Juan Costa: "We need to give much more support in terms of solvency and direct aid to the Spanish business fabric, which is very damaged"

Juan Costa Climent, former Minister of Science and Technology between 2003 and 2004, during José María Aznar's second government, presented his book 'Multicapitalismo: por un capitalismo que nos ayude a crear empleo, proteger el clima y frenar la desigualdad' (Multicapitalism: for a capitalism that helps us create jobs, protect the climate and curb inequality) on Capital Radio's Atalayar programme. In addition, Costa Climent analysed the current situation of the Spanish economy and the CSR that States must assume.

The former Minister of Science and Technology reviewed the global capitalist system. He also spoke of the need to change the way in which the success of companies and economies is measured, the importance of the solvency of economies in the future, the cooperation that the market requires between the private and public sectors, and the important role that politics must play in restoring public confidence.

Is it true that in recent years the organisational and economic system that has prevailed in the world is the capitalist one?

Capitalism since the fall of the Berlin Wall three decades ago has become the global economic ethic. In the last three decades it has brought 3 billion people into the market economy and has expanded prosperity around the world in an unprecedented way, creating a global middle class. In addition, it has created economies such as China through globalisation and has had great successes in terms of the world's economy and freedoms. Systems need to adapt and realities change, over the last 30 years the value or the way of measuring prosperity has changed and the system has lost the trust of the social majority. I think that especially in the most advanced economies like ours, in general the liberal democracies in Europe and the United States, the middle classes and the more modest classes have largely lost confidence in the system because it is true that globalisation promised prosperity for all and it is true that the middle classes have not benefited fully from that prosperity. This forces us to reflect on the fact that, rather than a crisis of capitalism, it is a crisis of confidence, especially in the advanced economies.

Indeed, this is the main thesis of the book: we are facing a crisis, not of the system as such, but a crisis of confidence. Could we be heading towards a kind of "progressive" social capitalism that adapts to the new ways of considering cooperation between countries, ecology and multilateral relations?

What I really argue in the book is the need to change the way we measure political and social success. The need to change the way we measure the success of companies and economies, and I do so taking into account that companies create an impact beyond financial profit that goes beyond their economic activity. This impact can be on the creation of intangible value, on the environment and on society. And in the same way economies have come from political success in the management of economic policy which has generally been marked by growth in Gross Domestic Product (GDP). GDP is a very important indicator from the point of view of economic activity, although it sometimes does not correctly reflect the increase in prosperity or the distribution of prosperity. Therefore, what I am proposing is a review of what are the indicators that allow us to measure the success of companies in economic activity and the success of countries. My proposal, and this is more of an opinion, is a market-based solution, not a regulatory solution, which is based on public policies in which we want to increase the role of the State. We are moving towards an economy that requires cooperation between the private and public sectors, where the private sector also has a public dimension to its activity. As we have seen during the pandemic, the private sector has mobilised to contribute and lend a hand and try to reduce the consequences or the lack of foresight of government policies. At the same time, governments today have to play a more relevant role from the point of view of countries' economic projects. So all this is changing, changing the way companies and economies create value and changing the way they measure it. Moreover, the polarisation or view that the public sector plays a different role from the private sector is changing. Today both sectors share goals because it is impossible in an economy not to share them in terms of creating prosperity. Thus, the role of both sectors is under review and as a consequence they are facing a change.

This reminds me of the concept of Corporate Social Responsibility (CSR) that I coined in business, could we be talking about a CSR of states and administrative systems to better adapt to these new times? And in relation to the pandemic, when the pandemic is over, will we experience a kind of happy 20s as happened in the inter-war period after the First World War?

Of course, you have to look at the past to foresee the future, although the situation is not the same. It does worry me to think that with such a large drop in economic activity as that which has occurred in Spain, far greater than that of the main economies around us, the economic and monetary policy decisions that are being taken. As if they were going to continue permanently in the future, economic activity is certainly not going to recover until 2023, and we have to be concerned about being in a position to get out of this dramatic situation, from an economic point of view, without creating permanent and structural imbalances. In the same way, I am concerned about the level of public spending, but also about the sustainability of public accounts in the future and, above all, about destroying economic activity and the solvency of companies. If we do not support companies, this destruction of the country's economic capital will be irreparable and, therefore, it is very important at this time to mitigate the dramatic consequences of the economic crisis. Much more support needs to be given in terms of solvency and direct aid to the Spanish business fabric, which has been badly affected. 

