same (157 percent) for Bilbao. Again here we find the export–import pattern seen above. Whereas exports from the Bilbao area are lagging behind the region (it exports less in value today, and as a percentage of regional exports, than at the beginning of the 1990s), the city maintains its status as the primary destination of import products going to the Basque Country, due to the importance of its port as a global node.

The Port of Bilbao as a Global Node Bilbao’s port is the third largest in Spain, next to Algeciras and then Barcelona. More importantly, it is the deepest port between Rotterdam (Holland) and Algeciras (south of Spain, next to Gibraltar) and it lies in the middle of the main European shipping routes. The port is about 20 miles long and has an annual traffic of 27 million tons. Its quays have water depths ranging from 15 feet in the Nervión River estuary to 96 feet in Punta Lucero (the most outer port area), where great oil tankers anchor to unload crude oil for the Petronor refinery. The port handles 425,000 TEU (Twenty-foot Equivalent Unit, a container’s measurement unit) annually. Over 3,800 vessels traded at the Port of Bilbao in 2001. The port provides 4,200 jobs, invests an average of almost $56 million annually (as much as the whole Basque automotive sector), and represents 1.57 percent of the provincial GDP and 0.8 percent of the Basque GDP (which in 2005 was approximately $59 billion). In order to clearly observe the global status of Bilbao’s port, we can make a simple comparison with the three American global cities studied by Janet Abu-Lughod in her New York, Chicago, Los Angeles: America’s Global Cities. As seen in Table 7.6, Bilbao compares well with the three cities in terms of tons imported and exported through their ports, despite the fact that Bilbao’s region is much smaller than any of the American cities in population terms. Bilbao is second to New York in raw tons imported, and second only to Los Angeles in raw tons exported. Over 50 percent of the goods which pass through the Port of Bilbao are on their way to or from countries on the Atlantic coast of Europe. The United Kingdom is the major market in Atlantic Europe for the Port of Bilbao, followed by Russia. In 2001, traffic with Russia exceeded 1 million tons, 98 percent of which were imports (mostly oil imports). The next most important area for trade with Bilbao is North and South America (18 percent of


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Table 7.5: Bilbao’s exports by region and country, 2001. Region/country

Percentage of total exports

European Union United States Latin America and Caribbean Eastern Europe South Corea/Singapore/Taiwan/Hong Kong Rest Within the European Union

65 8.2 8 3.2 1.4 14.2 As percentage of total European exports

France Germany Italy United Kingdom Portugal Belgium Netherlands Sweden Rest (Austria, Denmark, Ireland, Greece, Finland, Luxembourg)

27.60 20.25 12.95 10 9.7 6.9 4.6 3 5

Source: Foreign Trade Database, Basque Chambers of Commerce, and author’s elaboration.

Table 7.6: Port statistics: New York, Chicago, Los Angeles, and Bilbao. Region New York Los Angeles Chicago Bilbao

Raw tons imported

Raw tons exported

Population

47,121,436 13,492,146 3,162,718 18,804,551

7,179,929 11,261,409 1,078,530 7,715,487

17,000,000 14,500,000 7,200,000 1,000,000

Source: Data on New York, Chicago, and Los Angeles refer to 1989, and come from Janet Abu-Lughod (1999, p. 407). Data on Bilbao refer to 2001, and come from Uniport Bilbao.

the goods), followed by the Asian Pacific area (16 percent, mostly oil imports), and Africa (7 percent). The port provides a vast array of services. At European ports, only a small number of companies provide storage services for bulk liquids to the food sector. The Port of Bilbao has the greatest capacity in this field, due to a number of companies that operate there. Through its facilities the majority of this type of bulk traffic is channeled, unloaded at Bilbao from third countries, and bound for the processing plants located across the Iberian Peninsula. Most of it consists of fish oil mainly from the Nordic countries.


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In the 1980s, particularly in the second half of the decade, the possibilities for extending the Port of Bilbao were first analyzed, after ensuring that the use of older port areas was in decline following one century of integral use. It was at that time that start dates were set for extension works on the Port of Bilbao at the outer areas. The construction project was undertaken in 1989, and a work schedule was planned. A new extension of the port is now underway to provide more space for activities and to transfer port facilities from their old inner city riverside sites (which has allowed the Abandoibarra development into a new CBD in downtown Bilbao). Five miles of dikes harboring nearly 4 miles of water are being built and the depth of the docks will range from 63 to 75 feet. The project will allow the reclamation of 31.5 million square feet of land. The first phase of the project started in December 1998 with a cost of $240 million. In principle, the economic changes brought about by globalization are particularly favorable to ports. First, the world transport of freight increases considerably, intercontinentally or internally. This kind of transport is increasingly essential to create wealth around cargo-connected services. In addition, ports have an influence on urban development (and an influence on globalization processes too), because they constitute nodes in a global and multimodal transport system, and are usually located in cities with historical capacity for business. Further, the global circulation process has changed the traditional role of the port. In the past, the port was the way to serve the hinterland via State structures and infrastructures, whereas currently the transport multimodality can only be applied to those ports in control of all the circulation of goods in a particular territory. The spatial, territorial role of the port is linked to the range of logistic functions covered. The port development trend is moving from a variety of ports identified by world region toward the development of a global port network through old harbors (Bazan-Lopes, 2002). The global ports will certainly become the biggest free-trade zones. With container shipping growing, it is clear that fewer ports will handle the largest container vessels, and Bilbao wants to play a leading role in the network. During the Fordist period, a substantial source of job creation in port-cities reasonably derived from the port itself. New port developments increased employment share connected to wealthy urban productivity. In this post-Fordist period, when new transport technologies and managerial transformation have been applied to ports, the multiplier factor has moved from the specific port activities to an extended services sector. The drastic reduction in direct employment has not always been attached to labor reconversion and often the port service sector is not flexible enough to create new jobs. Nevertheless, there are cities where port activities still represent a significant amount of the local and metropolitan economies. In the duty-free zones of the Hamburg port, 1,047 companies employ 40,000 workers, and the whole port houses 2,000 companies with 140,000 workers, including both direct and indirect employees. This is equivalent to 15 percent of the overall employment in this German city. There is also an important concentration of industries in the Liverpool port. Its duty-free zone occupies half of the port surface and attracts storage and distribution activities with more than 1,000 companies currently established and a merchandise traffic of more than 30 million tons (similar to Bilbao’s port). The industrial area of the Antwerp port occupies one-third of the port area and employs 33,000 workers in the refinery, chemicals, and petrochemicals sectors, the automotive industry, gas, food, and civil engineering (Bilbao Metrópoli-30, 1998).


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The Bilbao port restructuring project is not only perceived as a major feature of the overall revitalization plan for the city, but also a necessity due to the growth of global trade flows (most of which are by sea) and increased competition from Mediterranean ports, which are becoming a viable alternative to the Atlantic ports. In fact, in 2001 the European Union commissioned a study about the maritime traffic in Atlantic Europe (European Commission, 2001), which aimed at proposing solutions for the relative decrease and loss of regional significance in inter-continental maritime traffic. Sea ports, formerly simple physical sea/land interfaces, first turned into commercial and industrial centers. Then they evolved into logistics and distribution platforms and they are now becoming intermodal nodes in international supply networks. The restructuring and extension of the Port of Bilbao is one example among many that have occurred in recent years in the North Sea and Baltic areas. Investments in the Atlantic ports are among the lowest in the European Union, although traffic is growing. Trade flows among the Atlantic area countries focus on North-Central Europe and trade volumes among the five Atlantic countries (Portugal, Spain, France, Ireland, and Great Britain) represent relatively small percentages of the total. Considering that the economies and cultures of these five countries are not homogeneous, one wonders where the concept of “Atlantic Europe” comes from, other than a merely geographical and discretionary construct. In fact, it is the European Union that promotes such area recognition as a new economic network. The concept of “Atlantic Europe” has transcended its original domain: the Bilbao planners, for example, state that Bilbao should become “... the capital of the Atlantic façade” in the revitalization plan. Most bulk traffic in Europe is generated by, for example, petrochemical companies, refineries, steel plants, electricity plants, and other industries using large quantities of raw materials. The presence of these companies in the neighborhood of the ports is critical for this traffic, especially in Bilbao. The Atlantic area has some strengths for traffic development, such as a strategic position close to the major maritime lanes, good relationships with African and American countries, and the possibility of increased trade between peripheral territories and the main European centers. Most ports in this area, however, do not have important captive hinterlands and are experiencing massive economic restructuring from manufacturing to the services sector, which may have an impact on the ports’ traffic. In addition, they exhibit low investment levels in port infrastructure, compared to other European regions. Further, this area of Europe may suffer from the projected expansion of the European Union to the East, which could be traduced by reassignment of resources for the new countries. The Atlantic area is a peripheral area of Europe. The main European industrial and consumption areas can be served through ports elsewhere. However, a restricted number of ports, one or perhaps two, could be developed into major transhipment hubs. Bilbao’s ambition lies here. The Atlantic area could serve as an alternative to more congested European areas. A wave of privatization has also arrived at the ports’ management business. Experts and consultants believe that “cost leadership” (being cheaper) and market differentiation (providing specific port services in market niches) can help ports to become more competitive. In this regard, a strong public presence is still a common factor in a large number of Atlantic ports. The authors of the European Union report complain at the same time that public spending in Atlantic ports is among the lowest in Europe. In general the report


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recommends that Atlantic ports should (1) develop synergies and partnerships (e.g. development of short-sea links, cooperation in lobbying for European funds, and in the promotion of the Atlantic area); (2) use innovative finance structures and mechanisms (in other words: privatize); (3) modernize port management; (4) should define their captive markets and commercialize such niches; (5) manage their infrastructure by web-based knowledge; (6) develop value-added logistics and non-maritime related activities; (7) realize crucial infrastructure investments; and (8) cultivate an environmental and a safety friendly business image (European Commission, 2001, p. 25). According to United Nations Conference on Trade and Development (UNCTAD), world seaborne trade (goods loaded) recorded its fifteenth consecutive annual increase in 2000, reaching a record high of 5.88 billion tons. The Port of Bilbao (30 million tons of traffic in 2001, 8 million loaded) represents a very small percentage of world seaborne trade (about 0.1 percent), although it reaches 146 countries. Seaborne trade more than doubled between 1970 (2.566 billion tons) and 2000. Tanker cargo has gone from 1.442 billion tons in 1970 to 2.149 billion in 2000, a 50 percent increase. Tanker cargo represented in 1970 about 56 percent of all trade, and only 36 percent of the trade in 2000. In 2000, about three-quarters of the tankers traded in crude oil with the remainder in petroleum products. Dry cargo has experienced a very significant increase in trade. It has dramatically expanded from 1.124 billion tons in 1970 to 3.736 billion in 2000, an impressive 234 percent increase. In 1970, dry cargo represented 44 percent of all seaborne trade, and in 2000 represented 64 percent (UNCTAD, 2001). In this context of global trade, the Port of Bilbao is a main point-of-entry for goods into the Spanish market. In 2001, more than two-thirds (69 percent) of all goods traded at the port were unloaded (over 18 million tons unloaded, 7.7 loaded), and came from over 146 countries in the world. The main goods traded at Bilbao are (ordered by weight of cargo) — crude oil (over 8 million tons in 2001), iron and steel products (over 3 million tons), diesel-oil (2 million tons), fuel-oil (1.7 million), coal (1.2 million), and petrol (1 million). All of these together accounted for 18 million tons, or 72 percent of the weight of all goods traded at the port in 2001. Following the trend at the global level, crude oil is the most traded single commodity at the port (30 percent of all traffic). It is interesting to note that not all iron and steel traded at Bilbao is imported. In fact, over 1 million tons of these products, corresponding to Basque and Spanish production, are exported through the Port of Bilbao. Similarly, oil-refined products such as diesel-oil, fuel-oil, and petrol are exported through the Bilbao port, and produced nearby at the Petronor refinery. Other important products exported through Bilbao are building materials, machinery, chemical products, and coal. However, dry cargo (solid bulks) does not represent the majority of goods traded at the port, unlike what is visible at the global level. Container-cargo has increased significantly, from 296,500 TEU in 1996 to 454,500 TEU in 2001, a 53 percent increase in just five years, and thus in this respect Bilbao does follow the global trend (Uniport Bilbao, 2002). A significant portion of the trade occurs with Atlantic Europe’s ports. In fact, over 10 million tons of goods (about 38 percent of the total) is traded with that area of the world, especially Great Britain, thus continuing and consolidating a long historical relationship with that country, as seen in Chapter 3. Trade with Great Britain represented in 2001 3.5 million tons, or over one-third of all trade with Europe, and over 13 percent of the overall


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trade at the Port of Bilbao. Atlantic Europe is also the area with the highest number of shipping lines, a total of 59. Remaining European countries that trade with Bilbao represent a small percentage compared to Britain. Trade with Holland exceeds 900 thousand tons; with Belgium, 700 thousand tons; with Italy, 640 thousand; and France’s trade amounts to only half a million tons — most trade with France (the main country of destination for Basque exports) occurs by road. Trade with Ireland reached 390 thousand tons in 2001. The Scandinavian and the Baltic countries also represent important trading areas for Bilbao. Trade with Finland totaled 437 thousand tons in 2001; with Sweden, 330 thousand tons; and with Norway 211 thousand tons. More significant is the trade with Estonia (625 thousand tons) and Lithuania (425 thousand tons). Latvia’s trade hit 264 thousand tons in 2001. A major trading partner for Bilbao is Russia. In 2001, traffic with Russia totaled 1 million tons, 98 percent of which were imports (mostly oil imports). Besides Europe, the next routes of trade importance for Bilbao are Mediterranean Africa and Middle East, Central America and Caribbean, and Asia via the Indian Ocean, certainly due to crude oil trade with Iran. Trade with this country amounted to 2.9 million tons in 2001. Crude oil trade accounts for almost all the trade (2 million tons) with the African countries in the Atlantic Coast: Equatorial Guinea (1.2 million tons) and Nigeria (680 thousand tons). South America is also an important trading area for Bilbao (a total of 2 million tons of goods). Trade with South America is diversified among various countries. The main trading partners in this zone of the world are Venezuela, 829 thousand tons, mostly oil imports; Brazil, 415 thousand tons; Argentina, 297 thousand tons; Chile, 204 thousand tons; and Cuba, 183 thousand tons. North America (1.6 million tons) and Central America (1.1 million tons) are the next trading areas for Bilbao. The United States is a main trading partner with 1.4 million tons traded in 2001. Canada only represented 163 thousand tons. Traffic with the ASEAN countries in Pacific Asia amounts to 850 thousand tons, most of it with China (217 thousand tons) and Singapore (207 thousand tons). A detailed analysis of the origin of goods loaded at the Port of Bilbao would show distribution all over Spain. The Port of Bilbao is a national port with global functions, and the Basque Country is well connected by highway and railway to the main transport routes in Castile and also in the Mediterranean areas. Further, precise information of product and country origins, and destinations, could give us a clearer picture of flows through the port. Nevertheless, Bilbao’s port contributes to globalization as a node in a global network of flows. In addition to regional trade flows in the form of exports and imports, which represent Basque presence in international markets, Bilbao is a primary link between Spanish markets and the world economy. Together with Bilbao’s global Bank (BBVA), the port is a major player in the historical process of globalization in the city (Table 7.7).

Financial Globalization: The Banco de Bilbao Abroad Since industrialization in the nineteenth century, the financial services sector has been one of Bizkaia’s strengths. Most of Spain’s largest banks and the country’s secondlargest stock exchange were founded there. Spain’s second bank, Banco Bilbao Bizkaia Argentaria (BBBA), is the product of a merger in 1988 between the Bilbao-based Banco de Bizkaia and Banco de Bilbao, which in 2000 acquired the third-largest bank,


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Bilbao: Basque Pathways to Globalization Table 7.7: Regular shipping lines from the Port of Bilbao, 2001. Region

Number of lines

Europe–Atlantic Ocean Mediterranean Africa and Middle East Central America and Caribbean Asia-Indian and Pacific Oceans North America–Atlantic Ocean South America–Atlantic Ocean Africa–Atlantic Ocean Africa–Indian Ocean Oceania North America–Pacific Ocean South America–Pacific Ocean Europe–Mediterranean Sea

59 49 43 40 38 30 28 20 20 19 18 18

Total

382

Source: Uniport, Statistics of the Port of Bilbao (2002).

