First, an anecdote.
When I moved from the United States to Spain and created Jazztel in 1998, I opted to offer health insurance to my employees—a very North American concept. I asked them if they would prefer that Jazztel pay for a private health insurance plan, or instead, that I give them that money directly. It wasn’t substantial, something like 60 euros (75 dollars) a month. It surprised me to learn that hardly anyone chose the private health insurance plan, that few were interested in private health care, that they were remarkably content with the public health system and that they preferred to earn 60 euros more a month.
Later, I was given the chance to check out the Spanish public health care system for myself, partly due to my mountain biking injuries and also because of my children’s various accidents. I saw firsthand that it was really very good and very free. Especially coming from the US where health care costs some 600 euros (750 dollars) per month and, you have to pay for additional things that are included as insured here in Spain.
Now, let’s “fast forward” to 2012.
We have a bankrupt Spain being bailed out by the EU day-to-day. A bankrupt health care system and with massive defaults, but still with good quality medicine and full of new hospitals freshly equipped with the latest “bubble” models from when we still had credit. All this accompanied by a great debate over the topic of copays and the plan to charge 710 euros (890 dollars) a year to illegal immigrants. Seeing the situation and being an entrepreneur, it occurred to me to make a business out of this tragedy.
Or let’s just say: make the tragedy less tragic by constructing a business to help it.
Spain is the fourth largest tourist destination in the world. We receive almost 60 million tourists per year and almost all of them come from countries where medicine is more expensive. Why don’t we sell our medical services—that are so good and so cheap—to our tourists? Why don’t we launch medical tourism to a larger scale? Why don’t we transform public health care into an export-oriented industry?
How do you do this? The government could launch a big publicity campaign in which they offer medical insurance to foreigners and allow them access to public health care for 100 euros per month. And for those foreigners who travel here without an insurance plan, they would be charged 40 euros (50 dollars) each time they wanted medical attention and not be seen for free as they are now. North American friends that had health problems in Menorca, for example, couldn’t believe it when after receiving medical treatment, were released without being charged. They were willing to pay 100 euros for a consultation; 40 euros would seem like a bargain. Foreigners don’t expect it, but they receive free medical treatment in Spain.
From here we can start to promote medical tourism. Come get yourself treated with the Spanish national health system! We are the longest-living of all big countries in the world!
If the government ensured that one million of the 60 million tourists pay this medical tourism insurance, it could obtain 1.2 billion euros (1.5 billion dollars) a year. To North Americans, being able to come to Spain and while here, go to the doctor for free, all for an insurance premium of 1,200 euros annually, would be very beneficial. The Germans pay 300 euros a month for insurance. And we won’t even speak of the uninsured people in many countries who have money but not enough to afford insurance in their country. In Argentina, for example, insurance that provides the same quality of service as Spanish health care costs about 300 euros per month. I know that getting a million customers isn’t easy, but the market has 60 million. Later we will have to determine the costs of treating these patients, but I find it possible to make a profit. Especially when there is so much infrastructure already in place.
I think the Spanish government has a possibility to finance a part of the health of its people with medical tourism, and that this opportunity should at least be studied. I know many Spanish people think that health care should be free for everyone, but it isn’t—we pay for it ourselves and we can find more customers overseas. It’s time to be creative and sell medical insurance to foreigners with the Spanish national health system.
It was agonizing being a Jew in Spain when Israel invaded Lebanon, when it attacked Gaza and when it shot the Turkish boat. I was against those three acts, as I felt that Israel was over reacting and responding with much more violence than it had received. Still I had a feeling that the tremendous anger of many in Spain was too targeted towards Israel and Jews in general, that it had an antisemitic undertone.
Now that I see how Spain doesn’t react in any comparable way to the massive killings of Syrian civilians by Bashar Al Assad, in a war that has already left over 25K dead, I am coming to the conclusion that I was right, many in Spain are just antisemitic.
It is not that Israel does not commit injustices, it does. And it is estimated that around 1000 people died in the Gaza attack and around 1300 in Lebanon and that is way too many, especially since most were civilians. So I want to make it clear that I opposed those wars.
But the number of casualties in Syria is shocking in comparison and nobody in Spain has done any demonstrating comparable to the massive protests against Israel. Because it was incredible how much Spaniards went to the streets to protest against Israel on each of those three events. I had to hear people call me “genocidal” just because I am Jewish, call all Jews Nazis and other attacks. My children were harassed at school over these incidents as if all Jews were part of them. Still I thought that I had to be understanding because Israel was committing injustices.
