Business History in Spain (19th and 20th centuries)

Gregorio Núñez Romero-Balmas

1 The second level of Spanish capitalism during the Restoration period: The Escoriaza group, a family-owned conglomerate in the world of public works

Abstract The different businesses within the railway sector are closely interwoven. Three of these businesses are especially important: the actual construction of the works, the supply of material and project restructuring. One particular family of entrepreneurs, the “Escoriazas”, operated efficiently in all three of these segments. Through a conglomerate of family-run companies, for decades the group was engaged in the complex and fluid world of the periphery of the large railway businesses. To do this, the “Escoriazas” drew from a broad network of national and international financial contacts and formed a large group of companies and contractors, becoming masters in the constitution, management and dissolution of these companies. The historiography reveals it to be a highly interesting differentiated segment. On the one hand were the large railway companies; and on the other, the small construction contractors which are almost opaque for historians. This business conglomerate of the Escoriaza family is fairly transparent and can be used to explain how these businesses operated.

1Introduction

Many decades ago, back in the nineteenth century, the business world in Spain was polarised between a small number of large, monopolistic companies, many of which are well-known, and a wide variety of small or very small companies that were highly competitive and accounted for the rest of the Spanish business fabric and are practically unknown to historians (González Ruiz & Núñez Romero-Balmas, 2016). In the past, and also today, one of the main problems of the Spanish economy has been precisely the poor articulation of the enterprise system and specifically the low growth capacity of small companies. A lack of medium-sized companies may also be observed. This phenomenon is relevant and very striking when compared with, for example, the case of Germany. This is the case not because medium-sized firms, on the whole family-run, are not feasible in Spain, but because institutional aspects or simply historical factors have made it this way and it is a situation that is very difficult to correct.

With respect to family-run companies in the historiography, there is an abundance of publications (Rose, 1995; Colli, 2003; Puig Raposo & Fernández Pérez, 2009; Lubinski et al., 2013) Recently, the consultancy firm KPGM and the Family Enterprise Institute in Spain published their fifth barometer regarding the situation of family-run companies, a category that is very similar to our object of study. The Barometer includes a survey of 288 companies or groups of companies of this type and highlights the following features: the great majority are managed by members of the same family (79 %) but not by the generation of the founders but by the second or third generation (75 %), even 8 % are managed by the fourth generation or younger; of course the immense majority of the capital (74 %) is owned by the family and very few (3 %) have needed and/or wanted to be listed on the stock exchange. Despite the alleged archaisms that are usually attributed to this category of firms – traditionalism, endogamy, a lack of professionalism in management, difficulties to grow when not listed, etc. – the above-mentioned features have not impeded these companies from employing between fifty and a thousand workers (63 %), reaching annual turnovers of between ten and two hundred million euros or having a noteworthy organisational stability, most having operated for more than twenty years (93 %, of which 53 % have been operating for fifty years) (Instituto de la Empresa Familiar and KPGM 2016). It is clear, therefore, that the organisational peculiarities of these second level companies do not limit the growth or diversification of their activities. Rather, they take advantage of specific opportunities that favour the flexibility, stability and long-term planning of these types of firms and the entrepreneurs who founded them. Modern studies in the field of business economics refer to medium-sized family-run companies and the historiography has also addressed the topic with a select but not exhaustive bibliography (Colli, Fernández Perez & Rose, 2003; Fernández Perez & Puig, 2004; Fernández Pérez & Colli, 2013; Fernández Pérez, 2017). We could also study this family conglomerate with solid international contacts from the perspective of the free-standing companies (Wilkins & Schröter, 1998).

The city enjoyed a central location and operated as the capital of a good part of the Ebro basin, from the Pyrenees to the Iberian mountain range, from Navarra to Tarragona, and it was practically in the centre of the triangle formed by the principal industrial cities of Spain. It therefore constituted the centre of the large railway system of which the main lines had just been completed by the Norte and MZA railway companies in north-east Spain. From then on, different initiatives seeking to complement them and give them greater density were implemented through a secondary railway network, with the support of the State.1 Making the most of their central location, the “Escoriazas” intervened in different business initiatives in the region. The fact that Nicolás, over time, established his residence in Madrid and San Sebastián shows his connection with the highest level industrial and financial networks, which he could endorse with the industrial capacity of the family based in the Iberian capital city (Núñez Romero-Balmas, 2010). Furthermore, the closeness of France also helped these entrepreneurs to establish contacts with Bordeaux, Paris and Brussels. These contacts accounted for a good part of their competitive advantage. This was similar to what occurred with the Tudor company, which shared international and national networks with Escoriaza and also chose Zaragoza as the place to base its industrial activity (Biescas Ferrer & Germán Zubero, 1992; Moreno Fernández & Sancho Sora, 2013).