Argentaria, thus consolidating its assets and market share and securing national leadership. Owing to its origin in Bilbao, the BBVA has an important presence in the Basque Country. The bank’s participation in basic financial activities, through deposits and loans, represents half of the Basque banking system. The BBVA is a major stockholder in big companies such as Telefónica (telecommunications) and Iberdrola (energy). Through the industrial group IBBV, a joint venture between BBVA and Iberdrola, the bank controls a large number of industrial and service firms in the automotive, mechanical engineering, aeronautics, and electrical components sectors. The bank continues to have its headquarters in Bilbao for both historical and financial reasons. Banco Hispano Americano, which merged with Banco Central as BCH and earlier with Banco Santander to create BSCH, was also founded in Bilbao, as was Banco del Comercio, another of the country’s top 10 banks. The fact that the newly merged BBVA keeps its headquarters in Bilbao is important, particularly for fiscal reasons. The combined entity pays its taxes to the local authorities, which impose a lower corporate tax rate than the rest of Spain. BBVA is the region’s largest deposit taker and it also finances more industrial projects than any other bank. To be sure, it enhances the region’s image to have the country’s principal bank and decision-making center in its largest city, which benefits directly from BBVA’s financial activities. Most foreign banks operating in the Spanish market have set up branch networks in Bilbao, concentrating on corporate and private banking. Chase Manhattan has made the Bilbao location its Spanish headquarters. The banking industry flourished in Bilbao, where its primary role was financing the local industrial revolution, trade with the Latin American colonies and in particular with the United Kingdom, whose navy was supplied with Basque iron and timber. The bank’s activity naturally followed these structural changes, if only broadly. The first foreign activity of the Bank of Bilbao dates back to 1902, when the bank opened a new office in Paris.


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The second office abroad, in London, opened in 1917. The “globalization” of the bank, therefore, predated the post-1973 period and followed the penetration of the Spanish economy in international markets and varying degrees of protectionism in Spanish economic policy throughout the years. In order to have some insight into the evolution of the degree of internationalization of the Banco de Bilbao (hereafter, “the Bank”) during the twentieth century, data have been gathered about loans and deposits in foreign currency from the Historical Archive of the Banco de Bilbao. Information on loans and deposits in foreign currency as percent of total loans and deposits in the Bank allows us to form a clear idea of the degree to which the operations of the Bank contained an international component. Loans in foreign currency express the Bank’s involvement with the export business, and the percentage of deposits in foreign currencies shows the proportion of accounts opened in its offices, mainly outside Spain. The data are presented in Table 7.8 below. Table 7.8 shows the value of loans (in million US dollars) in foreign currency between 1922 and 2001. It also shows loans in foreign currency as percentage of total loans for each selected year. This figure remained stable between 1973 and 1995 (below 20 percent), and then exceeded 35 percent in the second half of the 1990s, due to the Bank’s involvement in Latin American business. For a better historical perspective, consider the years between 1922 and 2001. These years present an inverted curve, with a peak in 1922 (28 percent) and a second peak in 1997 (35 percent). The shape of the curve reflects the fortunes of Spanish economic policy throughout the twentieth century. The Bank’s internationalization was significant between 1922 and 1942, with percentages of loans in foreign currency above 20 percent. After this period of openness before the Franco dictatorship, it follows the autarchic policies of the 1940s and 1950s, when the Bank was minimally involved with the export business (below 10 percent of loans in foreign currency). There is then a notable recovery in the 1960s, immediately before the economic crisis of the 1970s. Since the 1970s, as the table shows, the Bank’s international business has gradually increased. Table 7.8 also shows the value of deposits in foreign currency and the percentage of these in the total amount of deposits. This indicator provides another way to measure the relative internationalization of the Banco de Bilbao throughout this period. The pattern is somewhat similar to the performance of loans in foreign currency. Observing the years 1973–2001, we can tell that before the 1990s the percentage of deposits in foreign currency was relatively small, with a peak of 17 percent in 1983. There is then an explosion of foreign business for the Banco de Bilbao, particularly in Latin America, with significant investment activity to acquire local banks in more than 10 Latin American countries. This is reflected in the percentage of deposits in foreign currency during that decade, which accounts for 50 percent of all the deposits in the Bank. In other words, more than half of the Banco de Bilbao’s current clients are foreign. Again, considering a longer historical perspective, the period 1922–2001, reveals that between 1922 and 1987 the percentage of deposits in foreign currency never rose above 15 percent, with the exception of 1967 (24 percent). But the years between 1922 and 1937 showed higher percentages of deposits in foreign currency than the following years, marked by a great deal of isolationism of the Spanish economy. The Bank’s international business was more significant at the beginning of the twentieth century than the median years, similar to the loan percentages in foreign currency.


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Table 7.8: Bank of Bilbao, loans and deposits in foreign currency, 1922–2001 (selected years). Loans

Deposits

Years

Amount in million US dollars

As percent of total loans

Amount in million US dollars

As percent of total deposits

1922 1927 1932 1937 1942 1947 1952 1957 1962 1967 1972 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001

0.24 0.22 0.29 0.33 0.10 0.06 0.15 0.51 4.16 3.40 13.36 42.70 94.20 221.50 229 307.70 922 820 1,132.40 1,635.30 1,986.80 4,938.80 6,170.60 16,715.20 22,215.60 284,654.10

28 21 24 10 28 1 2 5 15 9 2.5 3.4 19 10 8.2 15 18 15.50 16 12 13 20 20 35 35 34

0.24 0.23 0.68 0.37 0.14 0.22 0.65 1.30 4.30 82.20 36.70 25.20 83.30 134.10 201.00 451.70 957.50 1,165.50 1,257.80 1,645.00 1,977.00 13,264.20 12,663.20 20,219.60 12,651.00 80,259.60

11.3 6.6 14 4.6 1.5 1 2 2 2.5 24 4 3.6 5 6 6 11 17 15.3 13.7 9 9.3 61 52 53 48.5 62.3

Source: Historical Archive of the Bank of Bilbao, Annual Reports, and author’s elaboration.

In summary, the Banco de Bilbao “globalized” early in the twentieth century, providing important financial support to the export business and to foreign clients. Its presence in international markets was more pronounced in the years between 1922 and 1940 than during the 1940s and 1950s, following the cycles of expansion of the Spanish economy and the political climate in Spain. Nevertheless, at the end of Franco’s dictatorship in 1975, and especially during the 1990s, the Bank expanded solidly beyond the Spanish borders with direct investments in Europe and Latin America. At this juncture, the Bank’s evolution abroad closely follows the economic interests of the Basque Country and Spain in the world economy.


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Foreign Expansion after 1973 In the 1970s, the Bank established a solid presence in foreign markets, beyond the opening of new offices and the management of loans in foreign currency for the export business. The Bank made a considerable effort to help entrepreneurs establish a direct presence in the countries of their choosing, helping them to solve any problem that they may face in such an endeavor, even in the choice of foreign partners, and their financial needs in the short and long term. The Bank’s international strategy seemed to revolve around two principles: first, developing an active presence in foreign markets and international centers, and second, providing solid support for Spanish investors abroad, in those sectors that involve technology transfer and export, or that involve commercial or financial penetration abroad (Banco de Bilbao, Annual Report 1973, p. 25). Banco de Bilbao’s international activity during the final years of the 1970s was influenced by the instability of the main Western currencies, the US dollar in particular, which registered a devaluation of 13.4 percent against the main European currencies. The Spanish peseta, for example, gained 15.7 percent against the US dollar between January 1978 and 1979. The credit activity of the Bank operating in foreign currencies grew significantly during that year. Loans in foreign currencies grew from $513 million in 1977 to $560 million in 1978 (9.2 percent increase). The Bank of Bilbao’s market share in Spain was close to 16 percent. The Bank’s participation in the Spanish foreign trade grew by 1 percent, and its purchase of foreign currencies grew by 34 percent in 1978. The Bank’s international expansion developed around two lines — first, an increased presence in the main financial centers, and second, an increased presence in the most attractive markets for the Spanish export economy. For example, the Bilbao International Bank Ltd. was created in 1979 in order to expand the activities of the London office, and a new office was opened in Grand Cayman to work closely with the New York office. New offices also opened in Caracas (Venezuela) and México City. Economic recovery in the most industrialized countries was the most relevant feature of the international economy during the first half of the 1980s, especially the United States and Japan, whose GDP grew by 3.5 and 3 percent, respectively in 1983. However, economic recovery did not induce a significant growth of exports by the OECD countries. International financial activity dropped noticeably in 1983. The activity in euromarkets diminished 18.5 percent compared with 1982. The US dollar gained value against the most important currencies, due particularly to its role as “currency-refuge” in tense political situations around the world, and also to the solid economic performance of the United States. The Spanish peseta lost 20 percent of its value against the US dollar. Interest rates remained stable in all industrialized countries. The Bank of Bilbao operated with caution in international markets during the first half of the 1980s. The overall balance in foreign currency was contained and deposits in the interbanking system were reduced. Emphasis concentrated on investments in traditional annuities, and issuing instruments to attract long-term resources by promoting lending operations with foreign banks. At the same time, the Bank tried to attract more international clients, both those present in countries with Bank offices, and those related with or interested in Spain. As a consequence, the balance of the Bank in foreign currency decreased by 15.2 percent between 1982 and 1983, and it represented 24.32 percent of the


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overall balance of the Bank in 1983, compared with 26.7 percent in 1982. In 1983, 31.9 percent of all deposits in foreign currency were located in Spain, and 68.1 percent abroad. Spanish export financing also increased, by expanding lending to buyers of Spanish goods and services. With 133 operations in 12 countries, the Bank financed transactions valued at $45 million, compared with only $20 million in 1982. About 63 percent of all foreign investments of the Bank took place in OECD countries, and 32 percent in the so-called developing countries, especially Latin America (25 percent). Most international investments happened with other banks and were short term. The Bank of Bilbao also developed business with public agencies and States abroad. In the early 1980s, the Bank expanded its international presence with new offices in Buenos Aires, Milan, and Panamá. By 1988 the Bank of Bilbao was already called Banco Bilbao Bizkaia (BBB), after its merger with the other Bizkaian bank, the Banco de Bizkaia. The balance in foreign currency represented 16.9 of the overall business of the new Bank, with $11.4 billion (12 percent more than in 1987). International investments in the OECD countries grew. For example, in 1988 some 82 percent of all foreign investments happened in OECD countries, compared with 78 percent in 1987, and 63 percent in 1983. Only 15 percent of the investments landed in developing countries (18 percent in 1987, and 32 percent in 1983). This geographical concentration is even more significant if we take into account that 78 percent of the investments were made in the European Community and Switzerland. According to the Bank itself, this was a sign of “safe” international investment for the institution (Table 7.9). In 1988, the Bank’s foreign network had deposits with a value of $4 billion. During the second half of the 1980s, the Bank paid attention to the integration of foreign offices, after the merger between Banco de Bilbao and Banco de Bizkaia. It also initiated plans to expand into new markets and reinforce its presence in old markets. A number of new branches were created. In Portugal, the Bilbao Bizkaia Sociedad de Inversiones, S. A. was created as an industrial bank to finance economic development in that country. In Morocco, Unibán S. A., a commercial bank, originated from the business of various Spanish banks during the period when Northern Morocco was a protectorate of Spain. The BBV acquired 50 percent of the stock of Unibán in 1988. BBV Finance SPA, in Italy, worked as a financial business dealing with consumer and capital goods, and it complemented the activities of the Rome and Milan offices. In 2000, BBV merged with Argentaria, another Spanish bank, to form BBVA, in order to position itself for the merger movement in Europe, and to cultivate better opportunities to expand in Latin America. According to the Annual Report of the Bank, the combined Table 7.9: Foreign network of the Banco Bilbao Bizkaia, 1988 (in USD million).

Total Europe America Rest of the world

Total value

Loans

Debtors

Offices

Employees

8,145 6,020 1,960 165

2,389 1,573 724 92

4,012 2,591 1,295 126

91 48 21 22

1,483 833 329 321

Source: Annual Report of the Banco Bilbao Bizkaia (1988, p. 75).


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institution had $238.7 billion in assets (BBV, Annual Report 2000, p. 63). The new CEO was charged with realizing BBV’s oft-mentioned ambition to create a southern European banking powerhouse. In order to achieve that goal, BBVA had to cross the northern border to Europe and compete with the other Spanish superbank, Banco Santander Central Hispano (BSCH), which already had the necessary cooperation to merge with Italian, French, and Scottish banks. As we are about to see, expansion in Latin America proved a more manageable task than expansion in Europe.

The Latin American Expansion of the 1990s While international capital markets had been developing for some time, direct foreign entry into the domestic banking sector of multiple countries has occurred only recently. Similarly, while consolidation of the financial services industry is not new, it is now beginning to transcend national borders in a more substantial way. These changes have occurred as a growing number of countries have considerably loosened long-standing restrictions on the foreign ownership of banks, thereby allowing financial globalization to advance on an unprecedented scale. BBVA’s investments in Latin America took place at a time when many Spanish companies and banks were developing business in the region (Guillén & Tschoegl, 2000). Spanish companies have spent billions of dollars over the years assembling empires in Latin America’s banking, power and telecom markets, and the BBVA has taken part in the process. Spanish companies alone invested an average of $10 billion a year in Latin America during the 1990s and in 2000 they invested about $20 billion. According to some studies (Latin Finance), the strategy also served to compensate the European companies for growth limits in their home turf, where most Spanish companies are too small to take on bigger competitors. Every major Spanish company with investments in the region did well in 2000, reflecting the strength of Brazilian and Mexican economies, Latin America’s most important markets. BBVA profits from Latin America grew 80 percent to $473 million in 2000. The group almost doubled its income from the region in 2001. BBVA assets in Latin America were valued at about $80 billion (Latin Finance, 2001, pp. 25–26) (Table 7.10). International expansion, however, is vulnerable to developmental contractions overseas, as argued by world-systems theorists (Arrighi & Silver, 1999). The economic performance for Latin America in 2001 was discouraging. Brazil and Mexico did not maintain their 2000 growth rates. Mexico, which grew an impressive 7 percent in 2000, slowed abruptly the following year as the United States economy came to a halt. Uncertainty deepened in Brazil, posting 4 percent growth in 2000, as the 2002 elections approached. Nearly every other country in Latin America, with the exception of Chile, was in recession or in the grips of political upheaval. Yet some analysts believed that Spanish companies, including BBVA, ultimately would succeed in the region because they had long-term investments that would become profitable for investors: “Latin America’s combined market of 450 million people helps offset the reliance of Spanish companies on Europe and its own population of just 40 million. And relatively few Latin Americans use banks. Brazil, for example has only 45 million bank accounts for a population of 169 million people. Only 15 percent of account holders have savings accounts, 16 percent own credit cards and 9 percent invest in mutual funds” (Latin Finance, 2001, pp. 25–26).


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Table 7.10: The presence of BBVA in Latin America, 2001. Countries

Value of loans (in USD million)

Market share (loans)

Value of deposits (in USD million)

Market share (deposits)

Argentina Brazil Chile Colombia Mexico Panama Peru Puerto Rico Venezuela Rest

8,600 2,400 2,800 1,500 19,000 890 1,800 3,300 2,600 79

6.2 1.4 5.7 6.8 26.2 6.3 15.3 9.4 16.7 5.7

7,800 2,100 2,700 1,300 48,000 500 2,900 3,000 4,200 110

8.5 1.3 5.3 7.1 28.1 5.0 20.2 8.5 16.2 4.9

Total

44,000

8.7

73,000

11.3

Source: BBVA Annual Report, 2001, and own elaboration.

