Productive model: right-wing for capital, left-wing for labour
The latest issue of the Catalan Economic Review, directed by Guillem López Casasnovas, is dedicated to analyzing its first forty years. The start of the REC is associated with Spain's entry into the European Economic Community. All the works offer important retrospective views.
The Catalan economy has expanded significantly in real gross domestic product, but in per capita terms the trajectory is disappointing. From 1975 to 1985, the Catalan economy, like the Spanish one, experienced a decade of crisis. GDP was not growing, nor was GDP per capita. What did grow, and significantly, was unemployment, to the point that productivity per employed worker and per hour of work also increased. Unemployment benefit was the first major social measure of the first democratic governments, and it quickly became one of the most important public expenditures, reducing the negative impact of unemployment through significant public debt.
Fortunately, the announcement of Spain's entry into the European Economic Community relaunched growth expectations. Spain could not receive community (agricultural) subsidies until after the first seven years, but it received an extraordinary wave of foreign investment that bought at bargain prices many Spanish companies that could not overcome the crisis or could only do so by conquering the European market. Local companies had to assume the substantial investments indispensable in production, management, and marketing, but they did not have enough financial muscle to do so. These years (1986-1992) were the last great wave of investment in productive capital experienced in Catalonia. Between the post-Olympic crisis and the entry into the euro (1-1-1999), it is observed that the gains were due to the expansionary impact of the sustained fall in interest rates, which was the prelude to the real estate bubble.
The next wave of investment – derived from the entry into the euro and the European Central Bank’s simultaneous policy of low interest rates – was what fueled the real estate boom, which allowed for a lot of new construction, but led to a financially unsustainable bubble. When it burst, its effects were devastating and wiped out the bulk of the Catalan financial fabric, especially the savings banks, and drove unemployment to historic highs. New regulations made access to mortgage credit difficult for many years (up to the present and probably much further). Massive real estate investment was the main attraction for immigration, to the point that real GDP per capita grew very little, and productivity, not at all.
The financial and sovereign debt crisis halted economic progress, although thanks to the massive destruction of employment, it gave the statistical illusion of an increase in labor productivity (fewer employees did almost the same job as before). The exit from the crisis was slow and when it seemed to have been completed, the pandemic was once again a very hard blow to the Catalan economy, as to all tourist economies. The post-pandemic Catalan recovery, which seems intense, is nothing more than a recovery of pre-pandemic real GDP per capita and labor productivity levels. In fact, the cycle of the real estate bubble and its subsequent crisis, and that of the pandemic, have had slow recoveries. The Catalan economy has not progressed, in terms of per capita prosperity, since the beginning of the century. Seen in perspective, we can affirm that since the first integration into the EEC was completed, there has been no real engine of growth that has translated into sustained increases in real per capita prosperity. Productive investment has grown too little. Labor remuneration has not grown at all. We find ourselves in a situation where we have little capital – it is aging and is not renewed or expanded – both public and private, and labor remuneration has collapsed after a succession of labor reforms that have worsened conditions for new entrants (young nationals or immigrants).
What needs to be done to get out of the deadlock of stagnant productivity? In my opinion, it is necessary to combine – simultaneously, and this is very important – policies that encourage capital investment and policies that make labor more expensive. In other words, right-wing policies for capital – that attract it and encourage it to invest – and left-wing policies for labor – that guarantee higher remuneration. That is, the opposite of what has been done in the last more than twenty years, in which left-wing policies for capital, which have scared it away, and right-wing policies for labor, which have devalued it, have dominated. This obviously requires a great pact for the country, which goes beyond the framework of the self-governance competences of Catalonia and demands consensus at the state level.