On the other hand, the economy of Zaragoza at the time was already complex and dynamic and highly promising for the long term.2 The city had a diversified business fabric in which, for example, metallurgy was a major sector at a decisive moment in Spain’s industrialisation process. But, most of all, the city and its region intensely benefited from the protectionist turn imposed in 1891 by the Cánovas Tariff, particularly due to its protection of mass agricultural products such as wheat and sugar and associated industries.³ On the other hand, one of the principal centres of the civil and administrative movement in favour of a hydraulic policy based on the construction of large hydraulic works and the extension of irrigation to a large-scale format was also based in Zaragoza, reaching a unique milestone in the founding of the Confederación Sindical Hidrográfica del Ebro in 1926, the first of its kind. We could say that the city and its region constituted a paradigm of the opportunities to be had in Spain at the end of the nineteenth century, as it formed part of the interior, agricultural territory, basically oriented both in terms of agricultural production and the agrofood industry complementing this, to the domestic market, highly protected by the 1891 and 1906 tariffs. In addition to all of this we should also mention the great opportunity derived from the availability of waterfalls which had an energy potential that was actively developed through local initiatives (Germán Zubero, 1990).

The Aragonese business fabric was completed with the promotion of several banking and insurance initiatives, in several of which the Escoriaza brothers participated. All of this highlights the vigour and broad vision of the family group and the solvency of the local context.⁴

Therefore, it is not surprising that the Escoriaza group chose Zaragoza as the centre of its activities of at least three complementary branches. First, the aforementioned execution of public railway works. Second, metallurgy and the construction of rolling stock for railways and tramways for companies throughout the whole of Spain. This was probably the differential element of the group in which it became a pioneer in Spain. And, closely related to the construction of rolling stock was the promotion, in some cases, and the modernisation and electrification in many others, of urban tramway networks in Spanish cities, which were singularly important and long-lived, including the company Tranvias de Zaragoza.5 The third and final branch of activities was the intervention in a variety of local initiatives from town planning to real estate promotion and the hotel trade. It was precisely the urban sector that provided a final opportunity to the third generation of the group when the railway works and the management of tram and secondary rail companies declined and terminated and the manufacture of rolling stock was incorporated into another industrial group (CAF). Zaragoza enabled the Escoriaza Group to enhance its dynamism as a large city immersed in a century-long vigorous growth and modernisation process. The local trams are, undoubtedly the best example but they also intervened in several investments related to local town planning, real estate promotion, the hotel trade and any other medium or large scale activity that required a great intensity of capital and specific management needs. After the civil war, when the other branches of activity of the group, the secondary railways and tramways in particular, were disposed of, stagnated and/or began their terminal decline, the Group concentrated on its activities in Zaragoza and was able to remain active precisely in this branch of activities, of a local but highly promising scale.

In this respect, the constitution of the company Cardé y Escoriaza in 1897 for the manufacture of rolling stock for railways and tramways represented a fundamental strategic turn. Thereafter, the “Escoriazas”, with the support of the Bordeaux-based constructor Pablo Cardé, became the suppliers of rolling stock for the large Spanish railway companies and soon became a leading agent in the imminent boom in the electrification of the Spanish tramways. Belgian investors and the “Escoriazas” themselves played a highly prominent role in this strategy (Martínez-López, 1998). The contacts that the family had with the railway industrial circles and the French and Belgian electrotechnical companies (the Française Thomson-Houston electric company, in particular) played a decisive role for the future of the group. As well as the electrical tramways of a good part of Spain we should also add the promotion of regional rail initiatives within the framework of the strategic and secondary railway plans (Ministerio de Agricultura, Industria y Comercio de España, 1904).