The risk of doing business in Latin America remains substantial — within the past years the three main economies in the region have collapsed. In 1994, Mexico fell into crisis. In 1999, Brazil was forced to devalue the real (the local currency) by 30 percent and the Madrid stock exchange’s main index plunged more than 15 percent. Argentina first sank into recession in 1999 and three years later was in the midst of a payments crisis, which spread to other Latin American countries. This volatility, indeed, damages banks more than most companies. Banks are among the first and hardest hit by decelerations of growth and changes in regulatory frameworks. For this reason, BBVA seems to play cautiously, with Latin America accounting for 20 percent of its profits. BBVA has a strong presence in Mexico. The Bank’s interest in the country is powerfully indicated by its takeover of Mexico’s Bancomer in 2000. After the takeover, Mexico represents 41 percent of BBVA’s assets in Latin America and 12 percent for the group as a whole. The takeover exemplified Basque and Spanish power abroad, and as such was not well received by Mexican public opinion in a country new to transnational banking operations. Initially, nationalist sentiment against the deal intensified, but the Mexican bank forced a final offer from BBVA that exceeded its initial plans, and criticism diminished. In the end, the Spanish bank offered more than double the $1.2 billion initially proposed. According to analysts (Latin Finance, 2000), BBVA held a controlling 32.2 percent stake and management control of what has become Latin America’s biggest bank after the deal, with deposits of $29.3 billion. The day after the Bancomer board announced its decision, the Mexican government approved the deal, citing “the intensification of competition” as a key reason. For some analysts, the operation meant that Mexico sent a message to foreign investors that they could invest without interference. The outcome of the Bancomer battle certainly showed how attitudes to foreign investment had changed in Mexico. Neither the governing Revolutionary Institutional Party or Mexico’s other


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parties caught up in campaigning for the July 2000 presidential elections made the struggle for Bancomer a political issue. Neither did BBVA executives appear particularly worried about the risk of economic crisis following the elections. The markets seemed confident that President Ernesto Zedillo’s economic reforms would enable Mexico to prevent any financial market instability from spiraling out of control. For BBVA, the acquisition of Bancomer represented a triumph over its Spanish rival BSCH. The two banks battled for supremacy in Latin American banking (Latin Finance, 2000, pp. 48–50). BBVA and BSCH hold the most significant positions in Latin America of any foreign banks and both took a hit from the Argentine debt crisis that began in the fall of 2000. At first, it did not seem that the crisis would pose a serious threat to the banks, because their financial situation in the region was acceptable and because there were no fears that the crisis would spread to other countries. In fact, they did overcome the problem in 2002, when the initial recovery for Argentina was more clear. BBVA and BSCH lost 10 and 8 percent of their respective market value when the Argentine crisis broke. But this was far from the roughly 30 percent drop in share prices in the 1998 Latin American financial crisis. According to some analysts, Argentina accounted for 3 percent of BBVA’s total assets, whereas Chile and Brazil, the countries sustaining the strongest regional relationship with Argentina, accounted for another 1 and 2 percent, respectively. In the worst-case scenario, a major crisis would have only affected 6 percent of BBVA’s assets. Disappointing profits from the Bank’s overall Latin American operations proved more distressing, however, causing the Bank to reconsider investments over the past several years. The contribution of BBVA’s Latin American banks was negative up to 2000 (Euromoney, 2000, pp. 12–13), although since then it has increased its participation in the overall business of BBVA, totaling 49 percent of all revenue in 2005 (El Pais, 2005). In any case, we must ask whether the international banking expansion continues an old pattern or represents a new trend. Certainly, the range and scale of international involvement represents a change in the order of magnitude of internationalization. Financial globalization as such, however, is as old as the need for financing the export business.

Conclusions It is still uncertain what the future will bring for the Bilbao metropolitan area in terms of industrial production (which now seems to develop in semi-rural areas in the province of Bizkaia), because the dismantling that took place during the crisis of the Fordist model was significant and the jobs lost have not yet been fully recovered. However, if we take the Basque Country as a whole, the past 15 years have been a story of industrial success for the region, which has made a dramatic comeback. The fiscal autonomy that Basques enjoy allows them to set their policy priorities, and the Basque government has chosen to invest heavily in an innovative industrial policy, with high investment in Research and Development (that doubles the average for Spain), intense professional training, and good use of the region’s traditional industrial capacity. Our approach to Basque global commodity chains (Gereffi & Korzeniewicz, 1994) shows that the Basque Country’s export drive is one of the highest in the Western world. If measured as a percentage of the Basque GDP, exports during the 1990s represented 28.9 percent. This figure placed the


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Basque Country above Germany (a high export economy) and also above the average for Spain. In the European Union as a whole, the value of exports as a percentage of the GDP is close to 20 percent, a figure that doubles the rate for the United States and Japan. About 10 percent of the value of all Spanish exports originate in the Basque Country, which has only 5 percent of the population of Spain. Whereas exports from the Bilbao area are lagging behind the region (it exports less in value today, and as a percentage of regional exports than at the beginning of the 1990s), the city maintains its status as the primary destination of import products going to the Basque Country, due to the importance of its port as a global node. The Bilbao port restructuring project is not only perceived as a major feature of the overall revitalization plan for the city, but also a necessity due to the growth of global trade flows (most of which are by sea) and increased competition from Mediterranean ports, which are becoming a viable alternative to Atlantic ports. The Port of Bilbao (30 million tons of traffic in 2001, 8 million loaded) represents a very small percentage of world seaborne trade (about 0.1 percent), although it reaches 146 countries. Nevertheless, Bilbao’s port contributes to globalization as a node in a global network of flows. In addition to regional trade flows in the form of exports and imports, which represent Basque presence in international markets, Bilbao is a primary link between Spanish markets and the world economy. Together with Bilbao’s global Bank (BBVA), the port is a major player in the historical process of globalization in the city. Since industrialization in the nineteenth century, the financial services sector has been one of Bizkaia’s strengths. Most of Spain’s largest banks and the country’s second-largest stock exchange were founded there. Spain’s second bank, BBVA, is the product of a merger in 1988 between the Bilbao-based Banco de Bizkaia and Banco de Bilbao, which in 2000 acquired the third-largest bank, Argentaria, thus consolidating its assets and market share and securing national leadership. Owing to its origin in Bilbao, the BBVA has an important presence in the Basque Country. The bank’s participation in basic financial activities, through deposits and loans, represents half of the Basque banking system. The banking industry flourished in Bilbao, where its primary role was financing the local industrial revolution, trade with the Latin American colonies and in particular with the United Kingdom, whose navy was supplied with Basque iron and timber. The bank’s activity naturally followed these structural changes, if only broadly. The first foreign activity of the Bank of Bilbao dates back to 1902, when the bank opened a new office in Paris. The second office abroad, in London, opened in 1917. The bank’s “globalization”, therefore, predated the post-1973 period and followed the penetration of the Spanish economy in international markets and varying degrees of protectionism in Spanish economic policy throughout the years. The Banco de Bilbao “globalized” early in the twentieth century, providing important financial support to the export business and to foreign clients. Its presence in international markets was more pronounced in the years between 1922 and 1940 than during the 1940s and 1950s, following the cycles of expansion of the Spanish economy and the political climate in Spain. Nevertheless, at the end of Franco’s dictatorship in 1975, and especially during the 1990s, the Bank expanded solidly beyond the Spanish borders with direct investments in Europe and Latin America. At this juncture, the Bank’s evolution abroad closely follows the economic interests of the Basque Country and Spain in the world economy. Globalization usually describes trends perceived to be dramatically and relentlessly increasing connections and communications among people regardless of nationality and


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geography. Globalization affects markets of four kinds: (i) commodities ⫽ through global trade; (ii) labor ⫽ workers who produce goods and services; (iii) assets and debts ⫽ securities, bank loans and deposits, titles to land, and physical capital; and (iv) information. In this chapter, we have surveyed markets of the first and third types, and have discussed the potential of local port infrastructure to support Basque global markets of the first type. Trades of financial assets are the easiest to globalize. Nothing is involved beyond exchanging pieces of paper or making entries in electronic ledgers. The communications revolution makes transactions easy, fast, and cheap. No movements of physical goods or of people are involved. No frontiers have to be crossed. The only barriers are national regulations. As these have been liberalized in country after country, international financial flows have flooded into national securities markets and banking systems all over the world. As Tobin (1998) comments: These flows could be the vehicles by which savings in the advanced capitalist democracies are channeled into productive capital investments in the developing countries of Asia, Africa, and Latin America. Or they could be causes of currency crises, recessions and depressions, unemployment and deprivation in those countries. Or both. Despite the apparent pace of recent financial globalization and its spectacular technological support, it is in fact nothing new — as seen in the global activities of BBVA. “Much of what goes under ‘globalization’ has in fact been a recurrent tendency of world capitalism since early-modern times. This recurrence makes the dynamics and likely outcome(s) of present transformations more predictable than they would be if globalization were as novel a phenomenon as many observers think” (Arrighi, 1997). Finance was much more completely internationalized in the nineteenth century, particularly the period 1870–1914, the heyday of the gold standard — and a period of rapid globalization for the city of Bilbao. There were virtually no restrictions on international financial transactions. Submarine telegraph cables from the 1860s onwards connected inter-continental markets. They made possible day-to-day trading and price-making across thousands of miles, a far greater innovation than the advent of electronic trading today. “Chicago and London, Melbourne and Manchester were linked in close to real time. Bond markets also became closely interconnected, and large-scale international lending — both portfolio and direct investment — grew rapidly during this period” (Hirst, 1996, p. 3). Indeed, (FDI) grew so rapidly that in 1913 it amounted to over 9 percent of world output — a proportion still unsurpassed in the early 1990s (Bairoch & Kozul-Wright, 1996, p. 10). Similarly, the openness to foreign trade — as measured by imports and exports combined as a proportion of GDP — was not markedly greater in 1993 than in 1913 for all major capitalist countries except the United States (Hirst, 1996, pp. 3–4). As Tobin (1998) comments: Taking into account the new national participants in world financial markets, the pre-1914 degree of liberalization has not yet been restored and, more important, transfers of saving from developed to developing economies are still, relative to the size of the world economy, much smaller than at the beginning of the twentieth century.


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To be sure, the most spectacular expansion of the last two decades, and the strongest piece of evidence in the armory of advocates of the globalization thesis, has not been in FDI or world trade but in world financial markets. “Since 1980” — notes Saskia Sassen — “… the total value of financial assets has increased two and a half times faster than aggregate GDP of all rich industrial economies. And the volume of trading in currencies, bonds and equities has increased five times faster”. The first to “globalize” and today “the biggest and in many ways the only true global market” is the foreign exchange market: “Foreign exchange transactions were ten times larger than world trade in 1983; only ten years later, in 1992, they were sixty times larger” (Sassen, 1996, p. 40). In the absence of this explosive growth in world financial markets, we would probably not be speaking of globalization, and certainly not as a departure from the ongoing process of world-market reconstruction launched under US hegemony in the wake of the Second World War. The idea of globalization was from the start intertwined with the idea of intense interstate competition for increasingly volatile capital and a consequent tighter subordination of most States to the dictates of capitalist agencies. “Nevertheless, it is precisely in this respect that present tendencies are most reminiscent of the belle epoque of world capitalism of the late nineteenth and early twentieth centuries” (Arrighi, 1997). As Sassen herself acknowledges: In many ways the international financial market from the late 1800s to World War I was as massive as today’s ... The extent of the internationalization can be seen in the fact that in 1920, for example, Moody’s rated bonds issued by about fifty governments to raise money in the U.S. capital markets. The Depression brought on a radical decline in this internationalization, and it was only very recently that Moody’s once again rated the bonds of as many governments. (Sassen, 1996, pp. 42–43) In short, careful advocates of the globalization thesis concur with critics in seing present transformations as not novel except for their scale, scope, and complexity. In fact, it has been a main thesis of this book that the peculiarities of the current globalizing wave are best observed and interpreted in historical perspective — indeed as political and economic pathways to globalization through which the present transformations can be fully appreciated.


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Chapter 8

Basque Pathways to Globalization

This book has examined the relationships between the city of Bilbao and globalization processes over time. Globalization has revealed itself as a cyclical feature in the city’s urban development. The analysis, in addition, has revealed that, because global forces interact with national, regional, and local forces to produce specific outcomes, one cannot focus exclusively on global forces in order to explain a city’s fortunes. Finally, after our journey into Bilbao’s development, one cannot assert that globalization is exclusively an economic or financial process affecting all cities similarly, because global forces have an extraordinarily important political component, which often obeys national and subnational circumstances. This chapter returns to the four key questions structuring the research in the light of the evidence presented. First, it briefly surveys Bilbao’s comparative advantage and the city’s articulation with the world economy. Second, it examines the role of State developmentalism in the globalizing process. Third, it advances some propositions regarding the current role of Bilbao in the context of the Basque region’s economy. Fourth, it offers an explanation of globalization as it develops from our research on Bilbao and emphasizes this book’s contribution to current research on global cities.

Bilbao’s Comparative Advantage Bilbao’s comparative advantage is based on long historical processes of deployment of transnational networks of exchange (goods, services, capital, information) across time and space, which have made Bilbao into a city linked to global circuits. • First, the city has been an important node in transnational trade networks (wool, iron, and codfish) since its foundation in 1300, linking Iberian markets with European and American ports. Its geographic position on a navigable estuary, which became the city’s port, and the city’s geostrategic position en route between Castile and the European countries made the city into an important node in European trade. Recent research (Grafe, 2001a, 2001b) suggests in addition that the regional economy of northern Spain was gradually integrated into a wide transatlantic network of trade, which included England and the Newfoundland territories in America between approximately 1620 and 1650. Basque traders, shipbuilders, and owners as well as the commercial ports on the Basque coast played a key role in this shift from local dependency from northern Castile to a more autonomous role in global commerce.


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• Second, the process of industrialization of the city in the late nineteenth century was fueled by exports of iron, particularly to Great Britain. The mining business and extraction of iron ore for export became the origin of Bilbao’s industrialization and it allowed the formation of a local business elite independent of foreign capital, unlike in other cases of export-led industrialization. Bilbao’s industrialization happened in a period of rapid globalization of North Atlantic economies, between 1880 and 1914, and the city participated in that process (Glas, 1997). • Third, the city has been home to an important financial sector since the 1860s, a sector which became associated with the rapid industrialization and expansion of the cityregion and a sector that then globalized early in the twentieth century. The best example of financial globalization in Bilbao is the BBVA bank, which shows us that financial globalization is not exactly new. • Fourth, Bilbao has always been a port city, and the importance of its port for global trade cannot be overstated. The export trade of Spain was channeled through the port of Bilbao and today the port serves as a link of large segments of the Spanish economy to European and other ports. Bilbao port trade happens today with about 145 countries. Bilbao’s port compares well in terms of imports and exports with the ports in huge global cities such as New York, Chicago, and Los Angeles, although it has lost ground in recent years within the Spanish port system. Yet, Bilbao is about half of the trade in New York ports, about the same as LA, and six times that of Chicago, with a population (one million) several times smaller than that of these cities (Chapter 7). • Fifth, the city’s geographic position in the North Atlantic economy, the most globalized region in the world, has always benefited Bilbao’s globalizing status and the networks of exchange between Bilbao and its business partners. Bilbao has always closely followed the globalizing and deglobalizing trends of this region of the world, whether in the sixteenth century, at the end of the nineteenth century, or in the current period. Structural position in the world-system, and interregional changes in balance of economic power due to Spain’s global expansion starting in the sixteenth century also affected Bilbao’s local development. The city both contributed to Spain’s trade with America and experienced relative decline because of it, since other Spanish ports channeled most of the trade, and Bilbao’s hegemony in the trade with Europe began to play a secondary role in Spain’s political economy. • Sixth, the gradual consolidation of a Spanish national market and severe competition from abroad led the Bilbao business elite to seek protection from the State in order to maintain production during the Fordist period (Glas, 1997). • Seventh, the current process of trade liberalization within the European Union has magnified the globalizing status of Bilbao and the Basque region as a manufacturing powerhouse with an important export business to Europe, and has allowed the development of several Basque companies into truly global companies. • Eighth, Bilbao is closer to Seoul or Tokyo (and its European counterparts) than to New York and London in the ways it is linked to the global economy. The global economy is spatially embedded in Bilbao, to be sure, despite the fact that Bilbao is not primarily a global basing point for the operations of transnational corporations. Rather, Bilbao is a nodal point for linking portions of the Spanish economy and the Basque economy to many regions in the world, just as it has been since its foundation.


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The local “growth machine” had already manifested itself in the fifteenth century, primarily because commercial preservation and economic development became sine qua non for Bilbao, due to its poor agriculture and scarce food resources. Such a growth machine coalesced around powerful local merchants and the political elite in a strong local government that promoted economic development based on the local commercial privileges established in the fueros. An alternative explanation is that such commonality of local interests sought the preservation of local commercial franchises to trade freely with the world and the integration into the Spanish market with protection from the State. This varying arrangement of forces, responding, essentially, to the configuration of world markets and the economic requirements of local commercial bourgeoisie, establishes the changing “globalizing” character of Bilbao throughout the centuries.

