Attributing Madrid's recent economic dynamism relative to Catalonia to its status as the capital raises several problems: 1) Catalonia was more dynamic than Madrid during the Franco regime (…) 2) During the first decades of democracy (1978–2000), Catalonia maintained a dynamism comparable to that of Madrid. 3) Catalonia's relative decline began in the 2000s and accelerated from 2012 onwards. (…) Any explanation, therefore, must focus on what changed in 2000 and, above all, in 2012. (…)
The real contrast lies in the business climate. (…) In Catalonia, everything is about administrative obstacles, (…) In Madrid, on the other hand, everything is easy. (…) And Barcelona has become the intellectual capital of degrowth, with its leading theorists teaching at Catalan universities.
Jesús Fernández Villaverde is one of the leading ideologues of the Spanish right, and he just tweeted a lengthy account of Catalonia's economic decline that warrants a response.
The debate demands defining what we mean by "economic dynamism" and how we measure it, because without doing so, we get lost in subjective impressions. We have no better concept than GDP per capita (GDPpc); it has many flaws, but it's what economists have invented to measure a country's prosperity. When we use this measure, Villaverde's thesis collapses on all fronts:
1. The chronology: During the Franco regime, the Catalan economy was very dynamic, but no more so than Madrid's: with the statistics we have (more imperfect than those we have today), all we can say is that their respective GDPpc doubled. Between 1980 and 2000, the Catalan economy was very dynamic (+81%), but not as much as Madrid's (+104%). Since 2000, both have slowed; the Catalan economy (+10%) more so than Madrid's (+19%), but the difference has been concentrated in the period from 2000 to 2012: this period generated 61% of the total difference, while since 2012, the remaining 39%.
2. Causality: Is the difference in the business climate what explains the greater dynamism of Madrid's economy, especially since 2000? Villaverde affirms this, but does not justify it. It may help us answer this question to examine which three Spanish autonomous communities have performed the worst economically since 2000. If Catalonia's GDPpc has grown by a tiny 10% since that year, the worst performers have been the Balearic Islands (+6%), Valencia (+4%), and the Canary Islands (0%). Is the business climate particularly stifling in these three autonomous communities? We have no reason to think so. It seems more reasonable to conclude that the problem of these autonomous communities and Catalonia is that their economic structure depends either largely or exclusively on a low-value-added activity—tourism—which has ceased to contribute since 2000.
3. The ideology: In Catalonia, there are undoubtedly some academics and minority political parties that preach degrowth. However, so far, neither have had any impact on events. If anything has characterized the Catalan economy in recent decades, it is accelerated growth. Unlike GDPpc (a very imperfect measure of development), GDP (which measures growth) is rocketing, which has translated into massive immigration that has caused the population to skyrocket. The engine of this economic growth has been a redoubled commitment to tourism, which has more than doubled the number of foreign tourists (+124%) since 2000. The same has happened in the other problematic autonomous communities: Valencia (+182%!), the Balearic Islands (+53%), and the Canary Islands (+52%). No, Catalonia is not for degrowth, but rather anchored in it. developmentalism from the 1960s.
It's clear that, once subjected to the data, Villaverde's thesis is completely unsupported. This doesn't mean he's fundamentally wrong: the fundamental reason for Catalonia's loss of "economic dynamism" isn't Madrid's status as the capital, but rather the commitment of our elites to an economic sector that contributed greatly in the past but is now more than enough.
The Letta and Draghi reports on the loss of European dynamism are central to the conviction that the European economy is trapped in medium-tech sectors (internal combustion cars, chemicals, etc.). Catalonia's problem is that it is also trapped in a low-tech sector, and what we need to do is focus on how to free ourselves from this dependence. Villaverde's interventions respond to a legitimate political agenda, but we must ensure that they do not lead us astray.
