A perfect storm in a sunny economy: a political economy approach to the crisis in Spain

Abstract

Although Spain’s economy was seen as a miracle during the most recent expansive phase (for its labour market outcomes in terms of job growth, among other things), the economy’s development during those years suffered from severe problems that deserve attention. This became more relevant in a context like the current one, where there is no consensus around which economic policies might lead the country back onto a stable growth path. Using a systemic approach in which we analyse the growth model, the role of Spain in the European division of labour, the financial sector, the labour market, the public sector, and the distribution of income, we contend that, in contrast with several narratives concerning the crisis in Spain: (i) the ‘living-beyond-our-means’ discourse is not true; and (ii) certain political and economic aspects, usually missing in those narratives, are essential to understanding the recent evolution of Spain.

Peripheral Europe beyond the Troika: assessing the ‘success’ of structural reforms in driving the Spanish recovery

“…Spain witnessed strong debt-led growth in private investment and consumption between 2000-2008, sparking a real estate bubble (Buendía, 2018). Once the global financial crisis broke, the imbalances accumulated by the Spanish economy became evident and triggered a sharp decline in private domestic demand.…”

Does deregulation decrease unemployment? An empirical analysis of the Spanish labour market

“…As regards the first factor, it is worth stressing that reducing unemployment in Spain requires higher growth rates than in other economies (Cuerpo, Geli and Herrero, 2018). Regarding the second factor, the recent trends in unemployment are clearly related to the rapid expansion of the construction industry during the period of growth and its equally rapid collapse during the recession (Buendía, 2018).…”

“…Data from the European Union level analysis of capital (K), labour (L), energy (E), materials (M) and service (S) inputs (EU KLEMS).8Buendía (2018) argues that the centrality of the construction industry is explained by four factors: (1) demographic expansion -in part due to an influx of immigrants -which created a demand for new housing; (2) the growing numbers of tourists in coastal areas;(3) easy access to loans at low real interest rates, in a context of low rates of return on other financial assets, which turned housing into a safe haven; and (4) the arrival of foreign investors drawn by a buoyant mortgage market.9 In 2015, the proportion of those employed in the construction industry with a basic level of educational attainment was 54.3 per cent, compared to 33.7 per cent in other industries(CES, 2016, p. 44).…”

¿Conduce la flexibilización a menor desempleo? Un análisis empírico del mercado laboral español

“…Respecto al primer factor, cabe recalcar que España necesita tasas de crecimiento económico muy superiores a las de otras economías para reducir el desempleo (Cuerpo, Geli y Herrero, 2017). En relación con el segundo, la evolución reciente de la tasa de desempleo está indudablemente conectada con la acelerada expansión del sector de la construcción durante la fase de crecimiento y con su derrumbe igualmente acelerado en el periodo recesivo (Buendía, 2018).…”