Bilbao’s Pathways to Globalization Globalization is not a new phenomenon in Bilbao. All recent Basque efforts at internationalization have historical precedents. Basque economic internationalization can be observed in the sixteenth and seventeenth centuries and then again in the period 1880–1936. Basque political globalization, clearly expressed in the Guggenheim project, also occurred before 1936 through the coordinated foreign action by the Basque Nationalist Party and then during the Second Republic (1931–1939) by the Basque government (Ugalde, 1997, 1999), although never with the public visibility that the museum’s operation has had in recent years. The two other processes examined in this book, namely, urban restructuring and revitalization, offer mixed evidence regarding globalization. Urban restructuring, although initially triggered by forces at the global level, was mediated by policies and political responses at both the regional and national levels, and these influenced the outcome of the restructuring process. Revitalization (the Abandoibarra megaproject) has been portrayed as a globalization effort to reposition Bilbao in the context of world cities, but with almost non-existing foreign investment it has not become a global process, and it remains a project of local, or at best regional, reach. Bilbao’s globalization may, however, have extended its reach during the most recent cycle, as shown by the impact of the foreign investments of Bilbao’s global bank. As we have seen, the financial globalization of the BBVA had reached unprecedented levels during the 1990s, with a solid expansion into Latin American markets and attempts at consolidation within Europe. Similarly, the projects to enlarge Bilbao’s port show the city’s unequivocal intention to be incorporated into the growing flows of maritime trade. The significance of the BBVA headquartering in Bilbao can be observed in the fact that, should the Basque government go ahead with its political emancipation projects, the Spanish government might be putting pressure on the bank’s management to relocate their headquarters to Madrid. Economic and political globalizations are, therefore, intertwined in the case of Bilbao, reenacting the tension regional–national. Structural adjustments in the local economy initially triggered by global forces, but mediated at the regional and national levels, and the long-standing political tension between the Basque region and the Spanish State, shape Bilbao’s current urban developments. On the one hand, Bilbao remains a key node connecting large segments of the


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Spanish economy with the world via its port, which is managed by agencies owned by the Spanish government. On the other, Bilbao’s industrial base has become increasingly interwoven with the regional economy, and the city is no longer the only industrial center of the Basque Country — although it remains the largest one and also the economic capital of the region. The Basque government places Bilbao at the core of its economic and political agendas, and thus the path from urban restructuring to regional geopolitics is marked by the standing tension between the regional and the national governments regarding control of urban policies and facilities. In this context, deliberate globalizing strategies implemented at the regional level by Europe’s only fiscally independent regional government constitute a show of political power vis-à-vis Madrid. The current phase of Basque globalization can be explained through three main factors — the new openness of the Spanish economy in the context of the European Union; the results of Basque regional policies promoting internationalization of companies, and a favorable currency exchange rate. As a structural component, the first factor is the most important one, because it has triggered a significant increase in the Basque figures of foreign trade (Basque foreign trade has tripled since 1994), and has motivated a changing geography of trade itself, from Spain as a main trading partner of the Basque Country, to the European Union. Membership of the European Union has also reactivated the Basque industrial base. Without a doubt, the process of integration into the then European Community in 1986 and then the overall process of building the Common Market and the Monetary Union have changed the entrepreneurial map of Europe, generating a more specialized industrial tissue within regions and an increase in business-to-business relationships, which, after all, was the main objective of the Common Market. Regarding public policies, it is evident that both Spain and the Basque Country maintain an active strategy for the internationalization of companies. In the case of Spain through the ICEX (Instituto de Comercio Exterior, or Foreign Trade Institute) and the Ministry of Industry, and in the Basque case through SPRI (Sociedad para la Promocióny la Reconversión Industrial, or Society for Industrial Promotion and Restructuring) (see Chapter 5). Political officials usually portray relative success of internationalization strategies through an indicator measuring the number of companies going global with the assistance of public programs funded by the government and the various chambers of commerce. In the Basque case, internationalization has occurred rapidly, and the degree of openness of the Basque economy is now significantly higher than that of Spain as a whole. In addition, it is important to take into account that success in exporting strategies for the Basque Country has depended significantly on the rate of currency exchange between Spain and the various European countries. High rates of exchange and sustained appreciation of the peseta in international currency markets toward the end of 1980s and beginning of 1990s became a liability for Basque companies. Additionally, the relative stagnation of the Spanish economy during those years, in the context of a worldwide recession, deeply affected the Basque Country’s economic performance. On the contrary, recent changes effected in Europe en route to the building of the common market and the monetary union, and finally the creation of the common currency, have been beneficial to Basque companies. The long and positive economic cycle on an international level starting in 1993 has also contributed a great deal.


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There is a Spanish context for the Basque economic rebound since 1994. Basque internationalization has occurred within the context of an increasing internationalization of the Spanish economy as a whole. Spain’s international economic profile has grown appreciably in recent years. It is now the world’s sixteenth largest exporting country. Major export items include motor vehicles, machinery, chemicals, base metals and their manufactures, vegetable products, plastic materials, and textiles. Major import items include machinery, electrical equipment, motor vehicles, chemical products, mineral fuels and petroleum products, and base metals and their manufactures. Spain traditionally runs a large deficit in its balance of trade. In 2001, the EU accounted for almost 70 percent of Spain’s exports and some 65 percent of its imports. Unlike the Basque Country’s relative poor performance in this division, Spanish foreign direct investment (FDI) grew strongly from the mid-1990s with the Spanish economy becoming a net exporter of capital in 1996. Spanish FDI reached a high of 58 billion euros (US$53 billion) in 2000, when Spain was ranked as the world’s sixth largest capital exporting country, but fell to 29.3 billion euros (US$26 billion) in 2001 as the foreign investment climate deteriorated. Much of the growth in Spanish investment abroad in the past decade is due to an aggressive expansion into Latin America by larger Spanish companies (see Chapter 6), although that has now slowed. The origin of this expansion is State-led policies of protection of “national champions” in the face of foreign competition. The Spanish economy experienced a period of slower growth, also reflected in the Basque economy, as a result of the general slowdown of the European and US economies between 2001 and 2004. GDP growth was expected to be around 2.0 percent in 2002, increasing to around 2.7 percent in 2003. Spain’s main long-term economic challenge has been the high rate of unemployment, which reached 22 percent in 1996. This has been coming down steadily and stood at around 9.5 percent in 2005. The rate of inflation, almost doubling that of the EU-15, was almost 4 percent in 2005. The Government’s budget deficit has fallen from 5 percent of GDP in 1996 to the first surplus of the young democracy in 2005.

Political Globalization Economic performance is not the only way to measure efforts at globalization on the part of Basque authorities. In Bilbao, restructuring came at the same time as another domestic political process not directly linked with globalization: the devolution of political power to the regions and the organization of a de facto federal State in Spain. So, whereas the traditional ties of the city’s economy with national development (steel and shipbuilding sectors) vanished, a new set of regulating forces appeared at the regional level. Globalization acquires a more profound and far reaching meaning in the Basque case because it provides the political opportunity structure for, and thus it becomes a regional political strategy of, emancipation from Spain. Globalization is embraced by Basque political leaders as a process by which the Basque Country can be linked to the world, possibly without Spain’s patronage and mediation. The best-known example of such a strategy is the Guggenheim project (see Chapter 7). The Guggenheim operation is clearly a globalizing strategy because a main purpose of it was to establish a link and a flow with an


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international partner and to raise the threshold of global visibility for the Basque region as a whole. In addition, the Guggenheim project is a political strategy by which nationalist elites in an aspiring independent region reaffirms itself in an increasingly important field such as cultural politics. The Guggenheim project, however, is not an isolated case of Basque attempts at political globalization as a means toward emancipation from Spain. A most recent and conspicuous example is the proposal by the Lehendakari, or President of the Basque Government, to modify the status of political relationships between the Basque Country and Spain, by suggesting a new mode of Basque association with the Spanish State. This so-called plan para la convivencia (plan for living together) was first proposed in the Fall of 2002, and triggered fierce criticism on the part of Spanish politicians and commentators. The plan was formally approved by a majority in the Basque Parliament in December 2004 and rejected in the Spanish parliament in February 2005. The plan proposes the possibility of free association of the Basque Country within the Spanish State. It is not, therefore, a plan for rupture with the State, but one that aims at the recognition of full Basque political identity and the development of the mechanisms to execute self-government within the context of global capitalism, including an additional set of powers that the regional government does not yet have. The plan’s ideological underpinnings are to be found in the so-called New Regionalism. In fact, Basque President Juan José Ibarretxe has cited Edward Soja’s presentation in Bilbao, and even Manuel Castells’s ideas, to suggest that “we live in a regionalized world on multiple levels [in which] the centralized governments of traditional European states no longer have a monopoly on power and decisionmaking. Rather, political power is shared among various levels and through interconnected networks” (Ibarretxe, 2002). Not surprisingly, Ibarretxe cited the Guggenheim project as one major and well-known example of the Basque outlook on global matters. As of the beginning of 2006, the plan para la convivencia has been superseded by political events, in particular the results of Basque elections in the Spring of 2005, which did not give Basque nationalists a mandate to continue with the plan. Political events in the Basque Country in mid-2006 were marked by the consequences of ETA’s “permanent” cease fire (declared in March 2006), which led the Spanish socialist government of José Luis Rodríguez Zapatero to initiate a process of dialogue with the terrorist organization aimed at ending four decades of violence in the Basque Country.

State Developmentalism and Globalization Basque globalization has more often than not been driven and mediated by the State, be it the regional State, the national State, or both. State policies have throughout history favored (or inhibited) the Basque actors’ moves toward globalization or de-globalization. Periods of globalization in the Basque case, therefore, are not exclusively a consequence of technological improvements in communication and transportation technologies and a resulting “time-space compression” (Harvey, 1990) of varied nature and extent throughout history, but also, and clearly, a consequence of well-defined State policies. In the first place, Bilbao was promoted as an international city when chartered by the King of Castile to be a node in trade between Castile and the world. The disputes about


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Bilbao as a free-trade zone and the contentions about the location of the customs offices, up to the nineteenth century, reflect an increased concern for centralization on the part of the Spanish State (Chapter 2). These disputes greatly contributed to shape the changing role of Bilbao in transnational economics and as a free-trade city. Similarly, the interlinks between business and politics during the nineteenth century (Chapter 3) show how Basque industrialists benefited from State policies, seeking State protection and export subsidies, and thus adapting their production and distribution channels accordingly. In addition, national policies of industrial restructuring always protected national champions throughout the twentieth century, even during the 1980s crisis, although Bilbao’s basic industry disappeared due to global structural developments that went beyond the reach and control of domestic policies and politics (Chapter 4). Moreover, the regional State via significant public investment is behind the Guggenheim project (Chapter 6), while generally the overall revitalization plan for the city is subsidized with public funds (Chapter 5). Lastly, Basque support to internationalization of companies is an example of active State policies at the regional level (Chapter 7). These distinctive characteristics of Basque globalization suggest that globalists focusing on transnational corporations (Sklair, 1998, 1999) and the role of information technology (Castells, 1985, 1989, 1996a, 1996b, 1998) and finance (Sassen, 1991, 1994, 1996, 1998, 1999a, 1999b, 2000a, 2000b, 2002a, 2002b) have not paid sufficient attention to the modes of intervention and regulatory practices exerted by States in the global economy (Agnew, 2002). Whether States’ regulatory practices contribute to the ordering of the global economy out of seeming chaos is hard to tell and is not tested here. However, States do help local economies to position themselves in a context of self-protection against external forces. Globalization becomes mediated at the national and local–regional levels, with variable effects on individual “global” cities. A growing literature on this subject documents this influence (Boyer & Drache, 1996; Brenner, MacLeod, & Jones, 2002; Dieleman & Hamnett, 1994; Hamnett, 1996; Keil, 1998b; Panitch, 1998; Smith, Solinger, & Topik, 1999; Taylor, 2000; Weiss, 1998b; Yeung & Olds, 2001). The case of Bilbao is particularly relevant in this context. Centralization, deregulation, autarchy, privatization have been the main structural moves of the Spanish State throughout history. These variations have significantly generated cycles in Bilbao’s economy and its global positioning. Global processes materialize in national territories and how nation-states and even regions regulate globalization, or actively participate in it, thereby transforms the process. The Basque government has contributed to globalizing tendencies in the Basque economy. In Bilbao, the revitalization plan is funded with public money — although the creation of Bilbao Ria 2000 represents an attempt to privatize planning and maximize returns from the sale of land without incurring in major public expenses and debt. Similarly, the Guggenheim project was funded by the Basque government at zero cost to the Guggenheim Foundation. The Basque government will also fund the approximately $10 million deficit per year. State-led globalization strategies can also be observed in the implementation of a comprehensive plan for infrastructure renewal and, most prominently, the active support of Basque regional agencies to the internationalization of Basque companies. Basque foreign presence, in general, is supported and funded by the Basque government as a deliberate strategy of economic and political visibility abroad.


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The role of State, regional, and local policy is also visible in processes of spatial polarization (Hamnett, 1994, 1996; Moulaert, Rodríguez, & Swyngedouw, 2001; Marcuse, 1989, 1993, 2001), which the initial wave of works on the global city too quickly attributed exclusively to globalization forces (Mollenkopf & Castells, 1991; Ross & Trachte, 1990; Sassen, 1991; Fainstein, Gordon, & Harloe, 1992). In the case of Bilbao, the metropolitan area’s original geographic bifurcation along the separate banks of the Nervión River decisively contributed to the area’s “dualization”. This trend has intensified with middle-class residences on the River’s Right Bank and factories and workers on the Left Bank. Although patterns of dualization were reinforced after restructuring took place during the 1980s, we cannot say, in the case of Bilbao, that globalization caused a new spatial order (Marcuse & van Kempen, 2000). Rather, urban policy failed to ease the existing urban polarization caused by industrial dismantling due to global restructuring in the steel and shipbuilding sectors. Let us not forget, then, that States continue to have a capacity to act independently in the face of globalization processes. Local, domestic politics matters to a degree, reinforcing the levels of analysis argument developed throughout this book. In fact, the Spanish case shows that States are not really “losing control” in the face of globalization processes. It has already been mentioned that the evolving relationships between the Basque region and the Spanish State show the viability/reality of one of the most economically and politically independent regions in Europe (not to say the world) within the context of a nation-state that, in recent years, has not reduced its international role (rather the opposite). Spain’s expanded role in Latin America could not have happened without a clearly defined State policy of protecting national industrial champions during the 1980s, which inhibited mergers and acquisitions with foreign companies and made possible Spain’s current world economic role. Contrary to Kenichi Ohmae’s (1995) argument, it is not always the case that regions rise because States shrink. The regional–national relationship is complicated and nuanced. It is not a zero sum game, but a more complex articulation of forces at both the regional and the national levels — one that it is not only economic but also political. In sum, States may gain global control even as regions gain it too (it depends on historical, political relationships between the region and the State), as has happened in a country such as Spain with great regional decentralization. Over the centuries, Basque developmentalism strategically approached the economy with the aim of building an industrial structure that would maximize Basque gains from international trade and export-led development. Recent changes to this approach appear to be only a matter of degree, not substance.

Post-industrial City or Emerging Global City-Region? Bilbao is not a “post-industrial” city in the making. More precisely, the Basque region is an industrial and emerging (“global”/globalizing?) city-region, with Bilbao as its economic and industrial capital. Despite severe employment losses in the 1980s, in 2002 manufacturing industry still employed 29 percent of the Basque Country’s active population as compared to 41 percent in 1985. In Metro Bilbao, that figure is 25 percent (38.9 in 1985).


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Between 1985 and 2002, the number of people working in the Basque Country increased from 656,400 to 894,500 — a 36 percent increase, despite the regional population having remained constant or even decreasing slightly. Most of these jobs have been created in the service sector (213,000), following a global trend toward tertiarization, but the interesting point is that in 2002 there were only 15,000 fewer jobs in manufacturing industry than in 1985 (253,800 versus 268,100), a decrease of only 5.3 percent. Restructuring not only meant de-industrialization, but also re-industrialization (see Graph 8.1). After the low point was reached in 1994, industrial employment recovered to almost the level it had enjoyed in 1985. In terms of value added, manufacturing still represents 30 percent of the Bizkaian output in 2001 (the provincial output in 2000 was about 21 billion dollars). “Manufacturing matters”, as the title of the 1987 book by Cohen and Zysman indicates — one can appropriately speak of the myth of a “post-industrial” economy — and this is clearly so for the Basque economy. What is new in historical terms is a redistribution and decentralization of manufacturing activities within the region. Industrial growth has occurred chiefly in the provinces of Gipuzkoa (32 percent employed in industry) and especially Araba (34 percent). In fact, Araba went from 38,500 to 47,000 industry workers during the period — a 22 percent increase — and Gipuzkoa went from 95,300 to 96,200 industry workers — a 0.9 percent increase. Bizkaia, however, has lost industrial jobs. It went from 134,200 in 1985 to 110,700 in 2002, an 18 percent decrease. The number of regional industrial jobs decreased almost steadily between 1985 and 1994, with only a small peak in 1989, the gain in industrial jobs occurring only since 1994. The year 2002 is the first since 1994 in which the

280

NUMBER OF JOBS, IN THOUSANDS

268.1 260.3 260

253.8 245.6

240

235

220

200

197.7

180 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Graph 8.1: Regional industrial jobs, 1985–2002. Source: EUSTAT.


