A mid-decade, Spain accounted for 14% of the population of the Eurozone and 12.2% of GDP in the European Union. Some figures provided by some economic studies agree that it in the last five years of the twentieth century, the Euro 10,800,000 jobs created, of which the English economy accounted for 29.5% of that total: 3,000,000. Between 2000 and 2005 the proportion was extended to 66% between 2004 and 2005 was estimated at 91% the proportion of total employment in the euro area produced by Spain. While the English economy for nearly two decades does not grow over 5% in real terms, it is true that the English real GDP grew above the average of the 12 most important countries of the European Union even before the global financial crisis . Thus, Spain opted for an employment-intensive economic growth which indirect effect has been the limited increase in labor productivity. It has created many jobs but has formed a negative gap with respect to labor productivity in the rest of Europe.
Spain just over 40 years was a poor country. His time overseas empire lay at the bottom of the annals of history homeland and successive civil wars, the iron dictatorship of Franco and the impoverishment of Europe after the world wars Spain had pushed to the peripheries of European interests and global . To illustrate a little is enough to look at the behavior of the Colombian economy versus the English economy between 1980 and 2009: the English per capita GDP current dollars in 1980 was $ 6045.14 compared to 1242.04 U.S. dollars recorded by Colombia, 20 years later the situation changed markedly, to almost $ 32,000 per capita income rose while the Colombian English came to $ 5055.75.
Spain began as a producer of goods of low added value, like most emerging markets today, which meant low wages and production costs therefore quite low. Low wages that attracted all sorts of labor and, given the high demand of work, prompted an exodus of foreign workers who made Spain a major recipient of migrants in the world. Indeed, as expected, the economy Iberian began to grow rapidly, wages rose and, of course, the competitiveness of English companies began to disappear. Being more thorough in the explanation, Spain faced supply shocks on the side of reduced interest rates of 12.7% between 1998 and 2005 to 3% on the eve of the 2008 crisis. Low interest rates and a large number of immigrants boosted the supply of goods and services and on the other hand, the demand was being fueled by the boom. Asset prices rose, especially real estate assets, wages rose moderately indebted companies with ease.
however did not work. Spain continued to sell the same goods and services, only more expensive, and plunged into the exploitation of new economic sectors with some shyness. The construction lined the 19% of GDP, for example, but the English economy could not introduce innovation and competitiveness lost every month. It was not something new. Economic policies were defending the low-wage model that agents interpreted as the easy way out compared to investment in innovation or adaptation of new technologies: a reflection made by the eccentric Sala i MartÃn successful and suggests that if immigrants had not rushed to accept low pay (of course higher than those of their countries of origin, problems and contradictions bulging) enterprise reforms in Spain would not have been delayed.
But there are macroeconomic factors to understand that the rapid economic growth would be an abrupt stop English. On the one hand the low interest rates do not depend on a sovereign decision of Spain for its accession to the Euro, interest rates end up being a decision of the European Central Bank. And like any set of strategies, movements in interest rates are being determined by external decisions, in this case, increases in the type of intervention that conducted the Federal Reserve of the United States in 2004. That sign of money market investors accounted for new expectations: that low interest rates in Europe would rise. And obviously, a big disadvantage of this kind of monetary policy tools is that once they are on the threshold under the expectation that incubation is a single, ever have to go.
The other factor was the strong dependence of the real estate sector. Shielded on the premise false that says "the brick never goes" I bet the English builder boom soon became a bubble. According to frequently cited estimates, for a good while 60% of gross capital formation was in construction. As the supply of housing and real estate grew over the belief of his constancy in prices, speculation they became somewhat widespread. Yet against all logic, buyers and sellers believe that prices would go to infinity and clearly did not happen. The frenzy stopped, prices fell due to the decline in demand, and real estate construction companies stopped building and hire workers and now 19% of the English economy, as Sala i Martin warns, runs the risk of disappearing. The sound of hysteria did not allow the voices of those who warned that this would end and needed strong reforms to modernize the English productive sector.
Real estate and construction indebted to the bone with the financial-sector debt is estimated at 27% of English GDP, "the banks will keep the properties and auction to recover something. The debt ratio will fall but will not disappear and, with an income close to zero, nothing to suggest that the housing sector responds their commitments. Today the English government naively (or incompetently?) Believes that the problem of Spain is motivated by low aggregate demand, then all Keynesian fiscal prescriptions have been conducted to revitalize it, when the fundamental problem is a very low supply. The problem is that demand exceeds supply, then left with two choices: reduce demand, which is already happening and generates harmful depressant effects or increase supply. The government should lead efforts to revitalize the aggregate supply, which is not yet the case. Spain is betting that short-term prescriptions are merely palliative, because the disease, severe and result frenzy of previous years, there seems to finish. Action is needed long-term, painful and difficult, but that ultimately impact on productivity, creativity and innovation.
This is another Spain, not smelling cane, snuff and pitch, but that is in danger of being reduced to a position unworthy of his greatness. Spain expects that the incompetence of their leaders, the silence of the regional authorities and the pettiness of popular opposition. It is time for reform. Either that or the catastrophe and the end of the English miracle.
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