But now that I see how little people care about Bashar Al Assad killings I am coming to the conclusion that if Israel kills it’s huge news in Spain, now, if an Arab dictator does commit something that is closer to the definition of genocide however, there are no massive demonstrations in Spain. But if Israel boards a Turkish ship it is front page news and material for huge demonstrations. Not that Spaniards are physically violent because they generally are not, but they are extremely vocal in their dislike of Israel. A Spaniard will say horrible things about Israel and about Jews and it will feel normal. Indeed in Spanish of Spain (not of Latin America) calling somebody Jewish is an insult.
I love Spain but if there is one thing that it is hard in this country is to be Jewish, something that only 1 person in 2000 is. There is tremendous prejudice. Spain is a country in which most have opinions about Jews but most have never met a Jew in person. I wish more went to Israel and then see that while Israel it is clearly a country that has to improve a great deal is is light years ahead of its neighbors.
For the record I have visited Israel, Lebanon, Jordan, Egypt and Syria.
Here’s an article I wrote in Spanish about the challenges of being Jewish in Spain http://www.elmundo.es/elmundo/2008/07/21/lapurezaestaenlamezcla/1216636800.html
Here I emphasize that there is a great deal of cultural prejudice in Spain and it is not at all only a Jewish problem.
Here is a survey of Antisemitism in Europe that ranks Spain very poorly.
For Spain to avoid default in its national debt two unrelated events must happen: one is that EU guarantees Spanish national debt lowering country risk, and the second one, which is even harder,is that Spain regains competitiveness.
Regaining competitiveness is the biggest challenge for Spain. To achieve this the country must focus on liberalizing its growing companies. I propose that all start ups be given 3 years in which their employees do not pay social charges nor receive forced severance pay in order for government to recognize the risks that VCs and entrepreneurs take in investing in new companies. This would be applied in start ups of up to 10 people and only while they are not profitable so it would have a negligible effect in the social security system overall initially and hopefully a very positive effect when start ups begin contributing. For those unfamiliar with the system Spanish social charges plus all other taxes, these can take up to 45% of what a person who costs €3000 per month to a company takes home. But so far PP, the conservatives now in power, has done little for new and growing companies focusing instead on measures that make firing, not hiring, cheaper.
I am normally quite an optimistic entrepreneur but right now I am sorry to say, I am not. We can still avoid the perfect storm, but it looks harder every day. Still as we know markets do turn around, and if Spanish unemployment numbers turned around, so would financial markets.
This post could be a book and it is about a subject that I still need to address in Spanish. The substance of this post is easier to explain in English because the English/American culture is a culture in which the role of business in society is much better understood than in Spain. Indeed, the biggest obstacle I see with the Spanish crisis is that most Spaniards, voters and government included, don’t really understand how wealth is created. They don’t understand how capitalism works and, therefore, how it sometimes does not work. They don’t understand the concept that a rising tide lifts all boats (economic expansion) and a falling tide…lowers all boats (recession). So as Spain goes into record high unemployment of 25% and youth unemployment of 50% the emphasis is not in improving the workings of the Spanish economy but in blaming each other.
In Spain it is more common to complain about what others are doing poorly than focusing on the “what can I do to help” that is needed for all Spaniards to collaborate to restart the economy. Many Spaniards unfortunately suffer from a serious case of “blinding envy” of others and thus have a false understanding of the economy. Envy makes them see the economy as a pie of have and have nots. Instead of realizing that a shrinking GDP makes everyone worse off, they think that if they are doing worse is because somebody else “stole” what they used to have, that if they are doing worse then somebody else is doing better. They don’t get the concept that everyone is worse off! As a result, Spaniards are constantly looking for the few people who are doing better and crucifying them. But these are the entrepreneurs who could save Spain. Instead they are convinced that either foreigners or rich Spaniards ended up with what they used to have. Spaniards in general, have a lack understanding of entrepreneurship, of innovation, of job creation, of wealth creation of how hard it is nowadays to compete in a globalized economy. Interestingly they get it in football and Spain has some of the best football teams in the world, but they don’t in normal life. Their best entrepreneurs, people like the founders of Zara or Mango, some of Spain’s most successful multinationals, live in hiding for fear of what the average Spaniard may think of them. Amancio Ortega (Inditex) one of the wealthiest men in the world and his famous picture in which he looks as a convict, is an “only in Spain” story. Entrepreneurs are seen as people who get what is not due to them, not as wealth creators, but as thieves. For me as the founder of Viatel (partly in Spain), Jazztel, Ya.com and now Fon all in Spain, it is painful to read my own Twitter line and see how confused the average Spaniard is about the subject of entrepreneurship and job creation. I am tired of getting called “rico de mierda” people focus on what I have and not on what I do for the economy. Nor what all other entrepreneurs do. Having a daily twitter conversation with around 30K Spaniards has given me a great insight as to what people think on subjects such as compensation, social charges, labor flexibility and other crucial aspects of wealth creation.
