Pain in Spain

A report just published by the Valencian Institute of Economic Research and funded, ironically, by a bank foundation shows the horrible results of the 2007-15 economic crisis.

Francisco José Goerlich Gisbert, Professor of Economic Analysis at the University of Valencia has studied the share of income for households in Spain, and the policies that the various governments (national and regional) have applied to income distribution. The results make interesting, and often awful, reading.

His report shows that:

• Household income in Spain has dropped since 2007
• Income inequality (the 'wealth gap') in 2013 (the latest figure available) is greater than it has been since records began. The principal cause has been the worsening situation of the job market.
• 'The challenge for the next few years is to encourage growth and at the same time to reduce inequalities'. Professor Goerlich refers to research by various authors demonstrating that inequalities in income slow down economic growth
• New technology is creating jobs, but only for people who are trained and qualified. Many miss out
• State pension payments are the main route through which money is redistributed from rich to poor. Professor Goerlich underlines the vital importance of the state pension...and then reminds us that Spain will find it increasingly difficult to pay the pension as our population ages
• Unemployment payments (benefits) are the second most important means of redistributing income.
• The 'supply of public services in kind (education and health) is the third [most important] means by which the public sector can improve the distribution of household incomes'

That last point is important here in Catalonia and in Scotland. Both countries offer free state-paid education, and both offer free or almost free higher education. It turns out that this is an important means for redistributing money - in this case in kind - from the rich to the poor. Professor Goerlich demonstrates that including the monetary value of the public services of health 'appreciably reduces inequality' in household incomes. Drawing the parallel with my home country, Scotland's health service and its free or nearly free education are worth fighting for.


We need a 'paradigm shift in economic policy to focus on the quality of life and the wellbeing of citizens, rather than on GDP per head.' In other words we need to move to an economy that shares out the wealth and the growth more fairly; 'Growth is not social sustainable if it is not inclusive,' concludes Professor Goerlich.

Reference:

Goerlich Gisbert, F.J., 2016. Distribución de la renta, crisis económica y políticas redistributivas 1st Edition., Bilbao: Fundación BBVA. Available at: http://www.ivie.es/en/actividades/noticias/2016/libro-distribucion-de-la-renta-crisis-economica-y-politicas-redistributivas.php [Accessed May 17, 2016].