In the beginning of the 19th century, Spain underwent a revolution due to the occupation of Napoleon I. Napoleon forced the then King Ferdinand of Spain to abdicate his throne. The people of Spain fought back against the French occupiers. Eventually the French overextended themselves in their attempt to enlarge their territories and could no longer continue to hold onto Spain. On the road to regaining an independent Spain, they recognized the Constitution of 1812. Decrees were issued abolishing entailed lands, cuts to the church tithes and monasteries, and instituted land income tax, tariffs. They instituted a national army as well. (1)
Though, no longer occupied, however, Spain was still at war. Infighting between political parties and revolutions between the military, the peasants, and the bourgeoisie marked this period. Of particular interest was a move towards a more liberal government and the dissolving of the monarchy. Spain, during the 19th thru 20th century, had a tumultuous political climate. Ferdinand VII who ruled Spain died in 1833 leaving his infant daughter Isabela as his heir. Carlos, his brother, challenged the succession leading to a lengthy civil war. Queen Isabela II was a controversial figure. Not only was she placed on the throne in an untraditional way, she was a notorious party girl, often taking lovers other than her husband. Because of her poor leadership skills and disinterest in actually performing her duties as queen, Spain underwent many years of revolting and in-fighting between political parties. (2)
The continuous fighting and war affected the Spanish economy immensely. While other European countries were flourishing with modern industrialization and imperialism, Spain struggled. Interestingly enough, Spain was one of the first Western countries to obtain colonies in the West Indies. However, by the 19th century, Spain lost their colonies due to rebellion from the inhabitants seeking independence. Territories such as Bolivia, Ecuador, Venezuela, and Argentina successfully rebelled from the Spanish occupiers. Mexico, Chile, Paraguay, and Uruguay followed suit. (3)
Spain also lost their colonies in the West Indies. The West Indies represented a huge portion of Spain’s economy. Agriculture was quite important in solidifying economic position in the Caribbean. The trading of sugar, molasses, coffee, rum, and tobacco was quite profitable to Spain and other Western countries involved in colonization. Another major source of commerce was the slave trade otherwise known as the Triangle Trade. Once news travelled of successful rebellions against the Spaniard occupiers, many West Indian territories fought for their independence as well.
Not only was Spain fighting rebels they were also fighting other Western nations for territory. They had already lost Jamaica to Britain in 1655. They eventually gave Trinidad to Britain in 1802 only to lose Santo Domingo on the island of Hispaniola in 1821. By the time the smoke cleared, Spain had lost all their possessions in south and central America, the Americas, and the West Indies. All that was left was Cuba and Puerto Rico. Once the slave trade simmered, Cuba relied on exports to America. However, when America had their own economic woes and cut down on the import of Cuban sugar, Cuban rebels began to destroy the plantations that continued to give Spain revenue.
Spain suffered many losses overseas due to its tumultuous political climate which affected their economy greatly. While other nations in the area were engaged in an Industrial Revolution, Spain lagged behind. Spain’s economy consisted of mostly agriculture. Spain was mostly rural. At this point their participation in modern industry was mostly in the textile mills. Wool was a major product. Even with the profiteering and growth that occurred as a result of World War I, Spain still lagged behind. Their technology was not up to par, they did not have sufficient irrigation projects, and had poor transportation. (4) An increase in population with limited natural resources also affected their economy. Spain simply could not keep up or compete with other nations because of their inability to establish significant capital. (5)
In 1936, the two main competing factions were the Republican Government and the opposition Nationalists. The Republican Government consisted of an alliance between communists, socialists, and anarchists who promoted equality and advocated for a smaller role for the church in government. The Nationalists were a right-wing alliance that consisted of the military, the church, the monarchy, and the fascists. (6) With continual infighting between government styles, the economy was unstable.

REFERENCES:
(1) http://encyclopedia2.thefreedictionary.com/Spanish+Revolutions+of+the+19th+Century
(2) http://www.antor.org/spain/queen-isabel-II.html
(3) http://www.historyworld.net/wrldhis/PlainTextHistories.asp?groupid=1737&HistoryID=ab49>rack=pthc