This is what is being proposed in Spain, direct aid to SMEs and small businesses so that they can pull themselves out of the abyss in which they find themselves. On the other hand, we would like to know what is multicapitalism?

Multicapitalism in a way what it tries to reflect is how the global economy has been transformed in the last 30 or 40 years. We have experienced a wave of growth in the world that has been based on the importance of financial capital and financial liberation. However, throughout this period, new capital has emerged, which is a concept we use in economics to talk about stores of value. Intangible capital is much more important today than it was 30 or 40 years ago. The environment is a scarcer resource and therefore the contribution of ecological capital in the creation of value in the economy is much more relevant and, today, social capital is increasingly important, especially in economies such as Spain's, where we need to regain the trust of the social majority. We need to have a cohesive society because in an economy that is increasingly intangible, trust and social cohesion are very important. Knowledge requires trust and a cohesive society. Multicapitalism reflects the transformation of the economy. An economy that has been marked by the prominence of financial capital in recent years. Today, this prominence of financial capital when measuring political and social success, the success of companies and governments, has to share the limelight with other capitals: intangible, ecological and social capital. These are more important than a few years and if we want to measure success, economic progress or the value created by a company, we cannot just measure financial profit. We must measure the intangible value that a company creates for shareholders and society and the impact that its activity has on the environment and on society as a whole. Otherwise, we can have companies that perhaps make money but do not create prosperity and it is important to incorporate this new vision when measuring the activity of companies, but the political success of governments is also important.

You are talking about having a growing economy and creating ecological wealth, how do you create ecological wealth?

I think that here too, in a way, we have had a conflict that is false. Clearly, ecological and natural capital is the primary capital of the economy, the economy relies on the environment, the economy needs the environment to advance and progress. We can have an economy in which the market takes into account the contribution to the environment, the contribution of ecological capital or not. In a way what I am proposing is that the market is the solution. The market can also aim to increase the stock of ecological capital or to increase environmental protection, to create ecological capital. A more concrete example, in Spain we developed an idea to promote tourism, which was that of Paradores Nacionales de Turismo. In Paradores Nacionales de Turismo what was their objective, to protect the Spanish cultural heritage because the State did not have enough resources to protect it, and they did it by linking it to an economic activity. Economic activities can also contribute to creating ecological capital, as well as, as they have done in the past, protecting the cultural heritage of a country, the important thing is that as an institution we give the market some instruments such as information and a pricing system. If you have taxes where destroying ecological capital is more expensive than creating it, economic agents will take these factors into account when developing their activity. However, today, despite the fact that natural heritage, the environment, ecological capital is very important, the destruction of ecological capital is not a tax indicator. We are demanding taxes for payrolls or activities that create profit and prosperity and we are not demanding taxes for the destruction of natural heritage or ecological heritage which is basic for the sustainability of the economy because the stronger the natural heritage the wider the growth potential of the economy. Therefore, it is about incorporating this into the equation so that the market is the solution to problems such as climate change or environmental degradation.

In that equation, very interesting, but what role should politics in a European country play?

If we focus on the environmental problem, there are two ways of dealing with environmental degradation and climate change, one is with more regulation and more state intervention. We are seeing that this is not working, the state must have a role in which public sector regulation is important. The other alternative is to use the market, instead of taxing activities that are good, with taxes on activities that are good, to demand taxes on activities that are bad and those citizens who have less economic capacity to give them direct aid or subsidies by means of less direct taxes or by other means.

Those are the two approaches that exist, there are no other approaches in between, so far the whole solution to the environmental challenge of the global economy has been more focused on the first alternative and I think it is good to open a debate on the possibility that the second alternative and the market can be a solution. If we talk about politics it is certainly very relevant within this equation and also over the last ten years we have seen how it has really been a time of political chaos in the world, reflected in events such as Brexit or the rise of left and right wing populism in many economies and in many advanced nations. Politics has a very important role to play and that role is through the recovery of citizens' confidence and that requires us to work together and bet on the system, learn from the mistakes made and try to fix them in order to recover the confidence of the majority, which I believe has been lost in many economies. Without regaining that confidence, the intangible economy cannot take off and in economies such as Spain's or the new advanced economies we will not be able to tackle the problems that require a collective response from society, such as climate change or the obvious environmental degradation.