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number of industrial jobs in the region decreased from the previous year. The trend in industrial job creation continued in 2005, when the unemployment rate in the Basque Country was 6.4 percent (whereas it was 8.7 percent for Spain as a whole). The period when Metro Bilbao was the only industrial area in the Basque country is over. In a trend that began in the 1960s (and therefore predates the 1980s restructuring), the region is becoming spatially reorganized as a poly-nucleated city-region of two million people with a high population density of 289 people per square kilometer. Its main urban center remains Bilbao, but less than half of the regional population now lives in that center. Commuting for work within the region is becoming more common — although travel time to the farthest workplace from anywhere in the region does not exceed 1 h and the communication infrastructure is very good. Some authors have termed this new regional organization of the Basque territory “Euskopolis” (Azúa, 2005). Nevertheless, the province of Bizkaia still contains 53.9 percent of the regional population and 43.5 percent of all regional industrial jobs in 2001. Metro Bilbao contains about a third of all regional industry. Bilbao has 41.5 percent of the regional population and 77.1 percent of the provincial population. Metropolitan Bilbao continues to be the largest industrial concentration in the Basque Country — despite its relative importance having diminished from the golden era of the first half of the twentieth century, when it was the only industrial area in the Basque region. The most industrial province in the Basque Country is no longer Bizkaia, but Araba, closely followed by Gipuzkoa. In Araba, industrial jobs (47,000) represent 16.41 percent of the provincial population, which totals 286,387 people. Gipuzkoa is home to 96,200 industrial jobs, or 14.2 percent of the provincial population, whereas Bizkaia’s 110,700 industrial workers represent only 9.8 percent of the province’s population. This is the first time in seven centuries of history that the Basque economy is no longer based on iron and shipbuilding. Despite the fact that the city of Bilbao lags behind the region in terms of economic performance (Chapter 7), the Basque region is reconfiguring as a compact territory with three main cities well linked by good communication infrastructure. Bilbao’s and the region’s industrial tradition remain strong, although the industrial base has diversified and reterritorialized. However, industrial clusters are widespread, and this probably makes the Basque Country a sort of “neomarshallian node” (Amin & Thrift, 1992) in an emerging global network of regions (Scott et al., 2002; Simmonds & Hack, 2000). In addition, the Basque region constitutes a unique example in Europe of a region able to run its own Treasury — a capability that enables the Basque Country to organize and fund public policy at the regional level. On the other hand, the new European political configuration with “network states”, as Manuel Castells has termed them (Castells, 1998, pp. 330–332), operating at various spatial scales, apparently favors the old Basque quest for political emancipation — or, at least, this is how local political leaders perceive it. In practice, the Basque region acts as a developmental State much in the manner of East Asian countries. A significant difference, however, is that the Basques are not a newly industrialized country, but rather a region with an old industrial tradition of centuries. Building a (global) city-region in the Basque Country has an extraordinary, and contentious, political dimension, not least because, unlike in some Asian cities (Singapore, Hong Kong, Kuala Lumpur, Shanghai), there is substantial opposition to the institutional will to construct the region as a reterritorialized national project. Ever since the devolution


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of powers granted by the Spanish democratic State in 1975, the Basque political elite (PNV) has redirected its efforts for greater political autonomy in the newly created, but still evidently “under construction”, European space. This is the case not only because the focus of economic policy at the regional level is convergence with Europe, but also because various political decisions are made to gain greater regional representation in Brussels, following the tradition of the foreign relations of the PNV before 1936. In the context of Basque “reterritorialization” (Brenner, 1998, 1999a, 1999b, 2001) — which in the region means competition with the nation-state for urban control — Bilbao’s centrality in the regional and national economies will likely become the subject of increased dispute. On the one hand, Bilbao is the economic capital of the Basque region, and regional political elites strive to mobilize their political capital to control the city. The Guggenheim project is the most outstanding development in this respect. On the other, Bilbao still serves its ancient function of linking large segments of the Spanish economy to the outside world (via its port), and key components of the Bilbao’s economy are regulated by the central government. The loss of an electoral base in the metropolitan area by the Spanish left, following industrial restructuring, has been accompanied by the rise of political efforts by the PNV to mobilize its nationalist base in the city. Despite the global visibility of the Guggenheim museum and its significance as a political strategy of globalization, the future of Basque Country’s and Bilbao’s international role depend on the power of its financial sector and the ability of the region to maintain its foreign trade accomplishments. In both cases, the Basque economy performs as a node linking Spain to the world, although the Basque region represents a powerful manufacturing production site as well. Basque exports to other countries have multiplied by a factor of three during the past eight years, underlining both the re-industrialization of the region and the globalizing tendencies favored by the common European market. The port of Bilbao functions as a redistribution locus for large segments of Spain’s manufacturing production as well as a major import site for foreign production. Finally, the Banco Bilbao Bizkaia Argentaria represents the power of the local financial industry, and its global expansion during the twentieth century serves as an example of the Basque Country’s and Spain’s financial strength as well as a reminder that globalization may not represent a radical break with past developments.

Globalization and the Case of Bilbao This book has shown the ways in which forces in the world-system have had an impact on the city of Bilbao, the ways in which these global forces have been mediated by regional and national factors, and the ways in which the city has tried to position herself to become global. The book, therefore, has developed an argument about the interplay among various “levels” of analysis — the scaling of the global — that are seen as necessary in order to explain Bilbao and globalization. Our theoretical argument about levels of analysis or scaling (Chapter 1) helps to deconstruct the globalization concept thereby providing a way to pin down the excessively abstract accounts of the process offered until now in the social sciences. From this perspective, globalization ought to be explained through a city’s specific trajectory, rather than vice versa, in order to understand the specific reach of global flows,


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whose impact always happens in the context of various structural process and differentiated territories. From this standpoint, and after identifying the main historical periods in Bilbao’s globalization, the following account of what is globalization can be offered: Globalization is not an entirely new process, although transnational financial strategies and the role of information technology may be strengthening its role in world economic processes at the turn of the twenty-first century. Rather, globalization appears to be a cyclical or spiral process, perhaps not irreversible, in which states’s positioning toward global forces depends on both the strength of globalizing tendencies and the national and regional political arrangements prevalent at any given time. One of the consequences of considering globalization a variable process is that it directs our attention to history, it suggests the value of understanding present processes in the light of past outcomes (Abu-Lughod, 1999; Arrighi & Goldfrank, 2000; Arrighi, 1999, 2000; Arrighi & Silver, 1999; Marcuse & van Kempen, 2000). Thus, global-city research intending to construct a geography of globally linked cities has to take into account previous geographies of linkages between nations and regions — recent work by Taylor suggests that New York and London are not exemplars but rather exceptions in a world of linked cities (Taylor, 2004), and a similar point is developed by Yeung and Olds (2001). If globalization is a historical process, and thus place and time specific, then we should give less weight to teleological explanations and grand narratives such as “time-space compression” and “the space of flows”, and be prepared to accept different outcomes of the process in different places and times. Another consequence of portraying globalization as a variable process is to allow us to consider whether and when the current cycle might end. At least two recent, but influential, arguments have been presented about the end of globalization as we are experiencing it. One of them, by Harold James (2001), shows how an earlier wave of globalization tendencies was disrupted by popular resentment against the hypermobility of capital flows, trade, and international migration during the Great Depression. The other argument, by Alan Rugman (2001), proposes regionalized strategies for business profit, suggesting that global strategies are simply a myth. The question about the end of globalization as we know it is, therefore, a legitimate one when the process is analyzed in historical perspective. Global analysis is not a zero sum game in which understanding the rise of international forces necessarily involves the neglect of attention to national and sub-national forces. Put differently, globalization is not the only one factor that can explain urban restructuring and economic development processes in cities, as Janet Abu-Lughod (1999) has suggested. On the contrary, Bilbao’s urban fortunes and the city’s international vocation have been variously constrained or facilitated by national and regional factors throughout the centuries. Globalization, therefore, is only one among many forces affecting Bilbao throughout history — Bob Jessop (2000) has argued that globalization “is just one face of a complex re-scaling of social processes which can be also interpreted from other scalar viewpoints, such as localization, regionalization or triadization” — although in recent local political and economic processes it has worked as a symbolic catalyst. A second major force affecting the city’s economic development has been the relationship between the regional economy and the Spanish State, a relationship that has greatly influenced the political map in the Basque Country since the industrialization of Bilbao in the late nineteenth century. The moves toward greater centralization on the part of the Spanish State, and the recent devolution of political and economic power to the Basque


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region, have reconfigured regional developments in several periods. One can say that not everything happening at the local level needs to be determined or greatly influenced by processes occurring in larger contexts. If globalization represents only a partial explanation of current processes in the world economy, then we could ask whether the recent wave has integrated the world to a qualitatively greater extent than it was integrated during earlier waves (Chase-Dunn, 1999). Globalization is a geopolitical process, in which, rather than losing control, States try to position themselves as potential global players. Their fate depends on the relative strength of national economies in the global context and also on positionality in such a global context. The cases of Spain and the Basque Country offer parallel examples of this global strategy. In the case of Spain, globalization of capital occurred based fundamentally on 1980s policies of protecting national champions in the face of increased deregulation and privatization. National champions in the financial and industrial sectors were thus able to avoid being absorbed by foreign companies and then, during the 1990s, could play an essential role in Spanish’s foreign investment, especially in Latin America. In the Basque case, regional geopolitics is in crescendo. Basque public investment has multiplied by a factor of eight since the 1980s and Basque support for the internationalization of companies is a key of regional economic policy. Basque geopolitics actively seeks more presence in the new European space and the international arena, at the expense of regional ties with Spain. The Guggenheim project and the recent Basque proposal of “free association” with the Spanish State are clear examples of this strategy. In both cases, local elite actors interpret globalization as development: in fact, as the next stage in modernization processes (Gereffi & Korzeniewicz, 1994; Gereffi, 1996). Implicitly there is the idea that globalization is an equalizing force, that as the world becomes more alike economically and culturally, all cities have a possibility to become global, that is, to become “central nodes” in a global network. Position in the global hierarchy makes a difference — but this assertion can only be tentative because a global and complex organizational architecture of the global economy linking cities around the world is not yet fully developed, although Taylor (2004) is an important step in this direction. Specifically, Bilbao is part of the North Atlantic economy, currently the most globalized region in the world — cross-border mergers and acquisitions, which dominate today’s global foreign direct investment, are highly concentrated in the North Atlantic economy and the OECD countries (Sassen, 2002a, 2002b, p. 10). Such positionality greatly affects Bilbao’s (and Spain’s) current moves toward globalization. If this interpretation of the Bilbao evidence is correct, and globalization is in fact a process in which States and State-related agencies play an important role, then one should be cautiously optimistic about prospects to govern globalization (see Held & McGrew, 2002; Nayyar, 2002). In any case, an architecture of global governance is, of course, yet to be developed, among other reasons because of nation-states’ resistance to relinquish power and authority over to international bodies — which, incidentally, constitutes additional evidence that globalization does not completely dismantle the power of States, as has been argued throughout this book. Globalization is a network of relations, structures, and territories, and flows and linkages ought to be discussed within their context of production. Globalization is not a linear and uniform process but contingent and complex and, although one can see similarities across time and space, the local outcomes may not be similar and homogeneous. One of the most


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fruitful ways to study globalization is to consider its occurrence in a specific place throughout history. In a clearly relational way, this analysis of Bilbao did not focus exclusively on any particular powerful institution or structure. Rather, it tried to capture the plurality of relations among various structures, institutions, and actors. Yet some actors, institutions, structures — and scales — are more significant than others: the city, the region, the nationstate, and the global economy. As a quintessential relational process, globalization acquires specific meaning when it is considered within such plurality of forces acting at various spatial scales. Globalization does not consist only of relations or flows among structures or territories. It also includes the ways structures are changed in the globalizing process, and the ways in which territories become embedded in such networks of relations. The approach followed in this book has been careful to distinguish between globalization as an outcome and globalization as a process — we have only been concerned with globalization as a process. When one speaks of a city being “global” (a established node in a selective group identified by researchers), then one is assuming globalization as an outcome; instead, when one speaks of a “globalizing” city, then one refers to globalization as a process featuring (i) the ways in which forces in the world-system have had an impact on the city, (ii) the ways in which these global forces have been mediated by regional and national factors, and (iii) the ways in which the city has tried to position herself to globalize. Whereas there is little agreement about what specific cities constitute the (in any case small) “global” group, one can more confidently assert that all cities in the world-system participate, in various degrees, in capitalist globalization and it is hoped that this book has convincingly shown the reader its most important features as observed in historical perspective. Globalization may have been prematurely overgeneralized in recent analysis of the global economy because few studies have surveyed in detail the circumstances of a specific place throughout history. Studying globalization through a specific place puts the process in perspective and in context, demonstrating how economic development, and more generally a place’s fortune, obey a complex array of forces of which globalization is only one (albeit important) part. The Basque region represents an intriguing case for study because the confluence of both political and economic factors in the region’s moves toward globalization characterizes the region’s current developments. Whether globalization will expand or retract in the coming years may challenge both Basque strategies of emancipation from Spain and the region’s approach to economic development. A downturn in the current phase of globalization may cause a significant reduction in Basque foreign trade flows, which will in turn affect investment and economic growth in the region, and a renewed interest on the part of regional economic elites to seek State alliances and effectively compete in more protected arenas. A relativization of the global city-regions argument leaves regional political leaders without a major ideological foundation to actively pursue a separate future in the world economy and politics. Yet globalization only explains one part of Basque developments, and therefore a globalization slowdown would only influence, not determine, future local outcomes. In this book, we have analyzed the political economy of globalizing Bilbao. Whether traveling the Basque pathways to globalization contributes to political conflict reduction in the city-region may well be the subject for future analysis.