And in this mix, the government does not help: the Socialists want to spend their way out of the crisis, the Conservatives want to cut their way out of the crisis. Nobody seems to understand that it is the type of spending that has to change, not the level. That less spending and more investment is needed. That Spain needs to invest on what works in Spain and less in what is dying in Spain. But the new economic plan seems tailored to old industry. The conservatives made it much easier to fire, but equally hard to hire.
As things stand Spain is in a much deeper crisis than any of the larger economies of Europe and as much as it is an economic crisis, it is a crisis of understanding. Without agreeing on the root of the problem: a lack of entrepreneurs, entrepreneurship, business imagination combined with a labor force that is to a great extent trained for an obsolete industry, construction, Spain will not turn around. But I don’t see anyone marching on the streets promoting new business creation. What I see is a lot of people trying to cling to a past in which Spain borrowed and build white elephants. A past that is gone forever.
I end my post with a link to the plan that I presented to Cristobal Montoro. I still consider it a great plan for 2013 but it was not taken seriously by the conservative government.
And here is another article in which I explain in more detail what is wrong with Spain that is different than what is wrong with the rest of Europe.
This moved me. It is a make believe restaurant in Vigo in which unemployed parents in Spain take their children to “eat out”. They take turns as volunteers. It is really a charity that makes children believe that their parents can afford to take them out to a restaurant. I felt so bad for those parents.
If you don’t live in Spain and you come here and go around you would be surprised. Spain is actually a wealthy country in global terms and it doesn’t look poor when you travel around here. But since the construction industry collapsed unemployment grew from 8% to 21%. Basically all of those who worked in that industry are having a very hard time finding a new role in the economy for themselves. The collapse of real estate had a tremendously negative multiplier effect. It is a huge part of the population that is in such bad shape and it will probably take a decade for unemployment to go down to where it was in 2008. In the meantime initiatives like this help alleviate the pain of those who have fallen into poverty.
In the midst of the euro crisis I would like to share a contrarian view. As opposed to most I am actually optimistic on the euro, and while aware that the euro project may actually implode, I think the opposite will happen and the euro will come out strengthened as a result. Now what I am less optimistic about is how long it will take Southern European countries to reinvent themselves, and in this article I will focus particularly on Spain but many of my arguments apply to Italy, Portugal and Greece as well.
In the case of the Euro I believe there are two possibilities. The first is the abyss, a return to the old times with a fragmented Europe where each country has its own currency. The second, more optimistic scenario, is a new Europe that is more united and better organized, with clear rules. I believe the second scenario is more likely simply because these past days the yield on German 10-year bonds was higher than that of the UK for the first time since 2009. This was a wake-up call for the German government, which is finally realizing that the country is not immune to the crisis and that the market is no longer unconditionally willing to purchase their bonds. This is not happening because Germany is a bad debtor, but because German debt is issued in Euros, a currency with an uncertain future. And as soon as German politicians start paying more to finance their country’s debt and are forced to provide less social services, they will change their current course and help shore up the Euro. At the same time, and I see this as something positive, the Germans will insist that the new Europe become more German, with rigorous controls in place. They will also create a real European Central Bank, a lender of last resort that will provide liquidity as the Federal Reserve did in the USA, but within a system of rules that will control the level of public and private debt within the EU.
So while aware of the perils I am positive that we will not see the Euro collapse, and that Spain and Italy will again be paying around 3% for their debt in a matter of six months. This is why I believe that buying Spanish and Italian bonds at 7% may very well turn out to be a good investment. I also think it’s absurd that nowadays people would rather deposit money in banks and earn much less interest than what the government of Italy and Spain are paying to finance themselves. Especially considering that these governments are the ones that take on failing banks.
