||Spain: From Boom to Bust to Sustainable Prosperity?
||Monday, July 28, 2014
||Aug 25, 2014
The ongoing crisis in Spain, while undoubtedly economic and financial in nature (as with the world economy as a whole), is also environmental and social. This current crisis certainly shares common features with its predecessors (excessive debt, speculation, fraud, falling production, unemployment, and so on). Along with this, we have seen a sharp increase in social inequality, gender discrimination, and the environmental deterioration brought about by a model of production and consumption (“the treadmill of production and destruction”) that seriously jeopardizes the very survival of not just Spain but our species.
Long before the onset of the crisis, many critical economists in Spain had been warning about the unsustainability of the Spanish economic model, above all when environmental costs are considered along with the high social and financial costs of this “development” strategy. The unsustainability of the Spanish model is evident both in terms of the consumption of resources and their waste/disposal (a type of analysis synthesized through the concept of the social or economic metabolism, in this case of Spain).
Of all the natural resources consumed and valued in the last two decades, 50 percent correspond to the products of quarrying and mining and are destined to feed the successive housing and infrastructure booms. This is absurd in both ecological and economic terms, and even more remarkable given that two-thirds of the buildings were built not in response to demand for homes, but rather as speculative construction of empty homes in expectation of their revaluation and subsequent sale to materialize the investment, or as secondary homes used on average just 22 days a year.
An even more striking illustration of this absurd situation is the fact that, at the height of the housing boom, more new homes were under construction in Spain than in France and Germany combined (about 900,000). It is hardly surprising, therefore, that the bubble wreaked enormous harm on the physical landscape, at the same time as the Spanish model of development based on real-estate and tourism has seriously undermined Spain’s hydrological ecosystems, especially on the coast.
Another feature of the Spanish model has been a pattern of territorial development based on the dispersion of urban centers and spaces, requiring the construction of major transport infrastructures to connect them. In this process, individual motorized transport and, on the collective side, high-speed transportation have been favored above all else. By way of example, while the Spain ranks 13th among the world′s economy (9th before the crisis), it now has the largest high-speed rail network in Europe, and the third largest in the world! Apart from the environmental destruction involved, both solutions have proved to be as costly, in both financial and quality of life terms, as they are ineffective in resolving the problem of traffic congestion. They also contribute to the territorial polarization of economic activity.
It should be stressed that this domestic unsustainability is matched by the international unsustainability of the model as a result of Spain′s increasing dependence on the rest of the world for both resources and disposal. Take for example, the fact that for every ton that leaves Spain in the form of exports, nearly three tons more enter as imports. Or consider that in order to offset its ecological footprint, Spain would require forests covering three times the entire country. These are some of the reasons why the ecological-economic model of a country like Spain cannot be reproduced worldwide, since, obviously, not all countries can at the same time run a deficit in material, territorial and financial terms.
The crisis that began in 2007 is exacting a huge social cost, in terms of unemployment as well as the decline in basic public services directly associated with social welfare. However, the drop in economic activity has also brought a change in the composition of the natural resources consumed by the Spanish economy: the use of non-renewable primary (extracted) materials and the emissions of greenhouse gases have shrunk dramatically, while the relative importance of renewable energy and materials has increased. These are “paradoxical” tendencies that might nonetheless point us in new directions, providing opportunities for quiet reflection on the necessary change of economic model.
Ideas on moving to a more sustainable and equitable scenario
If, beyond a certain level, the increased consumption of goods and services does not necessarily increase the welfare of the population, it would not appear very reasonable to increase indiscriminately the production of these goods and services. Thus, the economy should not be focused on first and foremost on growth, but instead on four principles of sustainability that would serve as guidelines for change: renewable energy; closed material cycles; sufficiency, redistribution and self-restraint exercised through democratic regulation; and the precautionary principle.
Introducing these principles into the Spanish economy would require implementing a battery of strategies and measures in different fields, ranging from the overall institutional framework (involving economic planning and its objectives with respect to the ecological footprint and material requirements, policy incentives and penalties favoring sustainable production, a more rational work-time policy, the development of information systems and data corresponding to new priorities) to sector-specific measures necessary for the economic and ecological conversion of the Spanish economy, such as:
Spatial planning based on the characteristics of the soil, climate and available resources.
Introduction of disincentives to the construction of new housing and infrastructures while providing incentives to efficiently manage the existing housing stock.
Integrated policies for energy and water management: driven by demand-management and consumption reduction, and, in the case of energy, faster replacement of fossil fuels and nuclear power by renewable energy (solar and wind).
Coherent waste management policies: prioritizing prevention, reduction and reuse rather than recycling and incineration, and ensuring organic nutrients are composted and returned to land to grow our soil reserve.
Transition to organic farming and animal husbandry: radically changing the bias of current public subsidies and policies for the sector.
Internalizing the basic principles of clean industry, for example, by generalizing pollution prevention and savings strategies and designing products that takes account of the entire life cycle of the product.
Job creation in the sustainable economy and the social economy: stimulating those sectors that help create generate employment, improve social cohesion, and do so with either minimal or even a positive environmental effect.
How should this be funded?
Of course, the kind of economic and ecological conversion we are talking about necessarily requires funding. This can largely be obtained by implementing many of the major reforms required in the Spanish financial and tax systems.
Recent events have clearly demonstrated the need to restore some of the old regulations and guarantees governing many types of financial transaction. Moreover, the reestablishment of a public bank would help not just to limit the huge economic power of private banks, but also to reorient economic activity and investment with sufficient financial independence. Recent nationalization processes resulting from bank bailouts have provided (and may still provide) opportunities for this.
Reform of the tax system, in order to make this both more solid and truly progressive, in terms of both the collection and the use of resources, is essential if we are to achieve effective economic transition and social welfare and equality. This system must be able to finance a series of public services (education and health) and quality social benefits. Several measures are necessary in order to meet these goals: a) adoption of a strategy based on more and better taxes, correcting the regressive character of the current system that benefits the rich; b) decisive action against tax fraud (estimated to amount to over 6 billion Euros, or around 6% of Spain’s GDP); c) equal treatment of gross labor and capital incomes, eliminating the deductions that lead to outrageously low effective rates on business income; d) launch a genuine ecological tax reform, focusing on the environmental impacts of production and consumption and thereby generating additional resources for the transition to the new model and a dissuasive effect on unsustainable behavior; e) elimination of the fiscal advantages for contributions to private pension systems to strengthen the public system, thus reducing the pressure for profitability in the financial markets, and hence the speculative movements associated with the operation of these funds.
All of these proposals show that it is technically possible to introduce substantial changes into the Spanish model of production and consumption. Unfortunately, that is not enough: change also requires political will, and above all, sufficient social support. Neither are easy to achieve in a context like that of Spain today, where many of these proposals imply breaking with the modus operandi of the economic powers, that is, with precisely that which explains Spain′s disastrous environmental-economic development in recent decades.
In current circumstances, not trying would not appear to be a valid option. Nor can we place our hopes in a return to the “good old days” or the false promises of technology, when what we really need is progress towards a radically new model that prioritizes the ecological and social dimensions over just the economic.