Álava’s Wealth: Fueros, Iron, and Literacy Explain High Income

Álava: Why Its Per Capita Income Exceeds the Spanish Average

In 1958, a photo of Dato Street in Vitoria showed so many parked cars it resembled an American Midwest city. The province had about 50,000 inhabitants in its capital then and already stood out for something that didn't fit the stereotype of a rural province of priests and soldiers: one of Spain's highest motorization rates. That is the starting point of a discussion that has lasted almost a year and has led to something much rougher: the nature of the Basque economic agreement (concierto económico) and its alleged role in Álava's development.

Álava has ranked among the top two or three Spanish provinces in the Human Development Index in 1981, 1991, 2001, 2011, and 2021. The question is why. And the answer, according to the exchange, is not single.

Literacy, Bourgeoisie, and Explorers' Societies

The starting point raised by the issue is a combination of factors rarely seen together. As early as the 19th century, the province stood out for its high literacy level despite being a rural territory. In 1907, with a capital of barely 30,000 inhabitants, construction began on a neo-Gothic cathedral that remains one of Vitoria's most visible buildings today. And in that same provincial city, Manuel Iradier founded Spain's first explorers' society.

Some argue that the key lies in the agricultural property model. Unlike the south's latifundios, with large landowners and landless laborers, the north developed small estates that allowed the emergence of middle classes, literacy, and surpluses. They argue this model extends today to Castile and León. The Reconquista and the disentailment laws—which eliminated communal properties and mortmain holdings with negligible leases—would have shaped that structure.

At the other extreme, the geological and geographic explanation: Álava and the rest of the Basque Country occupied one of the two passes connecting the peninsula to Europe, had iron ore deposits when that resource was worth gold, and their mountains were lower than the rest of the Cantabrian coast, facilitating their conversion into Castile's navy.

The Economic Agreement: Engine or Privilege?

Here is where the exchange breaks down. Some participants claim that Álava's development is largely explained by the foral regime: the exempted provinces—Álava, Biscay, Gipuzkoa, and Navarre—were not subject to the same fiscal regime or military obligations as the rest. The economic agreement and quota allow managing revenue with calculations that, according to this reading, are adjusted to be favorable.

The calculation circulating in the discussion is stark: the Basque Country, the second community with the highest GDP per capita, would receive around €6.5 billion annually in net fiscal transfers from the fifteen common-regime communities because it does not contribute to contributory pension deficits and because the VAT adjustment is allegedly deliberately miscalculated. The response from the other side is that the reference percentage of 6.24% was set in the eighties and that, since then, the Basque economic weight has fallen, so the contribution would be higher than what corresponds.

The discussion on pensions is particularly heated. It is claimed that the Basque Country does not want to assume the quota in this area because it is deficit-ridden, adding that any pensions it assumes will be deducted from the quota. The counter-reply asks for a link proving that refusal and reminds us that pensions are set by the central state.

Foral Military Service and Carlist Wars

The exchange culminates in a historical reckoning. Basques are reproached for being exempt from military service for 125 years, under a system of foral militias where weapons were kept in the town hall and training was handled by the mayor. The response is that those same foral militias fought in the Carlist Wars against the regular army, and that the human cost was devastating: the Basque Country suffered a demographic collapse at a time when the population was growing in Spain and all of Europe.

The counterargument is that the solution would have been not to rebel. The discussion becomes bitter to the point that one participant attributes to Basques a supposed inherited violent character. Such generalizations about a group are not supported by data and form part more of noise than analysis.

Vitoria, Foronda, and the Industrial Model

On the economic front, the conversation shifts to productive structure. Vitoria concentrates the community's industrial and business power, with the van factory that was first DKW and is now Mercedes as one of the historical engines. There was a mayor, Luis Ibarra Landeta, between 1956 and 1966, who promoted a general urban planning scheme in 1963—the only one a provincial capital had then, it is claimed—urbanized the Gamarra and Ali Gobeo industrial parks, and attracted industries. The result: a city that went from 50,000 to 400,000 inhabitants.

The road network was another obsession. The Provincial Council financed highways when that was unusual for a provincial institution of 200,000 inhabitants: the Vitoria-Altube in 1973 and the Gamarra-Villarreal in 1969. Foronda Airport, peine in the seventies, was designed as a Basque-Navarrese airport, but the train never arrived and Biscayans did not want the alternative.

The Data That Disrupts

80% of Basques under 60 have at least one grandparent born outside the Basque Country. That data, thrown in the middle of the exchange, dismantles any explanation based on supposed purity or differential identity. Álava's prosperity was built with iron, literacy, fueros, and many people coming from outside. What remains to be resolved is how much of that success is due to fiscal privilege and how much to having managed it better than the rest.