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.
So in my opinion a candidate that really understands the US economy and Northern European economies and who even understands Asian economies and can make deals with top CEOs of foreign companies to invest in Spain is crucial for our future. We also need a president who understands wealth creation, who understands the Silicon Valley quality job machine and how some parts of Spain have actually similar economies. We need a president who understands that social justice can only come after significant wealth creation.
So I am pleased to share that we now have a meeting scheduled with Rubalcaba. It will take place on August 17th at 17 hours. Easy to remember 🙂
Now the key question for Rubalcaba will be how can he be so different to the President he served for: Zapatero. He was in the same government and in charge of the same policies that saw unemployment shoot up from 8% to 20%. Rubalcaba as a candidate is as if Obama resigned because of a huge economic and financial crisis and Biden campaigned against a Republican having been the VP of the government that bankrupted USA. Still I think that before I speak about Rubalcaba I meet with him and then report about the meeting. And that’s what I will do. Maybe Rubalcaba did not have room for action, maybe he does have different ideas. In general I dislike to speak about people I don’t know. So let’s see what he thinks.
Lastly I would like to say that as opposed to my native Argentina, where ruling families like the Menems or the Kirchners, or governors like Scioli make hundreds of millions of dollars in a shameful cleptocracy this is not the case in Spain. It is not that in Spain Zapatero has been a corrupt president. Compared to say Berlusconi, Zapatero is a model of ethics and morals. The problem of Spain is not as many here think, corruption which is very small by the standards of other Latin nations. The problem is lack of imagination, creativity and overall awareness that Spain is part of a globalized economy and can only be saved by learning what works and doesn’t work in globalized economies. With a GDP of $1.5 trillion Spain still matters. And I sincerely hope my adopted nation gets out of the economic crisis it is in to thrive once more in the global economy.
We just spent a long weekend in Baeza and Ubeda in Andalusia.
I moved to Spain in 1995 and I thought that by now I knew this country very well. But then there is always something new to see. In this case these two beautiful towns in Northern Andalusia. Other than my family and friends here, what I love about my life in Spain is that I get to build global start ups, out of Spain. That I get to build Fon in Spain. That when I leave work, I am in Spain. I am not saying that California is not attractive, and it also has great weather. But to me, there’s something missing in California, or New York, or Florida. I love visiting USA but after spending 18 years of my life there I still feel better in Spain. And I feel better in Spain than in UK or Germany. Italy and France could be a contenders as they are beautiful countries as well. But the environment for start ups in those two countries is horrendous.
In any case here are two minor, further proofs as to why Spain is better.
I recently wrote two articles in my Spanish blog against parents physically punishing their children. In the first one, I argued that Skinheads and other very violent youth tend to come from homes in which physical punishment was commongly practiced.
In October of last year, I wrote this post What Happens when a Country gives up Religion…. where I comment that Spain gave up religion and actually did very well after doing so. Spain went from being a very poor Catholic country to being a wealthy country (approaching GDP per capita of Germany) that mostly treats Catholicism as a tradition and frequently legislates against its teachings (the latest case has been the approval of Gay Marriage). Then I go on to say that in spite of so many things in Spain being legal that are illegal in most of the States (or say that all of Spain has the legislation of Las Vegas and more), the country is overall quite moral and ethical and much less police, prisons and arms are needed per inhabitant than in USA. My point here is that violence against things some may not like does not always seem to be the best approach. Tolerance is best. This article was plicked up by Reddit two days ago and the most hilarious string of comments followed. Some spilled over into my blog. Needless to say visits to my blog went through the roof and around 20K people read the article. What follows is some of these comments.