Once the financial problems of Europe are solved, Spain and Italy will have to deal with a much more complicated issue, namely their lack of competitiveness. In the case of Spain the challenge is the highest unemployment rate of the OECD now at 21% and on its way to 23%. And the main reason for this unemployment rate is how un-competitive most Spanish employees, politicians and businesspeople are, compared to those of other countries. Spain, while leading in a few industries related to construction and infrastructure, is mostly a laggard in every other sector. As the current rankings by the World Bank show, Spain and Italy are not very competitive in terms of the overall ease of doing business (Spain is 44th, Italy 87th). And it gets even worse when looking at the ease of starting a business, in which Spain occupies the 133rd spot on the list and Italy the 77th. As comparison, the UK is 7th and 19th in the two respective rankings.
I spend a third of the year in Spain, and the other two thirds in the rest of Europe, the USA Latin America and Asia. Building a global business allows me to realize that there are problems pertaining to Spain that are intrinsically Spanish. At the same time, there are a number of Spanish virtues that are intrinsically Spanish and will help the country get out of the crisis. For example, Spanish people are less likely to believe in utopias and know how to tighten their belt during tough times. They are also more realistic as voters and citizens. Zapatero was bad, Rajoy is mediocre, but at least Spain does not elect a crook like Berlusconi as president.
However, one of the biggest flaws of the Spanish culture is its difficulty to produce excellence, and excellence is the only thing that will lead to recovery of Southern Europe in the long term. I could give many examples of this, but the most obvious one are the Spanish universities that are incredibly bad on an international level, they don’t show up in any of the meaningful rankings. Spain has the 12th largest economy in the world, yet it has nothing to show for in the educational field except for some private universities like IE and IESE. In the last decades, we haven’t received any Nobel Prizes in scientific disciplines, and we haven’t made any important scientific discoveries compared to France, Italy and Germany. Neither does it have a high level of technology, nor is able to live off our own innovations. The lack of excellence is a cancer that afflicts the entire Hispanic culture. Imagine how the world would be if tomorrow it decided to live only with what has been invented in Spanish?
In Spain we have a population that is not well educated enough to compete in a globalized world. A huge portion of the population is only prepared for one of two industries: construction or tourism. One of the industries, construction, is already dead. The other industry, tourism, only creates seasonal and badly-paid employment. I believe that if someone were to examine unemployment in Spain, they would conclude that most of it is derived by the fact that an enormous part of the population was educated to do something related to construction, an industry that no longer exists and that will never be nearly as big as it used to be. And considering the importance of tourism, the low level of English spoken by the vast majority of Spaniards is a real shame – this is true when it comes to waiters and other staff, and even the Prime Minister-elect, Mariano Rajoy, whose inability to speak English inhibits him from fully understanding the world around him. In Spain it sometimes seems like people take pride in ignorance. It’s hard to explain this unless you live outside of Spain or know the North American, British, French, German, Scandinavian and Japanese cultures of excellence well. It’s as if wanting to be really good at something, wanting to stand out and to be better than the others turns you into a pariah in this country.
When looking closer at the origins of Spain’s problems, it becomes clear that only a small part of the local crisis is related to the international crisis. Let’s assume that about a third of unemployment was caused by the international crisis. The rest, which takes us to the sad figure of 21%, has to do with the lack of training of the average Spaniard, a proper training that could enable them to do something genuinely meaningful. There is also a lack of incentives for companies to make up for the government’s shortcomings in education and adequately train their employees, which would ultimately benefit the entire country. Another problem, and one that contributes to the extremely high youth unemployment in particular, is the forced severance pay system, which hinders young people from being admitted into the workforce. Young people also lack access to housing, as even with the crisis, prices for real estate and rents are still out of proportion and will probably remain at their high levels since so many people are trapped by their mortgages. Being young in Spain is sad. The few jobs this country has are held by older people who are not going to leave, even if this makes the overall situation even worse. That’s why the best are leaving the country.
The underlying problem in Spain, meaning the disconnect between what its labor force can do and what the global market needs, is a problem that will take at least a decade to solve. It’s also a problem that will be solved by companies, if anyone is to do it. But for companies to solve this problem, the government needs to get out of the way. Nowadays, many people in Spain are so-called “mileuristas” – people earning 1000 (mil, in Spanish) euros per month or less. But in reality, the term “mileurista” is a misrepresentation, since a person earning 1000€ per month in fact costs the company 2000€, twice as much as she actually receives. The other half is squeezed out by the government in form of social security contributions, income taxes, value-added taxes, etc. Of course these people also receive many services from the government in return, such as healthcare and education, but the government has already reached its limit as to what it can take away from employees in the form of taxes and how many jobs it can create. The budget deficit is huge, making it easier nowadays for companies to get loans than for the government, in which no one trusts any longer.
