Politics without sovereignty: the strategic insecurity of the Spanish economy

In risk management jargon, two metaphors are used to qualify the degree of predictability of a major crisis. Lebanese mathematician Nassim Nicholas Taleb developed the concept of the Black Swan to signify the existence of events whose element of surprise has consequences that are greater than the sum of their parts. Some well-known examples would be the economic effects of the Twin Towers attacks, the Fukushima accident and the Lehman Brothers bankruptcy. For his part, French academic Didier Sornette coined the term Dragon King to conceptualise that there are options for anticipating or predicting "unknown events" if we have real-time information about the behaviour of complex systems, because they are subject to dynamics, correlations and patterns, "canaries in the mine" that allow chaos to be anticipated. It is still too early to say for sure if in the case of the economic crisis that is hatching under our feet it is more appropriate to talk about swans than dragons. 

Although it does not seem that, in the case of Spain, the weakness of our economic model could have taken anyone by surprise, and it has much to do with another fabulous animal, in this case the goose that lays the golden eggs, better known as the tourist industry. This sector has not stopped growing since the 1959 Stabilisation Plan facilitated its massive development, to the point where it now accounts for around 13% of the national GDP. It is not surprising, then, that the Bank of Spain has just predicted a fall of approximately 13% GDP in 2020, or that a recent study by the consulting firm Deloitte shows that 41% of employers consulted expect to reduce their staff by 16% this year, while only 51% expect to recover their activity after the second quarter in 2020.

The positive health that tourism enjoyed until it was affected by health confinement, led to the country's de-industrialisation, the inability to generate sufficient employment, and the demand for low-skilled jobs for labour-intensive activities, while our Public University subsidises Germany or the United Kingdom by providing vocational training for highly-skilled workers, immigrants whom our production model is unable to employ. 

Our perennial lack of an active industrial policy has a direct correlation with the lack of innovation-led growth processes; in short, because we cannot create added value, and are forced to compete on price. This being negative in itself, the COVID-19 crisis has highlighted the extreme strategic vulnerability and insufficiencies in which we have been placed by our industrial and information dependence over the years, thanks to the fig leaf of tourism, which, having now lost, can no longer disguise the fact that, as in Andersen's tale, our industrial fabric does not cover our nakedness. And what is worse, it has brought to light our inability to act strategically and autonomously. 

We have lost 30 years of being involved in disquisitions about the distribution of internal sovereignty, while smilingly giving up external sovereignty, and allowing more and more decisions that concern us to be taken by others for us. So, even though the export of our manufacturing companies -mainly focused on assembly activities and little added value- has seen continued growth since the previous crisis, there is a tendency for the shareholders of these companies to be transferred to foreign hands, so that decisions of the Boards of Directors -representing the interests of the shareholders- regarding investments, remuneration and labour contracts are made less and less in a Spanish key. As a result, the weight of manufacturing production in job creation continues to fall in Spain, largely because the globalisation of production chains has made it possible to reduce wage costs by outsourcing labour, and to relocate labour-intensive production activities to lower-wage countries. This has led to a fragmentation of production phases, which, being distributed across the planet, have promoted both multi-directional trade and our industry's expertise in the assembly of components produced in other countries, a consequence of which is our inability to produce consumer goods independently. In other words, our industrial production is only one link in a long international chain of production units, which have their own legal entity and operate under legal systems and interests over which we have no influence. 

If bicycles are for summer, the fragmentation of production chains requires an ideal climate to prevent interdependencies from depriving us of production capacity in strategic sectors. The systemic shock caused by the pandemic has highlighted these fundamental fragilities of our economy, but it has also put our tax powerlessness on the table. While solvent countries that have a central bank -the United States, the United Kingdom, Japan- have the capacity to determine their tax policies, by monetising the debt they issue to stimulate domestic spending, and thereby avoid job destruction, we depend on our conjunctural capacity to borrow on the financial markets, under the subsidiary tutelage of the European Central Bank.

So far, the response of the Spanish authorities has focused on tackling short-term business liquidity problems by increasing the supply of short-term financing. This being necessary to mitigate immediate insolvency, if Spain does not carry out public investments aimed at reformulating our productive model, our economy will continue to be vulnerable to dysfunctionalities between supply and demand flows dependent on factors that we cannot control. It does not seem to make much sense to limit ourselves to patching up another cycle of debt-austerity, only to continue being a captive to the Chinese market, a borrower from Brussels and with a languishing economy. One of the political attributes of long-term public debt is to share the burden of public investment with future generations. In this respect, the real moral risk is that the government's debts will not be incurred as an investment, so that future generations will have the economic capacity and strategic independence that we lack, and will not be forced to inherit for the benefit of the inventory.