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Name Index A & V, 102 Abadie cit., 130 Abalos cit., 81 Abando, 91, 95–96 Abandoibarra, 7, 75, 80–97, 109, 113, 120, 127, 138, 155 ABC online cit., 123 Aberasturi cit., 55 Abitare, 102 Abu–Lughod, Janet n., cit., 2, 10, 21, 136–137, 164 Acción Concertada, 53, 61 Aceralia, 66 Acería Compacta de Bizkaia (ACB), 69 Africa, 122, 137, 141–142, 151 Agencia de Desarrollo Económico y Empleo cit., 67 Agnew n., cit., 4, 159 Aguirreazkuenaga cit., 41, 45, 49 Alba n., cit., 14 Alberdi Larizgoitia cit., 71 Aldecoa cit., 18 Alderson n., cit., 4 Algeciras, 136 Alicante, 38 Alsdorf cit., 121 Altone, 39 Altos Hornos, 47, 52, 55, 64, 109 Altos Hornos de Bilbao, 47 Altos Hornos de Bizkaia, 47, 52, 55, 64, 109 Ametzola, 86 Amin, S. cit., 5, 18, 162 Amsterdam, 39 Ando, Tadao, 122, 124

Antwerp, 34, 138 Appadurai, A. cit., 112 Araba, 28, 63, 71, 108, 119, 133, 135, 161–162 Architectural Record, 122 Architecture, 1, 5, 8, 15, 97–98, 101–102, 109, 113–117, 122–127, 165 Ardanza, José Antonio, 106, 120 Areilza, 85 Areso, Ibon cit., 92 Argentina, 130, 141, 148–149 Arpal cit., 45 Arquitectura Viva, 102 Arrighi n., cit., 4, 22–23, 47, 147, 151–152, 164 Art and Antiques, 102 Art in America, 102 Art Newspaper, 102 Art Press, 102 Art Text, 102 Artforum, 102 ARTnews, 102 Arzalluz, Xabier, 106, 111 Asia, 12, 66, 122, 141–142, 151 Asociación de Comerciantes del Casco Viejo, 92 Astilleros del Nervión, 47 Astilleros Españoles, 66, 69 Astilleros Olaveaga, 81 Astragalo, 102 Asturias, 37, 39, 64 Asua Fundición, 69 Atlanta, 122 Atlantic Monthly, 122 Atlantic Ocean, 32, 142 Austin, 122


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Austria, 137 Ayuntamiento de Bilbao cit., 82–84, 91–92 Azkuna, Iñaki, 90, 105 Azpiazu Elorza cit., 34 Azúa, 162 Babcok Wilcox, 52 Bagnasco cit., 24 Bairoch cit., 151 Baltic, 32, 139, 141 Banco Bilbao Bizkaia Argentaria, 8, 127,141, 163 Banco Central, 142 Banco de Bilbao, 45–46, 48–49, 54–55, 141, 143–146, 150 Banco del Comercio, 48, 142 Banco Hispano Americano, 142 Banco Santander Central Hispano, 147 Banco Santander, 142, 147 Bancomer, 148–149 Banesto, 56 Baniotopoulou cit., 104, 114 Barakaldo, 28, 71–73, 85 Barcelona, 37–38, 44, 55, 68, 86, 96, 104, 136 Barkham cit., 34 Barnes cit., 18 Barrutia cit., 64, 66 Basas Fernández cit., 32, 44–45 Basque Country, 1–2, 7–8, 18–20, 24, 36, 40–41, 43, 45–46, 48–49, 51, 54–55, 58–64, 66–71, 74, 79–80, 90, 92, 104–112, 116, 118, 120–121, 125–126, 128–133, 135–136, 141–142, 144, 149–150, 156–158, 160–165 Basque Nationalist Party (PNV), 8, 66, 68, 87, 101, 104–107, 111, 120–121, 155, 163 Basque, 1–2, 6–8, 17–20, 24, 31–41, 43–72, 74, 79–81, 85, 87, 90, 92–93, 97, 101–118, 120–121, 125–137, 140–142, 144, 148–151, 153–166 Basurto Ferro cit., 45 Basurto Larrañaga cit., 2, 32–34, 36–40 Battery Park City, 83, 113

Bauen and Wohnen, 102 Baum n., cit., 3 Baumeister, 103 Bayonne, 33, 38 Bazan–Lopes cit., 138 BBV Finance SPA, 146 Beatriz Plaza, 118 Beauregard cit., 5, 12, 81, 97 Beaux–Arts, 102 Beaverstock cit., 10 Belgium, 39–40, 137, 141 Bell, J. cit., 115 Bellevue, 122 Benz cit., 19 Berger cit., 112 Bergman cit., 19 Berry, B. cit., 14 Bessemer method, 47 Bianchini cit., 104 Bilbao Bizkaia Sociedad de Inversiones, 146 Bilbao cit., 1–9, 11–12, 14–15, 18–21, 23–25, 28, 31–75, 79–98, 101–128, 131–146, 149–151, 153–160, 162–166 Bilbao International Bank Ltd., 145 Bilbao Metropoli–30 cit., 83 Bilbao Ria 2000 cit., 81, 84–85, 87–88, 97, 159 Biscay, 33, 97 Bizkaia, 8, 28, 31–33, 36, 38, 41, 44–57, 61–64, 69–71, 85, 94, 96, 108–109, 119, 127, 132, 141, 146, 149–150, 161–162 Blackwell Encyclopedia of Industrial Archaeology, 70 Blockmans n., cit., 4 Blueprint, 83, 102 Bluestone cit., 63 Bordeaux, 33, 38–39, 82 Borja cit., 12 Bornschier n., cit., 4 Bo–Sin Tang n., cit., 3 Boston, 110, 122 Boyer cit., 4, 159 Braudel n., cit., 4, 22, 33 Brazil, 61–62, 122, 130, 141, 147–149 Brenner cit., 4, 9, 13, 24, 81, 159, 163


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Name Index Brewer n., cit., 4 Bridgestone, 131 Bristol, 39 Britain, 6, 38–39, 44, 46–47, 52, 56–58, 119, 127, 130–131, 139–141, 154 Brooklyn Bridge, 122 Bruges, 2, 31, 33–34 Brussels, 87, 132, 163 Budd cit., 24 Buenos Aires, 146 Bunnell, T. cit., 3, 24 Burgos, 31–32, 37, 39, 41 Burgos–Bruges axis, 31 Business Review, 111 Cádiz, 33, 37–38 Caicoya cit., 116 Caja Laboral Popular cit., 63 Calatrava, S., 90, 113, 124 California, 128 Calvo Serraller, F., 112 Cámara de Comercio de Bilbao, 69 Campo Volantín, 95 Canada, 119, 141 Cannes, 89, 96 Cantabrian, 32, 37–39 Caracas, 145 Caribbean, 38, 137, 141–142 Carlist wars, 44 Caro Baroja, J. cit., 39 Cartagena, 38–39 Casabella, 102 Casco Viejo, 92, 96 Castells, M. cit., 9, 12–13, 17, 20, 127, 158–160, 162 Castile, 2, 6, 31–32, 35–37, 39–41, 45, 103, 127–128, 141, 153, 158 Catalonia, 41, 54, 128 Cataluña, 119 CATIA, 116 Cava cit., 48 Celaya Shipbuilding, 69 Cenicacelaya cit., 87 Central America, 141–142 Chadoin cit., 94

209

Chagall, 110 Chapa cit., 48 Charlie cit., 19 Chartres cathedral, 114 Chase–Dunn n., cit., 4, 20, 23, 165 Chase Manhattan, 131, 142 Chaunu cit., 34 Chen n., cit., 4 Chicago Tribune, 124 Chicago, 3, 21, 124, 130, 136–137, 151, 154 Childs, 32 Chile, 130, 141, 147–149 Chillida, E., 112 China, 130, 141 Chiu cit., 24 Chua cit., 24 Cincinnati, 122 City, 1–8, 10–21, 23–25, 31–37, 39–45, 51, 54, 56, 58–59, 62, 64, 70–71, 74–75, 79–87, 89–93, 95, 97–98, 101–111, 113–118, 120–127, 132–133, 135–136, 138–139, 141–142, 145, 150–151, 153–160, 162–164, 166 Ciudadanos por Abandoibarra, 88, 91–93 Clemente cit., 54 Clout cit., 24 Cochrane n., cit, 3 Coe n., cit, 4, 14 Cohen cit., 24, 161 Coleman, Peter, 2, 20, 22, 88–89, 93, 98, 123 Colombia, 130, 148 Concierto Económico, 49, 132 Connaissance des Arts, 102 Construcciones y Auxiliar de Ferrocarriles (CAF), 130 Coop-Himmelblau, 109 Cork, 39 Corporación Siderúrgica Integral, 66 Costa Morata cit., 53 Cousins, Jim, 123 Cox cit., 5, 12 Crónica de una seducción, 106, 112


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Croquis, 102 Cuba, 130, 141 Czech Republic, 130 Daimler Chrysler, 131 Dardel cit., 38 David cit., 19, 127 Davis n., cit., 4, 11–13, 34 Dawson cit., 24 de la Puerta cit., 44 De Vries n., cit., 4 Deas cit., 85 Denmark, 38, 40, 137 Denver, 122 Deusto, 84, 88, 90–92, 95, 104 Dicken n., cit., 5, 9–10, 12, 14, 16 Dieleman cit., 4, 159 Díez Medrano cit., 32, 40, 54–55 Diputación Foral de Bizkaia, 96, 132–133 Domus, 102 Douglass n., cit., 3, 24 Drache cit., 4, 159 Drainville, 11–12 Dublin, 39 Easterling cit., 102 Echaniz, 62–63 Echevarría Alonso cit., 36 Eckardt cit., 81 Eiffel Tower, 114 Eisenman, 123 El Correo cit., 106, 116–117, 120 El Ensanche, 51 El Milagro Guggenheim. Una ilusión de alto riesgo, 107 El Pais cit., 111–112, 116, 128, 131, 149 Elf Atochem, 131 Elmhorn n., cit., 3 Emirbayer n., cit., 14 England, 33–35, 39–41, 153 Enjuto, Torres cit., 53 Ensanche, 51, 80, 82 Ensidesa, 64, 66 Equatorial Guinea, 141 Ericsson, 131

Escudero cit., 62 Esquire, 102 Esteban, 81, 83, 86, 88–95 Esterow cit., 115 Estonia, 141 Etchemendy, 64–65 Etxebarría Kerexeta cit., 61, 68 Euromoney, 103, 149 Europa-93, 68 Europe, 1–3, 11–12, 17–18, 31–34, 37–40, 44–45, 47, 57, 60, 62–64, 66, 68, 70, 75, 80, 102, 104, 107–108, 113–114, 117, 120, 125, 127, 129–132, 134, 136–137, 139–142, 144, 146–147, 150, 154–156, 160, 162–163 European Commission, 139–140 European Monetary Union, 86 European Software Institute, 80 European Union, 8, 19, 66, 86, 92, 108, 128–129, 131–133, 137, 139, 150, 154, 156 Euskadi Ta Askatasuna, 58 Euskalduna, 47, 52, 69, 81–82, 88–89 Euskopolis, 162 Eustat cit., 54, 62, 64, 69–72, 128, 130–131, 133–135, 161 Evans cit., 19, 24 Exeter, 39 Experience Music Project, 124 Fainstein cit., 97, 160 Falmouth, 39 Feijóo Caballero, 37 Fernández de Pinedo cit., 38, 45–46 Fernández, 32–33, 38, 44–46, 110 Fernández–Galiano, Luis, 110 Filo, 92 Finland, 38, 130, 137, 141 Finot cit., 33 Flanders, 32 Flash Art, 102 Floranes cit., 36 Flyvbjerg cit., 81, 97 Forbes, 122 Fordism–Keynesianism, 22


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Name Index Fordist, 2–3, 6–7, 18, 24, 42–43, 56, 58–61, 74–75, 79, 109, 127, 138, 149, 154 Foreign Policy, 22 Foster, N., 24, 68, 90, 113 Fraile cit., 49, 52 France, 38–39, 44, 47, 57, 67–68, 82, 89–90, 95, 119, 130–131, 133, 137, 139, 141 Franco, 44, 52–53, 55–56, 58, 61, 104–105, 112, 132, 143–144, 150 Frank n., cit., 1, 3–4, 101, 103, 109, 113, 115, 121–122, 124 Fraser cit., 103 Freire cit., 52, 66 French Brittany, 38 French Revolution, 38 French Sociétés d’Economie Mixtes, 85 Friedmann cit., 2, 12, 16, 96 Fuenterrabía, 36 Fueros, 18, 36, 41, 49, 107, 155 Fuge, 110 Fujita n., cit., 3–4 Furst cit., 19 Fusi cit., 50–51 Galarza Ibarrondo cit., 46 Galicia, 37, 39, 82, 90 Gamesa, 130 García Baquero cit., 38 García Crespo cit., 55 García Merino cit., 61 Garcon a la veste blue, 110 Gardeazábal cit., 130 Garmendia cit., 120 Gascoigne, 33 Gehry, F. cit., 1, 3, 101, 103, 108–110, 112–117, 121–122, 124 General Electric, 131 General Primo de Rivera, 52 Geneva, 33, 39 Gereffi cit., 12, 149, 165 Germany, 33, 38, 41, 47, 57, 64, 67, 119, 130–133, 137, 150 Gernika, 107, 111

211

Getxo, 28, 71–73 Ghazali cit., 24 Ghoshal n., cit., 14 Gibraltar, 136 Giddens cit., 9, 12, 14–15 Gijón, 38 Giménez, C., 107 Giovannini cit., 1, 114 Gipuzkoa, 28, 63, 105, 108, 119, 133, 135, 161–162 Giuliani, R., 122 Glas cit., 44–51, 154 Gobierno Vasco cit., 73, 95–96 Goldberger, P., 115, 120 Goldfrank n., cit., 4, 23, 164 Gómez cit., 61, 63, 68 González Ceballos cit., 64, 103 González Portilla cit., 45 Goodwin n., cit., 14 Gordon cit., 160 Gorordo, José María, 89 Gortázar cit., 47 Gough, P. cit., 113 Grafe, R. cit., 34–35, 153 Grand Cayman, 145 Granovetter n., cit., 4, 14 Graz, 110 Great Britain, 6, 38–39, 44, 46–47, 52, 56–58, 119, 127, 130, 139–140, 154 Great Depression, 22, 164 Greece, 137 Gren cit., 19 Gritsai n., cit., 3 Guasch cit., 103 Guggenheim Museum, 1, 20, 75, 80, 82, 84, 88–90, 97–98, 101, 103, 105, 117–118, 121, 123, 125, 127, 163 Guiard cit., 32, 34, 37–39 Guillén cit., 9–10, 147 Gulati n., 14 Gulf of Biscay, 33 Hack cit., 19, 162 Hall, P. n., cit., 4, 12, 20, 24, 82, 84, 87–88, 91–93, 97–98


212

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Name Index

Hamburg, 36, 39, 138 Hamnett, C. cit., 3–4, 159–160 Harding cit., 19, 24 Haring cit., 33 Harloe cit., 160 Harper’s Bazaar, 103 Harrison cit., 63 Hartford, 122, 131 Harvard, 111, 130 Harvey, D. cit., 15, 22, 79, 127, 158 Harvie cit., 19 Hassard cit., 14 Havana, 38 Heers cit., 33 Held cit., 55, 83, 148, 165 Henao cit., 34 Henderson n., cit., 14 Herreros cit., 81 Herri Batasuna, 92, 111 Hess n., cit., 14 Hill cit., 24 Hirst cit., 5, 12, 151 Hitler, 107 Ho, 24 Hohenberg n., cit., 4 Holland, 38–39, 130, 136, 141 Hong Kong cit., 3, 62, 122, 130, 137, 162 House Beautiful, 102 Houston Pennzoil Place, 124 Huet cit., 130 Huntington cit., 112 Hyatt, 94–95 Ibárrurri, Dolores cit., 70 Ibelings cit., 102 Iberdrola, 142 Iberian, 22, 32, 41, 128, 137, 153 IBM, 131 Idaho, 128 IDOM, 116 Imaz cit., 129 Imrie cit., 85 Indautxu, 95–96 Indian Ocean, 141–142 Innis cit., 34

Instituto de Comercio Exterior (ICEX), 156 Inter–Continental, 95, 139, 151 Intermodal Station, 96 International Labor Organization, 67 Iran, 61, 133, 141 Ireland, 39, 137, 139, 141 Isozaki, Arata, 109 Israel cit., 34 Italy, 33–34, 38–39, 47, 57, 119, 130, 137, 141, 146 ITT Hartford, 131 Ivy, Robert A., 93, 122 Izar, 66 Jai–Alai, 93 James, Harold cit., 21, 164 Japan, 66–67, 119, 131–132, 145, 150 Jencks, Charles, 115 Jersey, 39 Jessop, Bob n., cit., 164 Jiménez n., cit., 3 Jodidio cit., 114 Jonas n., cit., 3 Jones cit., 4, 159 Juan Carlos (King of Spain), 111 Juan Jose,158 Juaristi cit., 105 Kamin, Blair cit., 124 Kandinsky, 110 Kansas City, 122 Kaufman, J.E., 117 Kawano n, cit., 4 Keating cit., 18–19 Keil, Roger n., cit., 16 Kiel cit., 9 Kim cit., 24 King of Castille, 2, 158 King, A. cit., 3, 102 Klebnikov, 122 Knox cit., 5, 19, 102 Kobie, 102 Kogge, 33 Koolhaas, Rem cit., 122


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Name Index Korea, 61–62, 66–67 Korzeniewicz cit., 149, 165 Kozul–Wright cit., 151 KPMG Peat Marwick, 117–118 Krause cit., 102 Krens, Thomas, 1, 85, 103, 106, 115, 122 Krugman n., 4 Kuala Lumpur cit., 162 Kultur Keska, 111 L’Architecture d’Aujourd’hui, 102 La Alhondiga, 109 La Arboleda, 70 LaBianca, 19 La Bizkaia, 47 La Coruña, 37–38 La Iberia, 47 La Pasionaria, 70 La Rochelle, 33 Laborda cit., 36 Lafarga cit., 32 Landerneau, 38 Landscape Architecture, 102 Lang cit., 10 Lapeyre cit., 34 Laredo, 34 Latin America, 8, 17, 40, 62, 108, 130, 132, 137, 142–144, 146–151, 155, 157, 160, 165 Latin Finance cit., 147–149 Latour cit., 14 Law cit., 14, 21, 41, 50, 64–65, 108, 131 Le Corbusier, 124 Le Havre, 38–39 Ledebour, 18 Lee cit., 14 Lees n., cit., 4 LeGales cit., 19, 24 Lequesne cit., 19 Ley de Reconversión y Re–Industrialización, 64 Liebeskind, 122 Liga Vizcaína de Productores, 50 Lisbon, 38, 82 Liston cit., 129