In this situation, it’s not that companies need help, but the government needs to stop forcing them to be job creators and agents of the welfare state at the same time. They shouldn’t have to pay enormous social charges for every job that they create, and they shouldn’t have to make high severance payments if things go wrong. What companies need is a government that doesn’t drown them in taxes and other covenants. A government that is laissez-faire in terms of business, at least when it comes to job creation. It’s terrible being an entrepreneur in Spain, I already wrote about the subject, you can be ruined for life as your liability is unlimited. The only thing that compares to this is having a mortgage in Spain, under the unbelievable pro-bank rules that exist here. A person cannot simply give up ownership of the home they used as collateral for the loan, as is possible in the USA, but remain slaves of the bank for their entire lives or until they somehow find a way to pay off their debt. Something has to be changed now to give back mobility to the Spanish so they can move to where the jobs are. In Spain, unemployment is regional – low in the north, and high in the south.
I know that in other countries companies are also required to be social agents, this is the case in the Scandinavian countries, but the difference is that there, companies have a more educated and ethical population at their disposition thanks to the successful measures of their governments. Also the entrepreneurs from those countries are much more educated and ethical than the Spanish. In Spain, the problem of poor education and lack of ethics is fairly widespread: businessmen, politicians and workers are all affected. That’s why this country needs to reinvent itself and change, which could finally happen because of this crisis. Spain lived through decades of artificial growth, partly because the same system used to measure GDP growth falls into the fallacy of considering debt as growth, but this is over and due to the crisis, people are rethinking the system and want to improve.
What Spain needs is a government that doesn’t penalize job creation, so that companies can hire more and take more risks. It’s not so much Spanish companies that are involved in a huge mess right now, but rather the government itself. And only way for the government to fix its problems is with the help of companies, who nowadays pay less for their debt than the Spanish state, a state that nowadays lives on charity from the European Central Bank. If it weren’t for this institution buying Spanish debt, Spain would have no credit since its citizens have lost trust in their government and will not invest their savings in it.
What I hope is that the political party now in power, the People’s Party (PP), will manage to unleash the forces that will pull the country from ruin. Creative forces, forces that help build a new country. The past party, the PSOE, could have done this, but now it represents the status quo; those who are part of the problem, not the solution. It represents big business, big banks, state officials, unions. The PSOE should represent those who are unemployed but want to work, but instead it represents those who have jobs and housing and want to maintain their privileges while blocking out the others. It represents those who do not want to lower housing prices or increase productivity and make us more competitive so that more people could have jobs and housing. It represents state officials who can’t be fired, no matter what they do, and incompetent workers who hide under the concept of “unfair dismissal” that always blames the employer. In Spain, a salesperson who does not close any contract in a month, but works in a team that closes 10 a month can’t be fired for being useless. This happened to me at Jazztel. Even in such a clear-cut case where an employee is unable to carry out his job, the employer gets blamed when he fires that person. This is simply unacceptable. There has to be a way of suspending people, just like there was in school. There has to be a way of promoting the good guys and moving the bad out of the way. There has to be a way of cultivating excellence, of competing on a global level and winning. In Spain there are incredibly good employees. I see this at Fon, which from this country has created the largest WiFi network in the world with a great team. This country has its clusters of excellence, as the case of Fon, Inditex and other companies shows, especially in the sector of alternative energies where Spain is among the leaders of the field. But so far, these are still small islands in a sea of mediocrity. And it’s about time to change this. Building a business in Spain is still a struggle against a society and a government that does not understand the entrepreneur – this is not how it should be.
Now my case
I have 5 children ranging from a few months to the age of 21 years. My oldest daughter, who studies at Columbia University and is graduating in few months, already has several job offers in the United States. But she’s thinking of starting her own business instead. But not for a moment has she considered starting that business in Spain. And why would she, when countries like the US or the UK are welcoming entrepreneurs with open arms. Everything is easier there, and the appreciation for the work of entrepreneurs is also much higher. And herein lies the challenge for Spain’s government. The most educated part of its workforce is drawn to other countries where their skills are highly sought after, and at this point in time there are not many incentives for them to stay in this country. The government needs to prevent a brain-drain by making it much more attractive to work in this country and innovate, both from the perspective of entrepreneurs as well as that of employees.
