The Spanish economy as a surprise

Spanish economy

We might be already used to hear the government spread good omens about the Spanish economy. But we may not be to used to read them in the English-written press. However, the headline of this article happens to make reference to a comment recently published in the Financial Times (on May 9). It mentions favourable surprises hard to see due to the political hubbub that floats as foam on the surface of our society, conveniently fuelled by interests groups and the media. Let’s try to remember.

The first source of these surprises is the size and speed of our external adjustment. Well after the crisis started, and as a result of a growth of prices systematically higher than that of the rest of the Eurozone, our external deficit was, proportionately, the highest among the surrounding countries.

Without the ability to pursue devaluation policies, it was hard to believe that we managed to adjust our prices fairly. Nonetheless, it is very likely this year to register a surplus for the first time in quite a long time. The cost, in terms of growth and employment, has been very high, but the goal of adjustment has been achieved. Consequently our ability to compete has improved as much as it did during the recession of 1992-1993. Only that on that occasion, the peseta had to be devalued three times. This time, we had to do it within the framework of a single currency.

Secondly, there’s our fiscal adjustment. It’s true that if we take into account the weight of our deficit compared to the GDP, we will find a figure that is just slightly lower. But it has done so within the context of a deep recession. Like in the case mentioned earlier, we are talking of an adjustment without precedents.

Needless to say, this adjustment is possible at a high cost. It’s also true that it would have been preferable to delay the adjustment until growth had been recovered, but that was not a viable alternative due to our dependence on external funding.

The behaviour of exports is a third case in point. Even though they started with the prices against them, during these years, export companies lost less market share than its counterparts in other Eurozone countries (yes, German companies included). And this is not a futile achievement. These companies are indeed at the core of the once famous production model: to be able to give our people top quality jobs, it will suffice that all companies, exporting and non-exporting, operate at the same efficiency than those that grew a reputation in the global market. It will be slow, of course, but we need not create anything from scratch: we already have a solid starting point. It is smaller than one might have wanted, and still subject to risks. With the never addressed debt issue being the largest of them. But it still gives us a path to follow, and therefore it raises a reasonable hope.

Lastly, there’s one less visible but also very important surprise. Outsiders wonder how our society is in peace, despite of the deep crisis. There are some reasons for that. But today I’d like to elaborate a bit more about one reason in particular by giving a real example.

In the Raval district, in the Spanish city of Barcelona, 45.000 people inhabit an area of around 1 square kilometre. Almost a half of them are immigrants. They come from a dozen different countries, with 9 different religions (without counting the agnostics), and there is a 30% unemployment rate. Nonetheless, one can safely walk around the neighbourhood without worrying too much. Something one might never dare to do in some areas in cities like Paris, New York, Mexico or Buenos Aires. Is this a miracle? No. Are we warmer and nicer people? Not either.

The calm reigning there is the result of the silent work by some organizations, mostly private. They work in collaboration with schools and public services, as well as with the valuable help of hundreds of volunteers. The goal of these organizations is to foster the integration of the inhabitants of the district, with a special focus to children. A significant point, because many immigrants come not so much to improve their lives, but to give a future to their children. So they stay put as long as they see their children have real chances of prospering, learning and achieve a good position in life.

Long time ago, when I was a teacher at a school in Barcelona’s Montjuic district, the father of one of my students told me he didn’t wanted anything for himself. Instead he wanted his children to have better luck. He was 29 years old. The day the citizens of neighbourhoods like Raval start having the feeling there’s no hope for the generations to come, social peace will be over.

These organizations struggle with humble budgets and suffer a growing lack of resources, mostly coming from private initiatives. The fact these organizations can keep on with their mission of delivering hope to the underprivileged is as important as adjusting the deficit or changing the structure of our economy. And they must be able to attain their cause not by delivering sermons or giving gifts and promises typical from the welfare state, but offering real options for change through hard-work.

Therefore, since there are a group of companies holding the seeds of the economy that we want; and also there’s those who work to integrate the underprivileged we can be sure the seeds for a more human society exist. Let’s not forget this: it is an integral part of the surprise.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

Be the first to comment on "The Spanish economy as a surprise"

Leave a comment