Thursday, 2 September 2010

Bread today can bring hunger tomorrow

The above phrase is a literal translation of a Spanish saying: “pan para hoy y hambre para mañana”. The closest sensible translation I can think of is “laugh now, cry later”… a typical Southern European attitude to problems which makes this part of the world a great place to live in. Sometimes, however, we can get carried away with “laughing” by adding a few boosters (such as consumer or housing debt) so that the “crying” can almost develop into “dying”. While I write this facetiously, I think we have experienced too many excesses in Spain over the last decade.

How have we Spaniards managed to focus on today at the expense of tomorrow? Here go three of my favourites:

1. Dependence on the construction and housing sectors

This is a sector that cannot be competed away via trading and has thus avoided the impact of globalisation. It also happens to be low value-added labour intensive so that job-creation was an added bonus. Politicians of all sorts became chummy with construction “entrepreneurs” in a fatal embrace which was to show itself to be unsustainable. There were few incentives to improve education and competitiveness to face increasingly assertive emerging markets.

“Pan para hoy y hambre para mañana”

2. The use of deferred payment mechanisms to finance the above

The main constraint to the above policy is the availability of finance. Fortunately, central bank policy across the Euro area meant that money could be thrown at the above sectors in the form of both development grants from the European Union as well as financial debt provided by foreign financial institutions and other long term investors. To ensure that the volumes of debt being thrown in did not scare these foreign investors away, the funding was conveniently disguised into debt issued by local financial institutions, infrastructure “public-private project financing” and corporate debt of construction companies. I will not provide figures in this post but take my word for it. The volumes involved are huge. One flaw in this policy- debt has to be repaid and we cannot devalue our currency.

“Pan para hoy y hambre para mañana”

3. The restricted list method for choosing political representatives

The intellectuals who designed the post-dictatorship constitution decided that they wanted to strengthen political parties in the light of the inherited power of the Armed Forces, the Catholic Church and other reactionary elements. This might have made sense at the time, but it has since developed into a mockery of democracy where candidates owe their loyalty to the party that includes them in the list and not to the electorate. As a consequence, political parties have become so strong that they have weakened the very fabric of society. There are few, if any, genuinely independent institutions in Spain, including the judiciary and the press.

“Pan para hoy y hambre para mañana”

Change is necessary but I don’t think that change will come naturally. Those that benefit from the status quo will not voluntarily become the agents of change. Change will only come about if forced by circumstances or outsiders. This was and still is my great hope for the crisis. A renewed commitment to envision, propose and create a genuinely liberal society where basic rights are enforced, responsibility is assumed, and creativity and freedom from coercion genuinely flourish. After all; who wants to build a house on sand?

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