I came to Spain and started Jazztel, Ya.com and Fon here, but it seems like my days in Spain are also numbered. The governments in Ireland and the UK have been trying to attract me and convince me to move to their countries, and they are succeeding. They know that the new arms race is not won by those with the most atomic bombs, but by those who have the most “atomic entrepreneurs,” entrepreneurs with ideas that create jobs. That everything depends on a dynamic, creative and strong economy. But here, in this country that I love so much and where I raised my older children and now bring up my young, I get insulted for being successful, I get too many people calling me “rich bastard” to feel comfortable, and the government is not putting any effort into keeping me here, grow Fon and start new companies.
In Ireland and in the UK, the Prime Ministers gladly receive visits from and listen to entrepreneurs. Both David Cameron and the Irish authorities invited me over. Here, Zapatero completely ignored all entrepreneurs. But this was not so much his fault. Zapatero saw that the average Spaniard didn’t understand the role of entrepreneurs and businessmen. They don’t see them as what they are, job creators, but as rich thieves. As a result, Amancio Ortega, a national hero, now lives like a “fugitive” in his own country. He doesn’t show up anywhere because being the richest man in Spain isn’t an honor, but a shame, despite the fact that Inditex is the source of tens of thousands of jobs. If he were English, Amancio Ortega would be knighted, Sir Amancio Ortega, and he would receive the same kind of appreciation and recognition as other English or North American entrepreneurs. What Zapatero does by mistreating those who create wealth is to respond to a public that does not realize that unemployment and minimum wage jobs would decline if Spain had many entrepreneurs competing among each other for employees’ skills. As a society, if we keep biting the hand that feeds us, we will go hungry. While we remain a society where future Amancio Ortegas live in hiding or leave the country, we will continue being the champions of unemployment. I hope that the PP realizes this and will do its best to change it. The PSOE didn’t see it, which left us in our current situation. But as most entrepreneurs, I am an optimist and I believe that there is nothing that is so wrong in Spain that it can’t be changed with what’s right with the country. The Spanish people want and deserve something better. I will continue having Spain as a reference for building companies, and depending on how the situation evolves, I will be more or less around this part of the world that I love so much. I hope that Spain will finally realize its problems and, by standing united, will manage to reinvent itself.
I have been debating with my Spanish followers on Twitter about why Spain has the highest unemployment rates of all developed nations - 21% for the population as a whole and 46% youth unemployment. To put Spain´s unemployment into perspective, the EU´s average rate of unemployment is less than half of Spain´s.
In my view, Spain´s high unemployment is as much the product of poor financial/ investment decisions (over investment in real estate) as it is one of the country´s culture. The main cultural weakness of Spaniards, and indeed Latin Americans in general, is to take little or no ownership of their problems, instead blaming others for their shortcomings. Of course, this kind of culture also has its positive side: countries in which people tend to blame others for their problems usually have low suicide rates and a general positive outlook on life. The flip side is that this attitude is very hard to change and it is not conducive to a country reinventing itself in the face of failed economic strategies. This can help explain why Spain is so much behind the EU when it comes to unemployment. Spain needs to reinvent itself, and in order to do that, a culture of self responsibility is essential.
To me, if Spain has such high unemployment rates, it is because the Spanish government, Spanish entrepreneurs and business leaders and Spanish workers are uncompetitive. I say this after having hired thousands of Spaniards and having built Jazztel, Ya.com and Fon in Spain. Yes, there are responsible and hard working Spanish government employees, imaginative and hard driven Spanish entrepreneurs and highly ethical Spanish workers, but they are less common to find than in Germany, for example.
When you talk to Spanish people, they will quickly agree that Spanish politicians are mediocre, that Spanish “empresarios” are “unos chorizos” or scumbags but few would agree that there is something wrong with the way that Spanish people think, organize themselves and work.
Unfortunately, the average politician, businessperson and employee are all to blame for Spain´s poor economic condition. They are to blame as a group, as a culture. This is a nation where one in five are out of work and where one out of three young people have no future – this needs to be fixed. But this can’t be fixed if the average Spanish person does not realize that they are both part of the problem and an essential part of the solution. What is common here is to believe that Spain is the way it is because of a few who have somehow kidnapped the country into perennial underperformance in terms of unemployment.