213

Lithuania, 141 Liverman cit., 19 Liverpool, 138 Loftman cit., 84 Logan cit., 18 London, 3, 12–13, 21, 39, 113, 143, 145, 150–151, 154, 164 Los Angeles, 3, 21, 136–137, 154 Lotus International, 102 Luxembourg, 131, 137 Lyon, 110 Machimura n., cit., 3, 5, 24 Macías, 51 Macleod cit., 4, 19, 159 Madrid, 2, 7–8, 41, 49–50, 54, 57, 59, 68, 74, 87, 90, 102, 104–108, 111, 113, 119, 128, 131–132, 148, 155–156 Mahmberg, 14 Málaga, 38–39 Malaysia, 3 Manchester, 151 Marcuse cit., 60, 160, 164 Marítima de Axpe, 69 Markusen cit., 19 Marriot, 95 Marston cit., 19 Martin cit., 19 Martín de Retana cit., 54 Martínez cit., 70, 80–81, 86 Massachusetts, 35 Max Center, 89, 91–93 McAdam n., cit., 14 McGrew cit., 165 McNeill cit., 102, 112 Meca cit., 49 Mediterranean, 32–33, 44, 139, 141–142, 150 Melbourne, 123, 151 Mendizábal cit., 55 Mercer n., cit., 4 Merkel, J. cit., 115 Metropolis, 73, 75, 79–81, 102–104 Metropolitan Home, 102 Mexico, 130, 147–149


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Name Index

Meyer, D., 3 Michelin, 131 Middle East, 122, 141–142 Milan, 146 Milwaukee, 122 Minondo cit., 45 Modern Painters, 102 Modigliani, 110 Mollenkopf cit., 160 Molotch cit., 18 Mondragón Corporación Cooperativa, 130 Montero cit., 40–41, 44–48, 51–54 Moody’s, 152 Morlaix, 38 Morocco, 39, 130, 146 Moscow, 110 Moulaert cit., 97, 160 Moya cit., 56 Mundaka, 108 Murdoch n., cit., 14 Muschamp, H. cit., 1, 101 Museums Journal, 103 Nadal cit., 45, 47 Nantes, 38–39 Napoleonic wars, 40 National Institute of Industry (INI), 82 National Palace Museum, 123 Navarra, 108 Nayyar cit., 165 Neguri, 51 Nervión, 31, 37, 46–49, 51, 54, 109, 136, 160 Netherlands, 33, 67, 131, 137 Nevada, 122, 128 New Art Examiner, 102 New York, 1, 3, 12–13, 21, 83, 101–102, 105, 108, 110–113, 115, 118, 120–123, 136–137, 145, 154, 164 New Yorker, 102, 120 Newfoundland, 33, 35, 153 Newhouse, V., 115 Newsweek, 102 Nigeria, 141

Nikitin cit., 12 Nohria n., cit., 14 Normandie, 82, 90 North America, 34–35, 38, 41, 122, 141–142 North Atlantic Ocean, 32 North Carolina, 122 North Sea, 139 Northern Sea, 32–33 Norway, 38, 40, 44, 141 Novia de Salcedo cit., 36–37 Nuestra Señora del Carmen, 45 O’Riain cit., 4, 17 O’Toole cit., 85 Oceania, 142 Ohmae, K. cit., 17, 160 Olabarri cit., 48 Olds n., cit., 4–5, 9–10, 159, 164 Oliveira Marques cit., 38 Olympics, 86, 104 Organization for Economic Cooperation and Development (OECD), 66, 130, 134, 145–146, 165 Ortega cit., 72 Ortuondo, J., 89–91 Orum n., cit., 4 Osaka, 110 Otazu, A., 107–108 Oteiza, J., 111–112 Ottaviano n., cit., 4 Pacific Ocean, 142 Palace Square, 122 Palacio Atard, V. cit., 39 Palacio Euskalduna de Congresos y de la Música, 88 Paluzie n., cit., 4 Panama, 148 Panitch cit., 4, 159 Panza, 110 Paris, 142, 150 Park cit., 14, 80, 83, 92–93, 113, 117 Parkinson cit., 24, 104 Parque de Doña Casilda, 83–84


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Name Index Parque de la Ribera, 84 Pelli, C., 83, 85, 87–88, 91–95, 113 Pepsico, 131 Pérez Agote, 54 Peru, 130, 148 Peter, 2, 20, 22, 88–89, 93, 98, 123 Petersburg, 122 Petro cit., 102 Petróleos del Norte, 69 Petronor refinery, 136, 140 Philadelphia, 122 Phillips cit., 33–34 Picasso, 107, 111 Pierre cit., 5, 81, 97 Pirenne n., cit., 4, 22 Pittsburgh, 114 P. J. Taylor, 3 Plan Especial de Reforma Interior (PERI) de Abandoibarra, 83 Plan General de Ordenación Urbana de Bilbao (PGOUB), 82–83, 88–89 Plan para la convivencia, 158 Plaza del Museo de Bellas Artes, 84 Plaza–Paseo Puerta de la Paz, 84 Poland, 67 Pons n., cit., 4 Pops cit., 115 Port Authority, 82, 85 Porto, 38 ports, 32–34, 37–41, 44, 136–140, 150, 153–154 Portugal, 38–39, 119, 130, 137, 139, 146 Prigogyne n., cit., 14 Priotti cit., 34 Productos Tubulares, 69 Proetorium Cantabrium, 33 Progressive Architecture, 102 Provincial Government of, 97 Puerto Rico, 148 Pulitzer Foundation for the Arts, 124 Punta Lucero, 136 Raritan, 103 Rauen, 114, 121 Recio cit., 67

215

Red Nacional de Ferrocarriles Españoles, 80 Reina Sofia Museum, 111 Rhode Island, 35 RIBA Journal, 102 Ribechini cit., 37 Rimmer n., cit., 3 Roberts cit., 80 Roca cit., 67 Rodríguez, A. cit., 72–74, 80–81, 86, 89, 97, 158, 160 Ronchamp, 124 Ronnenberger n., cit., 3 Ross cit., 160 Rotterdam, 136 Rubio, Freire cit., 52, 66 Rugman, A., 164 Russia, 38, 40, 122, 133–134, 136, 141 Rybczynski, W., 124 Saint Louis, 122, 124 Salmagundi, 103 Salona cit., 87 Salzburg, 107, 110 San Francisco, 47, 122 San Sebastian, 36, 105, 118 Sánchez Tirado n., cit., 54 Santa Ana de Bolueta, 45 Santa Marta, 38 Santander, 34, 36–39, 42, 44–45, 142, 147 Santurtzi, 28, 71 Saro Jaúregui cit., 64 Sassen, S. cit., 2–4, 12–13, 16, 20–21, 152, 159–160, 165 Satler cit., 102 Saunders cit., 102 Savannah, 122 Savitch cit., 24 Scandinavian, 32, 141 Scandinavian Peninsula, 32 Scotland, 39 Scott n., cit., 4–5, 13, 162 Sea, 32–33, 82, 139–140, 142, 150 Seattle, 124 Second Republic, 52, 155


216

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Second World War, 21, 152 Seoul, 154 Sestao, 28, 70–73 Seville, 32–33, 38, 86, 96, 104 Shachar n., cit., 3 Shanghai cit., 162 Sheppard n., cit., 4, 11, 14 Sheraton, 88, 94–95, 120 Shin cit., 19 Sidenor, 130 Silver n., cit., 4, 23, 147, 164 Simmonds cit., 19, 162 Singapore cit., 62, 122, 137, 141, 162 Sirat, 24 Smith cit., 3–5, 15–17, 55, 64, 159 Sociedad para la Promoción y la Reconversión Industrial, 65 Society for Industrial Promotion and Restructuring, 129, 156 Sofitel, 95 Soja, E., 158 Sol Meliá, 94–95 Solinger cit., 4, 159 Solomon R. Guggenheim Foundation, 121 Sopher n., cit., 4 Soria, 108 Sornn–Friese n., cit., 14 South America, 122, 136, 141–142 Southampton, 39 Spain, 1–2, 6–8, 14, 17–19, 31–35, 37–41, 43–45, 47–68, 71–72, 82, 86, 90, 95, 101–107, 110–112, 114, 117, 119–122, 125, 128–132, 136, 139, 141–146, 149–150, 153–154, 156–158, 160, 162–163, 165–166 Spectator, 102 Stanford Online Report cit., 123 Starwood, 88, 95 Stein cit., 34, 116 Stilwell n., cit., 3 Stirling, J., 113 Stohr cit., 24 Storper, M. n, cit., 5, 10, 12, 14, 19 Su, 4 Suárez Fernández, 32

Sunley cit., 19 Sweden, 33, 38, 40–41, 137, 141 Switzerland, 131, 146 Swyngedouw cit., 97, 160 Sydney Opera House, 114, 123 Sykes cit., 80 Taichung, 122–123 Tai–Lok cit., 24 Taipei, 123 Taiwan, 62, 122, 137 Tajbakhsh cit., 11 Tamames cit., 55–56 Taylor n., cit., 2–5, 10, 14, 22–23, 102, 159, 164–165 Telefónica, 142 Tellitu cit., 111 Terranove, 128 Thailand, 130 The Architectural Review, 102 The Burlington Magazine, 102 The Cooper Union, 123 The Economist, 102 The New York Times, 101–102, 105 The New York Times Magazine, 101 The Wall Street Journal, 102 Theodore cit., 81 Thisse n., cit., 4 Thomas cit., 1, 85, 103, 106, 115, 122 Thompson cit., 5, 12 Thorne n., cit., 14 Thrift n., cit, 4, 14, 18, 162 Tilly n., cit., 4, 14 Times cit., 1, 6–7, 11, 16, 23, 25, 34–35, 44–45, 48, 53, 56, 101–102, 105, 109, 113, 115, 122–123, 151–152, 154, 164 Tobin, 151 Todtling cit., 19 Tokyo, 3, 13, 21, 110, 122, 154 Topik cit., 4, 159 Tortella, 44 Toward a New Museum, 115 Trachte cit., 160 Travel and Leisure, 103 Triano Mining District, 49


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Name Index Trinder cit., 70 Tryp, 95 Tschoegl cit., 147 Tudela, 45 Turkey, 39 Turner cit., 19 Turok cit., 84 Tzonis cit., 102 Ugalde cit., 155 Ugarte cit., 32 Umbach cit., 102 Uniport Bilbao cit., 137, 140 United Kingdom, 67, 136–137, 142, 150 United Nations Conference on Trade and Development, 140 United States, 1, 12, 18, 53, 62, 66–67, 75, 94, 113, 116, 122, 130–132, 137, 141, 145, 147, 150–151 Uriarte, Zabala cit., 36 Uribitarte Building, 96 Urquijo, M. cit., 38, 56 Urrutia cit., 54, 85 Urry cit., 13, 15 USA, 95, 119 Uzzi n., cit., 14 van Kempen cit., 60, 160, 164 Vanity Fair, 103 Varela, M. cit., 69 Vázquez de Prada cit., 38 Velasco cit., 55 Venables n., cit., 4 Venezuela, 61, 130, 141, 145, 148 Venice, 110, 121–122 Veracruz, 38 Vicario cit., 70 Victoria, 115, 123 Vidarte, J. A. cit., 101, 108–109

Vidler, A. cit., 114 Vienna, 110 Villota cit., 49 Vitoria, 28, 63, 105, 107 Wade cit., 5 Walker cit., 131 Wall Street, 102, 108 Wallerstein n., cit., 4, 9, 42 Washington, 111, 118 Watts n., cit., 4 Weiss cit., 4, 159 Weltaanschaung, 106 Werk, 102 Whatmore n., cit., 14 Whitley n., cit., 14 Whitney Extension cit., 122 Wilson, L.A. cit., 122 Wolf cit., 85 Wolff cit., 2, 12 World Fair, 86, 96, 104 World War I, 22, 55, 152 Wright, Frank Lloyd, 115, 122 Wu n., cit., 3, 24 Yalcintan n., cit., 3 Ybarras, 45 Yeung n., cit., 4–5, 9–10, 14, 24, 159, 164 Young, 12, 14, 35, 157 Zabaleta, I. cit., 105 Zaheer n., cit., 14 Zedillo, E., 149 Zibel n., cit., 3 Zones of Urgent Re-industrialization (ZUR), 65 Zulaika, J. cit., 103, 106, 108–113 Zysman cit., 24, 161

217


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Subject Index 1992 as the “year of Spain” in the world, 104 Abando area, 95 Abandoibarra as example of the new Bilbao, 75, 113, 124 Central Business District of, 8, 75, 82, 113 Concert and Congresses Hall of, 84 development of, 7, 91 Euskalduna shipyards of, 52, 69, 81, 82 impact of Abandoibarra development, 95 implementation plan, 85 industrial development of, 81 Maritime Museum of, 84 Megaproject, 75, 81, 97, 155 music and conference auditorium of, 82–84 Parque de Doña Casilda of, 83, 84 Parque de la Ribera of, 84 plan modification of, 81, 87, 97 Plaza del Museo de Bellas Artes of, 84 Plaza-Paseo Puerta de la Paz of, 84 railroad company RENFE, 82 real estate market of, 95 structural obstacles of, 81, 97 Universidad de Deusto Library of, 84 waterfront revitalization project, 80 “Adjustment” phase, 68 Acción Concertada, 53, 61 Acería Compacta de Bizkaia (ACB), 69 Acritical adoption of policy discourses, 125 Actor-network theory, 4, 14 Agency, 11, 15, 16, 20, 64, 65, 85, 86, 109

Altos Hornos de Bilbao, 47 Altos Hornos de Bizkaia, 47, 52, 55, 64, 109 American trade, 33, 127 Amsterdam as a clearing house of imported wool, 39 Ancillary industries, 68 Anti-Basque, 112 Architecture political side, 102 role in globalization, 127 role in globalizing cities, 127 Babcok Wilcox, 52 Banco Bilbao Bizkaia Argentaria (BBBA), 8, 127, 141, 163 Banco de Bilbao and Franco’s dictatorship, 44, 53, 58, 61, 132, 143, 150 and international markets, 142, 145 Banco de Bizkaia, 48, 54, 55, 141, 146, 150 Banco del Comercio, 48, 142 Barcelona Olympic Games, 96 Basque “culture of metal,” 116 army, 53 artists, 111 autonomous power, 107 capital-goods sector, 55 cod fisheries, 34 commercial and industrial crisis, 40 commercial and landowning elites, 45 corporations, 18 developmentalism, 18, 160


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Subject Index

duty-free imports, 44 expansion, 7, 56 fiscal autonomy, 49, 129, 149 free trade with the Spanish colonies in America, 37 geopolitics, 165 global commodity chains, 149 heavy industry, 55 industrialization, 128 iron, 2, 31, 34, 38–40, 47, 57, 142, 150 Kultur Keska, 111 mercantile freedom, 36 merchants, 2, 35, 41 nobility, 36 peasantry, 45 political emancipation, 101,112,155, 162 political identity, 158 power, 107 privilege, 6, 56 proposal of “free association” with the Spanish state, 165 public investment, 165 regional geopolitics, 165 re-identification, 112 Spanish-oriented and pro-Franco attitudes, 55 structural adjustments, 6, 56 vertical integration, 55 Basque Country and The New York Times, 105 as a poly-nucleated city-region, 162 as a sort of “neomarshallian node,” 162 economic globalization in, 126, 127 export drive of, 132, 149 GDP of, 41, 54, 119 political violence in, 60 Basque economy humanistic intelligentsia, 55 internationalization of, 109, 127 technical intelligentsia, 55 tertiarization of, 7, 59, 60, 74 Basque government plan Europa-93 of, 68 Basque Nationalist Party (PNV), 66, 68, 105, 106, 121, 163

