Will Spain’s working poor take revenge?

Credit: Denis Doyle/Getty Images

Europe Eurozone Populism Spain UnPacked Wages

Peter Franklin

February 26, 2019 3 mins

The G20 is an increasingly important forum of nations (well, 19 nations plus the EU).

Its membership, though, is controversial. To make room for countries from different parts of the world, countries in well-represented regions have been excluded. The most glaring example is Spain. By any reasonable measure, the Spanish economy easily makes the global top twenty. But because western Europe is rich in medium-sized powers – with four in the G20 – it was thought that adding a fifth to the list (at the expense of, say, Argentina or South Africa) would result in a regional imbalance. And so Spain is fobbed off with “permanent guest invitee” status.

That’s the Spanish story more generally: it’s a country that doesn’t get the global attention it deserves. Never mind the size of its economy, just look at the influence its culture and language has in shaping the modern world. But even when the media’s attention is on Europe alone, it’s as if the continent stops at the Pyrenees.

Of course, if the news is about the fraught relationship between the richer northern and poorer southern members of the Eurozone, Spain (and Portugal) may get a mention, but the focus tends to be on the latest Italian drama or Greek tragedy.

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But perhaps that goes to show that ‘no news is good news’ – because as Clara Wright reminds us in an AFP report (via the The Local), there is some good news about the Spanish economy:

“Spain’s economy shrank during the financial crisis from 2009 to 2013 but rebounded in 2014. Its rate of expansion has since outstripped much of the EU with growth of more than 3 percent.”

Furthermore, “Spain’s jobless rate is down from a peak of nearly 27 percent in 2013 to 14.5 percent in September”.

The Spanish recovery is an under-reported story; and perhaps that’s because it doesn’t fit the standard narratives. It contradicts the idea of southern Europe as an economic disaster zone in need of firm guidance from Frankfurt.

It also appears to contradict the Eurosceptic narrative. If membership of a single currency is such a straitjacket (one tied to the primary benefit of the Germans) then how have the Spanish pulled off such a notable turnaround? Indeed, how have they managed to show those self-righteous northern Europeans a thing or too about growth?

Unfortunately, this is where good news gives way to bad:

“The country has the European Union’s highest proportion of workers at risk of poverty, 13.1 percent, after Greece and Romania, according to 2016 Eurostat figures…

“…salaries did not recover when the economy returned to growth because unemployment has remained high…

“Real wages actually declined in the last two years, the OECD said in a report published in July.”

Poverty pay isn’t the only way in which Spanish workers are disadvantaged:

“Spain is more reliant on temporary contracts than any other EU nation. More than one in four workers, 26.9 percent, was employed on a temporary contract in the second quarter, according to Eurostat.”

There’s a name for this kind of thing: internal devaluation.

When a country suffers a severe economic shock as Spain did during the Eurozone crisis – and it can’t devalue its currency in response because it no longer controls that currency – then it has to find other ways of staying afloat. One of the easiest, but unfairest, approaches is to squeeze workers. At a time of high unemployment and cuts to social security, people can’t afford to turn down work – no matter how poor the wages or insecure the contract.

Of course, it’s not as if the external devaluation resulting from exchange rate adjustment is cost free. When the value of a country’s currency sinks, its exports get cheaper and imports more expensive, driving up prices at home. However, while everyone experiences the pain of inflation, an attack on wages and work security falls heaviest on the least protected workers – such as the young and low-skilled.

It should also be said that upward pressure on prices tends to help people in debt by inflating away the real value of the sums they owe. Putting pressure on wages, on the other hand, only reduces people’s ability to repay their debts.

For all these reasons, Spain’s economic success story is not quite what it seems.

The shine has also come off the political success story. For many years Spain was unique among the big EU countries in having no significant party of the radical Right.

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Though politics-as-usual was disrupted, but by new parties on the Left (Podemos) and in the centre (Ciudadanos), not to mention the separatist movement in Catalonia.

However, in the last year or so, the national populist party Vox has emerged from nowhere to become a major force in Spanish politics. It’s set to win dozens of seats in the forthcoming general election. Last year, it also pulled off a major upset by helping dislodge the ruling socialists in their Andalusian heartland.

The rise of Vox has been explained as a nationalist reaction against Catalan separatism. However, political discontent and volatility are also the result of economic factors.

It is one thing to have ordinary working people suffer through a recession, but if they’re still suffering through a supposed recovery, that’s when the establishment should really watch out.