Spain is a country with huge potential, but low entrepreneurship. The average Spaniard focuses energy and attention on old, ailing industries like infrastructure and real estate, and banks tend to only lend for these activities. Spaniards don’t see the risk in borrowing the equivalent to five times their annual salary to buy a home. This means that many are tied to mortgages that will sink them into debt for life, because of this, they can´t even move to where there is work.
Spaniards are among the Europeans who live the longest lives, yet they are the ones who call in sick to work the most. In Spain there is a yet to be measured but enormous underground economy, with a very large number of workers who collect both unemployment insurance and a regular salary. Tax cheating is rampant. Moreover, Spaniards love colossal and useless infrastructure projects. They vote for politicians who give them something, even if it has no practical use. These are the same politicians who approved colossal public works like the T4 terminal, a $10bn project. They spent public money building airports that no one uses and roads that nobody takes. Take the Castellón Airport, for example, built at a cost of $213m but that still hasn´t received a single flight. Meanwhile, Germany and other European countries gave Spain gifts of billions through the EU and a lot of this undeserved money was misused.
Will Spain´s problems be fixed? I certainly hope so. I am an immigrant to this country, by now a Spanish citizen who built three significant companies here and have five Spanish children. Spaniards are now saying: “el problema no es la crisis, es el sistema” or, the problem is not the crisis, it’s the system. But this “system” works for the Netherlands, Germany and many other new EU countries such as Poland. My answer is, “el problema no es el sistema, somos nosotros.” The problem is not the system, we are the problem.
Filipinos don’t speak Spanish anymore but they speak English with a Spanish accent. Spaniards are not practicing Catholics but they live life with a Catholic accent. Spaniards are not pious anymore but they have an obsession with being humble. On Twitter, Tumblr, here, I frequently get accused of not being humilde enough, not humble enough. It’s as if I was a sinner of some kind. In Spain you can’t build a company and say that you are so proud of your work. Say that in Spain and you will be frowned upon. When people ask me why is it that unemployment is so high in Spain at 21% I say: there aren’t enough people here who want to build companies and be proud of their work. There aren’t enough people who want to do whatever it takes to be successful.
In Spain where I most live, and I say mostly because we travel so much, there are parts of the country, Basques, Catalans, that would like to become independent. Or let’s say there are some people in some parts of the country that would like to become a new country (because I understand that if there was a referendum say in Catalonia and everyone who lives there voted the “independistas” would lose). Why? I see two trends that are “gluing” Spain together in spite of its different cultures. One is demographics. Native Spaniards have one of the lowest birth rates in the world and if the population of Spain does not shrink it’s because of immigrants who are 12% of the population but have a quarter of all new babies. As an immigrant myself and father of 5 I know that immigrants do not care about issues related to nationalism. My children consider the nationalisms of Spain a problem of the past, irrelevant to them. As a family, we already moved to another country Spain, and have a hard time thinking of that country itself moving to another country or becoming a smaller different nation. The second trend is the accelerated increase in the national debt in the context of a European and global financial crisis. If a part of Spain wanted to split up now, say Catalonia, they would have to agree with Spain’s creditors what part of their debt corresponds to Catalonia and that would be tougher than all the discussion around language and culture. We are a country partly united by its obligations. Maybe if things get really bad, like in Greece, there could be a fragmentation of Spain. But in terms of GDP over debt Spain is still only at 70% and Greece close to 200%. So we are not there yet.
Yesterday I spent three and a half hours brainstorming on how to turn Spain around with presidential candidate Alfredo Rubalcaba. He understands that the answer to unemployment is entrepreneurship. I appreciated that he listened carefully to my ideas for increasing employment. Spain has the highest unemployment rates of all OECD nations (20%) and this problem was the focus of our meeting.
Spanish citizens have 3 choices this November. To go with Rajoy, to go with Rubalcaba, or to vote for lesser parties and hope one day they become meaningful actors in Spanish politics. What I decided to do is to promote one simple and I believe powerful idea to grow employment to both Rajoy and Rubalcaba. I started with Rubalcaba today, the candidates with less chances to win. The plan is that during 2012 the Spanish government does not demand that companies pay social charges for all employees hired beyond the level of employment they had in 2011. It is an incentive to grow employment, to promote new and increased hiring only for 2012. It’s a jump start for the economy. The idea is explained in Spanish below. I believe this measure will make the difference that may make entrepreneurs start businesses and grow existing businesses. Rubalcaba reacted well to it and said his economists would study it.