4Following national sugar? Granada, Castilla, …

After his successful installation in Zaragoza and becoming a member of the small business elite able to intervene in his own name and in close cooperation with the major railway companies and leading groups involved in the electrification of the Spanish tramways, Nicolás Escoriaza set his sights on the city of Granada. There was a tramway project there that had been delayed for more than a decade and did not have the support of local promoters or the intervention of foreign investors. For this reason, Escoriaza moved to this city with the intention of undertaking the project, managing it directly and from the outset addressing the technical and financial difficulties involved in electrification.6

In many aspects, the economy of Granada at the time was similar to that of Zaragoza. As in the Aragonese case, the territory included important cities, Granada, of course, as well as Málaga and Almería and a large group of longstanding smaller towns. But, contrary to Aragon, we could describe this area as Andalusia’s “far east” which had a peripheral and isolated location in the national territory and encountered serious transport problems which only the coastal towns could overcome thanks to sailing (Fernández Sánchez, González Ruiz & Núñez Romero-Balmas, 2019). All of this made it a failed candidate to becoming the regional capital, secondary to the more dynamic cities of the country. Like Zaragoza, Granada and its region formed part of mainly agricultural territories that intensely benefited from the nationalist involution from 1891.⁷ Therefore, cereal farming and olive growing and consequently, the flour and olive oil industries, even wine production before the phylloxera crisis (Piqueras Haba, 2005; Molleví Bortoló & Serrano Giné, 2007), and other segments of the agrofood industry were profitably extended throughout the province and required significant investment in transport infrastructures in order to overcome the topographic limitations. We should also add the promising innovations of the second industrialisation, particularly the production of cane sugar (on the subtropical coast) and beetroot (on the plains of the interior of the region, across the whole of the Intrabetic Basin); an expansion which, for at least a decade, allowed Granada to be thought of as the national capital of the sugar industry. Activities derived from the sugar industry were also developed, such as the production of alcohols and other equally modern activities that were more or less related to the above-mentioned industries such as the production of fertilisers and cements, essential oils and a relatively broad range of industries that were small but covered a wide range of activities from the production of cured meats and cheeses to small-scale metallurgy activities (Jiménez Blanco, 1986; Malpica & Martín, 1992; González Ruiz & Núñez Romero-Balmas, 2007; Martínez Soto & Rosado Cubero, 2017; Germán Zubero, 2020).

In this way, a new and promising export base was developed in the region whose market was not necessarily limited to the small domestic consumption. And, like Zaragoza and its surrounding area, there was a large number of waterfalls in Granada which could be exploited with low-complexity and low-cost plants, one of which was installed by Escoriaza and his local tramway company. As in the case of the sugar industry, Granada seemed to be destined to become a regionally significant hydroelectric centre with many local companies, but the scarce demand and lack of cooperation between the local capitalists frustrated this expectation in the life cycle of the first generation of electrical industrial installations (Núñez Romero-Balmas, 1994, 1998; Piñar Samos & Giménez Yanguas, 2019). With all of its advantages, the logic of protectionism, which constituted the institutional support of the expansion of the Spanish flour and sugar industries, imposed limitations. The production of sugar expanded to other regions (Zaragoza, Valladolid, Madrid, Navarra) and, with overly high prices and costs, the supply soon exceeded demand even though the per capita demand was growing vigorously. The constitution of a quasi sugar monopoly in 1903 (Sociedad General Azucarera) reorganised this industrial branch, but, although a group was formed of free sugar producing companies that were proliferating in the province of Granada, the sector suffered from a golden decline as a result of the high protection and the limited internal demand (Martínez Soto & Rosado Cubero, 2017).

We could consider the business conducted by the “Escoriazas” in Granada in the same way as the first phase of their operations in the tramways of Zaragoza. They adapted to the usual model of intervention of tramway and railway installing companies. They took on a project that was experiencing difficulties, resolved the pending problems using financial contacts even on a European scale, mediating between them, ensuring the execution of the project and, once concluded, transferred the management and capital to other interested groups. A considerable part of this capital had to remain in local hands, which was apparently well-equipped at that time financially speaking and in terms of complementary initiatives.