Basque parliament, 131, 158 Basque restructuring, 19, 24, 59, 63, 64, 66, 69, 79, 84, 156 BBV Foundation, 61 Bessemer method, 47 “Big Seven,” 56 Bilbao agricultural deficit of, 35 and the Basque region in the “postFordist” era, 127 and the world economy, 141, 150 as a frontier town, 2, 6, 31, 32, 41 as a node in networks, 14 as emerging city-region, 6, 24, 160 as “in the world consciousness,” 20 as part of the Burgos-Bruges axis, 31 as part of the North Atlantic economy, 154, 165 as post-industrial city, 6, 24, 160 as redistribution site for European textiles, 37 banking industry of, 142, 150 commercial expansion of, 34, 41 comparative advantage of, 153 crisis and de-globalization of, 31, 40 crisis of the nineteenth century of, 31, 40 demographic transformation of, 54 economic development of, 34, 40, 54 eighteenth century, in the, 31, 35, 37, 42 explosive industrialization of, 43 export-led development of, 11, 31, 37 export-led industrialization of, 43, 46, 154 financial crash of, 48 flagship steel company of, 47 flagship steel manufacturing company (AHV) of, 64 foreign trade of, 31, 127, 133 free trade with America of, 37 free-trade zone status of, 159 global approach to museum management after Bilbao, 122 “global reach” of, 18 internationalization of, 80 Late Middle Ages, in the, 6, 31, 42, 68


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Subject Index mercantile policy of, 40 metropolitan area of, 24, 54, 60, 62, 69, 70, 72, 73, 85, 128, 149, 160 mining entrepreneurs of, 46 pathways to globalization of, 155 political economy during the Fordist period of, 6, 43 population of, 37, 48, 54 pre-industrial history of, 31 productive system of, 60 reconversión of, 64 shipbuilding industry of, 7, 33, 59, 74 socio-spatial fragmentation of, 60 structural weaknesses of Bilbao’s industries, 61 the Bilbao industry’s crisis, 64 Third Globalization of, 43, 51 trade disputes with the Spanish government, 37, 42 urban development of, 25, 84 urban revitalization of, 59, 79 working class of, 54 Bilbao Chamber of Commerce, the, 50 Bilbao Effect, the, 121, 124 Bilbao General Urban Plan (PGOUB, or Plan General de Ordenación Urbana de Bilbao), 82, 88, 89 Bilbao Ría 2000 and European fund, 92 as a quasi-public agency, 85 opposition to, 89 Bilbao Stock Exchange, the, 48, 52, 57 Bizkaia Acción Concertada, 54, 61 banking system, 48 capital as a hegemonic role, 51, 57 commercial bourgeoisie, 41 economic deprivation of, 36 economic revolution, 48, 57 fiscal autonomy of, 49 heavy engineering industry of, 61 industrial development of, 36 industrial revolution of, 41 local elite of, 36 Mining Law of, 41

221

population growth of, 51 privatization of mining, 41 “pro-growth” attitude of, 49 tax rates of, 50 transnational mercantile activities of, 31 Bizkaian triangular trade, 34 Black market, 53 Board of Trade, the, 50 British Empire, 47, 57 Burgos as the centre of wool production, 32, 39 centrality in trade of, 32 Cádiz, 33, 37, 38 Capital accumulation, 22, 52 Capitalism commercial, 6, 31, 40, 59 industrial, 6, 25, 31, 40, 41, 43, 44 Carlist wars, 44, 45, 48, 49, 57 Castile Castilian Monopoly companies, 35 Castilian wool, 2, 32, 37, 39 contraband, 36 Cities as “central nodes” in a global network, 165 Cities’ possibility to become global, 165 Civic pride, 2, 106 Commercial freedoms, 2 Common Market, 16 Communist union (CCOO), 65 Concierto Económico, 49, 132 Conference and Concert Hall, 97 Corporación Siderúrgica Integral, 66 Corporatism, 51 Credit-distribution, 55 Crónica de una seducción, 106, 112 Cultural centrality, 104 De-globalization, 31, 40, 43, 53, 158 De-industrialization, 24, 62, 63, 66, 161 Denationalization, 16 Dependence, 19, 39, 41, 54, 58, 60, 61, 131 Deregulation, 72, 159, 165


222

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Developmental states, 17, 24 “old” developmental states, 18 Dual market, 53 Dualization, 59, 60, 160 East Asia, 24, 162 Economic development, 8, 18, 20, 22–23, 34, 36, 40, 43, 46, 49, 54, 57, 79, 82, 97–98, 102–103, 146, 155, 164, 166 Economic liberalization, 53 Economic recession, 52, 60 Economic restructuring, 64 Economic self-sufficiency, 53, 58 Eduardo Chillida, 112 El Ensanche, 51 Electronic trading, 151 Empire, 44, 47, 57, 147 England “new draperies” industry, 34–35 as exporter of Spanish wool, 39 as the main European exporter of wool, 34 cod fishermen of, 34 commercial revolution in, 35 Industrial Revolution in, 40 protectionist policies in, 39 Entrepreneurial mentality, 46, 56 Entrepreneurialism, 7, 79 ETA (Euskadi Ta Askatasuma) as major impediment to investment, 60 fight for independence, 58 impuesto revolucionario, 60 socialism, 58 terrorist campaign, 60 “Europe of the regions,” 68 European Community, 68, 146, 156 European fleets, 33 European Monetary Union, 86 European Union structural funds, 68 Europeanization, 68 “Euskopolis,” 162 Euskalduna The Euskalduna shipyards, 2, 69, 81, 82 Expansion years, 22, 51

Fascist ideology, the, 53, 58 Financial globalization, 8, 127, 141, 154, 155 Financial self-sufficiency, 85 First World, 12 Flagship projects, 86, 93, 97, 103, 105, 117, 126 Fordist accumulation, 59, 60 Bilbao, 6, 18, 42, 56, 58, 75, 127 model, 3, 7, 24, 59, 74, 127, 149 period, 2, 6, 43, 79, 109, 138, 154 Foreign capital, 46, 56, 61, 154 Foreign competition, 157 Foreign direct investment (FDI), 67, 131, 157, 165 Foundries (ferrerías), 34, 38–41, 44 Franco Autarchic interventionist policy, 55, 58 Franco’s regime, 61 interventionist economic policy, 55, 58 the Franco dictatorship, 44, 53, 58, 143 the Franco years, 53, 58 Frank Gehry’s design, 103, 113, 121, 124 French Revolution, the, 38 General Primo de Rivera, 52 Gernika, Pablo Picasso’s, 111 Gernika, town of, 107 “Global” group, 166 Global city, 11, 13, 21, 160 Global city-regions, 13, 18, 24, 160, 162, 166 Global economy linkages to, 9, 79 organizational architecture, 165 Global flows, 5, 16, 23, 24, 31, 42, 164 Global governance architecture of, 165 Global hierarchy, 165 Global museum, 103, 108, 114 Global networks, 6, 12, 15, 21, 31 Global structural developments, 159 Global trade, 8, 139–140, 150–151, 154 Global trade flows, 139, 150


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Subject Index Globalization and assets and debts, 151 and commodities, 151 and foreign exchange market, 152 and information, 151 and labor, 151 and the Port of Bilbao, 136 and world financial markets, 152 as a geopolitical process, 165 as a network of relations, structures, and territories, 165 as a process, 166 as action-reaction process, 16 as an outcome, 166 as cyclical process, 56 as development, 165 as export-led development, 11 as global industrial restructuring, 11 as industrialization, 11 as interaction of global forces and local conditions, 10 as international networks of trade, 11 as partial explanation, 11, 43, 165 as symbolic catalyst, 11, 164 as time-space distantiation, 9, 15, 20 cycles, 12, 20, 42 nation-states’ resistance to, 165 not as “external force,” 10, 42 not natural and inevitable, 10 not universal, 10 Globalization thesis, 11, 152 “Globalizing” city, 166 Golden years of industrial Bilbao, 126 Great Britain as economic superpower, 57 war with Spain, 39 Great Depression, the, 22, 164 Guggenheim Bilbao Museum articles about, 102 as a “Cinderella” story, 103 as a spectacular worldwide image campaign, 125 as cultural artifact, 103 as instrument of globalization, 101

223

as representing the Basque Country’s own 1992, 104 as the “catalyst” for the city’s positive economic performance, 102 Controversies surrounding, 102, 110 effect in Bilbao, 116 “Guggenheim effect,” the, 95, 116, 118 influence in attracting tourism, 118 success of, 110, 127 Guggenheim foundation, 103, 106, 107, 109, 110, 121, 125, 159 Guggenheim “miracle,” the, 104 Guggenheim project, the, 20, 101, 155, 158, 160, 163, 165 as a “strategy of seduction,” 106 political overtones, 102 Herri Batasuna, 92, 111 “Highest Banking Council,” 56 Historical macrosociology, 10, 19 Iberian markets, 32, 41, 153 Image campaign, 125 Indigenous industries, 32 Industrial labor unions, 51 Industrial productivity, 46, 56 Industrial Proletariat, 51 Industrial Revolution, the, 40, 45, 49, 57 and the production of cotton, 40 Industrialization, 11, 18, 38, 43, 46, 59, 61, 73, 79, 126, 128, 132, 141, 150, 154, 164 Informal economy, 53 Instituto de Comercio Exterior (ICEX), 156 International Competition of Ideas for Abandoibarra, 83, 88 International financial flows, 151 Internationalization, 24, 80, 109, 127, 129, 130, 143, 149, 155–157, 159, 165 Iron export, 32, 38, 41, 56, 57, 154 “iron culture,” 62 production, 32, 38, 41 Izar, 66


224

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Japan, 66, 67, 119, 131, 132, 145, 150 Jorge Oteiza, 111 Joseba Zulaika, 106, 112 King Carlos V, 33 King Juan Carlos of Spain, 111 Kogge, 33 La Bizkaia, 47 Labor markets, 74 Labor relations, 51, 72 Latin America, 17, 108, 130, 132, 143, 144, 146–150, 157, 160, 165 Latin American colonies, 40, 142, 150 Liga Vizcaína de Productores, 50 Local economy, 25, 32, 35, 45, 46, 48, 56, 60, 68, 80, 118, 136, 155 Local laws (fueros), 18, 36, 49 Madrid, 41, 49, 50, 54, 57, 59, 68, 74, 87, 90, 102, 104–108, 111, 132, 155, 156 Managerialism, 79 Manufacturing techniques, 46, 56 Max Center, 89, 91, 93 Mercantile circuits, 40 Mercantile traffic, 40 Metro Bilbao, 160, 162 Migration, 10, 45, 48, 51, 54, 164 Modernization processes, 165 Modernization, 45, 51, 65 Monetary Union, 68, 156 Multilateral cooperation, 22 Municipal Office for the General Urban Plan (PGOUB), 83 Museum of Fine Arts, the, 104 Museum of Science and Technology, later Guggenheim Museum, 82 Napoleonic Wars, 40 Nationalist elites, 158 Neguri, 51 Neoliberal policies, 81, 97 Nervión River, 31, 37, 47–49, 51, 54, 109, 136, 160 as the epicenter of industrial production, 46

Network, 14–16, 31, 34, 42, 79, 130, 138, 141, 150, 162, 165 Network process, 6, 16, 31 Networks of relations, 166 “Network states,” 162 Neutrality, 52 New “commercialization plan,” 87 “New” countries, 61 New regionalism, 18, 158 New World, the, 38, 128 Non-linear dynamics, 15 North Atlantic economies, 154 North Atlantic trading network, 34 Nation-State, 9, 12, 13, 15–19, 43, 56, 79, 114, 159, 160, 163, 165 Ore trade, 40, 52 Organization for Economic Cooperation and Development (OECD), 66, 130, 145, 146, 165 Path-dependence, 19 Pathways to globalization, 23, 31, 41–42, 56, 59, 60, 79, 101, 127, 152–153, 155, 166 Peripheral city, 1 Plan Especial de Reforma Interior (PERI) de Abandoibarra, 83 Plan Para la Convivencia, 18 Plurality of relations, 166 Political conflict reduction, 166 Political unrest, 1 Popular Party, 66, 91, 92 Port of Bilbao as a node in a global network of flows, 141, 150 global connectivity via, 8, 127 Mediterranean ports, competition from, 139, 150 Portugal foundries and factories of, 38 mercantilist policies of, 38 relations with Spain, 38 Positionality in global context, 165 “Post-industrial” economy, 161


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Subject Index Price inflation, 53 Privatization, 41, 45, 65, 139, 159, 165 “Proetorium Cantabricum,” 33 Profit margins, 47 Public capital, 55 Public debt, 41, 55, 61 Regional economic elites, 166 Regional trade, 141, 150 Regionalism, 18, 102, 158 Regionalization, 18, 19, 164 Reina Sofia Museum, 111 Relational thinking, 4, 14 Research and development (R&D), 68, 129, 149 Revitalization plan, 2, 7, 75, 79, 80, 103, 104, 113, 120, 121, 139, 150, 159 San Francisco, 47, 122 Santander, 34, 36–39, 42, 44, 45, 142, 147 Second Republic, the, 52, 155 Seville, 32, 33, 38 Seville’s World Fair, 86, 96, 104 Sheraton chain, 120 Shipbuilding industry, 33, 61, 66 “Social salary,” 68 Social polarization thesis, 2 Socialist union (UGT), 51, 65 Sociedad para la Promoción y la Reconversión Industrial (SPRI), 65 Spain and Bilbao’s shipbuilding industry, 33 and protectionist measures, 33, 40 as anti-reference, 18 as dominant exporter in the wool market, 34 autarchic isolationism in, 61 commercial treaty with Morocco, 39 globalization of capital, 165 inflation rates, 60 international economic profile, 157 socialist government, 158 transition to democracy, 58, 60 Spanish Civil War, 51, 57 Spanish Crown, 32, 33

225

Spanish currency, 47, 57 Spanish economy in international markets, 143, 150 Spanish GDP, 40 Spanish Government and inter-city competitiveness, 37 centralization policies, 56 large-scale interventions, 96 liberalization policies, 56 new customs arrangement, 36 trade legislation, 37, 41 Spanish national industry, 47, 50 Spanish State centralization, 56, 159, 164 liberalization, 56 Spanish trading system, 36 Spatial scales, 10–15, 127, 162, 166 Speculation, 45, 55 Stabilization Plan (1959), 53 State and the globalizing process, 24, 153 and State-related agencies, 165 as global players, 25, 165 developmentalism, 17, 158 export subsidies, 64, 159 functioning, 4 regulation of globalization, 4 regulatory powers, 6, 24 repositioning, 13 “reterritorialization,” 13, 19 systems, 13 Steel industry, 45, 51, 52, 5, 63, 64 Strategic investment, 1 Sub-national networks of trade, 15 Sweden, 33, 38, 40, 141 Swedish iron, 34, 39, 40 Sydney Opera House, 114, 123 Taichung, Taiwan, 122, 123 Terrorism, 105, 114, 130 Third World cheap labor, 63 periphery, 62 Time-space compression, 15, 20, 21, 158, 164 Time-space distantiation, 9, 14, 15, 20


226

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Subject Index

Topological presupposition, 16 Trade globalization, 8, 127, 128 Trade liberalization, 19, 68, 154 Transnational corporation, 4, 8, 24, 154, 159 Transnational finance, 126 Transnational networks of trade, 14, 15 Transnational trade, 41, 153 Triano, 49 Unemployment, 52, 61–63, 65, 67–69, 72–74, 157, 162 United States, 12, 18, 53, 62, 66, 75, 94, 113, 116, 122, 130–132, 141, 145, 147, 150, 151 Universality, 11, 12 Urban economy, 2, 8, 71, 79, 102, 126 governance, 79, 85, 86 marketing, 2 middle classes, 51 planning, 7, 106 renewal, 83, 85, 86 Urban development, 4–8, 24–25, 43, 81, 83–85, 97, 138, 153, 155

Western economy, 53 Wool economy, 32 export trade, 34 exports, 31, 32, 34, 35, 38, 39, 41 flows, 32 trade, 32, 35–37, 39–42, 127 World city, 10, 23 World economy, 12, 14, 18, 22, 23, 25, 62, 101, 126, 141, 144, 150, 153, 165, 166 World energy crisis, 53, 58, 60 World market, 79, 97, 103, 152, 155 World media, 2 World recession, 60 World system, 9, 10, 19–23, 43, 59, 68, 74, 147, 154, 163, 166 World trends, 7, 59, 74, 75 World War I, 6, 22, 52, 56, 58, 127, 152 World War II, 21, 55, 152 capital-goods production, 55 Zones of Urgent Re-industrialization (ZUR), 65, 67

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