I know most Spaniards believe there is no hope that Rubalcaba will get us out of the crisis. Most Spaniards however also believe that there is little hope that his rival Rajoy will get us out of the crisis. But personally I believe that there’s nothing that is so wrong with Spain that cannot be fixed by what is right in Spain. I am more optimistic than most.
On Rubalcaba himself I can say, after having met Felipe Gonzalez, Aznar, Zapatero, Rajoy and him, that he is different from the other politicians. He is the only one trained as a scientist and educator. He is more of an administrator and thinker. He is a Chemistry professor and it shows. Would I wish Spain had other choices for President? Of course I would. I recently met with embattled David Cameron and in spite of his dubious choice of friends and poor handling of the riots he is a more impressive global leader. I never met Angela Merkel but I got a sense from what I see about her that Rubalcaba is more like her in terms of personality. But a government is not just a president, it’s a president and a team. And even though I find Rajoy an unimpressive candidate I could still end up favoring if he announces a better team than Rubalcaba before the election.
Now Rubalcaba speaks English and that is more than can be said about anyone else who’s run this country. In the end a President has to be the number one promoter of the country. Both Rajoy and Rubalcaba are Spanish characters not particularly appealing to foreign leaders or investors. None of them are like Jordi Pujol for example who was amazing at promoting Catalunya around the world. But between the two, Rubalcaba is slightly better as he can communicate without an interpreter and is more aware of what makes a country succeed in a globalized world. Rubalcaba seems a pragmatist, a person willing to try and fail hoping to get policies right in the end. I identify with that. People expect politicians to get things right but if in business being successful involves being right only slightly more frequently than being wrong I don’t see why decision making should be different in politics. In general when I confronted Rubalcaba with obvious mistakes of the Socialist Party, like the Ley Sinde, he did not try to defend the indefensible. Indeed he agreed to my proposal of bringing some of the tech entrepreneurs who were heavily involved in the 15M movement that brought millions out to the street protesting against the incompetence of all politicians himself included. In that sense he is very different from dogmatic Aznar who still thinks that invading Iraq was a great plan.
What really and concretely happened to this country is that it went from building 800K new homes a year to building 100K and around 12% of the labor force ended up unemployed. That explains 80% of what is wrong here. The rest of the industries were hurt in this crisis but not as badly as the construction industry. Spain can be turned around if we focus on growing the rest of the economy. So far what happened here is that the growth of Spain was fake, based on increasing debt and not sustainable sectors of the economy. My plan promotes employment in whatever sector may end up hiring without having government try to guess exactly how to grow the economy.
I am happy that Rubalcaba said he would have an economist specialized in tax revenues study my plan. Common sense tells me that my plan is a net revenue generator for the government from day one. Why?
Because it only applies to new employees and only on businesses that increase their work force compared to 2011.
Because there is a pool of 5 million unemployed and net job increases must come to a great percentage from this pool.
Because government stops paying the unemployed the moment they join a business and this produces immediate savings.
Because even if the government does not immediately get social charges they will get social charges over time and anyone making financial projections on tax revenue collections will have this into account. As a result rating agencies will see positive trends on tax collections and ratings will improve, this will lower the cost of borrowing for Spain. Shirking the debt premium produces enormous savings.
Because as soon as somebody is employed this person starts consuming and pay VAT and all sort of consumption taxes, gasoline etc that help tax revenues.
Because my plan provides an opportunity for the millions in Spain who work illegally to negotiate a transition to legality that will cost nothing to the employer during the first year and some will emerge from the underground economy in a way similar to a tax amnesty. It is an attack on the underground economy based on incentives that could be more successful than the failed Socialist Party plan based on increased fines that was put in place.
Now one way in which this plan would cost the government money is if ONLY those employers who were going to hire anyway hire, nobody else is attracted by the incentive and then the government loses 2 and a half years of social charges and some severance packages. But from an informal survey to my entrepreneur friends and the question, would you start a business or grow a business further if during 2012 you don’t have to pay social charges and if the business fails you don’t have to pay severance packages the answer from everyone was a resounding yes.
Note: if you feel that this article lacks content you are right While with Rubalcaba I agreed not to disclose a lot of the ideas that were part of the brainstorming.