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.