Economic governance, understood as the capacity of public policies to accompany the transformations of the productive system, is probably the main challenge of our times. In the case of Spain, the economy’s trajectory is positive in relation to others, according to various economic indicators, consistent with slight growth, when some of the EU partners most exposed to shocks are on the verge of recession. But it would be wrong to conclude that the tailwind can last without new consensus on the role of the state in the current disruptive context.
At present, the impetus comes from two transitory factors. Firstly, competitiveness – a key factor in our export boom and the solid external surplus that prevails despite the succession of global shocks – is highly dependent on labor costs. Wage moderation has been the keynote of this last decade, and the availability of renewable energy sources has added a bonus. Since 2010, unit labor costs have increased by 15% in current euros, i.e. 9 percentage points below the European average. However, this is of little relevance for undertaking the productive adaptations and reallocation of resources needed to make the digital and energy transition. Because the key lies in boosting productive capacity, and this is precisely where we have a problem, with investment not meeting expectations. Since 2010, spending on equipment has risen by 11% (in constant terms, discounting inflation), just half the European average.
The automotive sector is a paradigmatic case of the unfeasibility of competing with attractive wages without adapting production chains to electric vehicles. According to industry data, production in this market segment is growing much less than demand, showing the road ahead.
The second factor of resistance, namely fiscal policy, is in an even more precarious situation. This policy has played the role of an automatic stabilizer, protecting the productive fabric in the face of the crises of recent years, and ensuring a certain social cohesion, as in the case of labor reform or the indexation of pensions to inflation. All this, however, has only been possible in the now defunct era of monetary abundance. Now that the State’s financing conditions have tightened, in line with rising interest rates and the ECB’s gradual disinvestment from the debt market, there is no room for maneuver to take on new compensations that do not find a counterpart on the public revenue side.
In addition to having a space for conjunctural action, the State must assume a proactive or strategic role, with the capacity to deal with structural changes. This is what European funds are for, provided they serve to transform the productive fabric. Quantitatively, the execution of these funds seems to be progressing. The central administrations, for example, have committed practically all the resources disbursed by Brussels. But for the moment the results are not reflected either in productivity, which is languishing, or in productive investment, which is declining in relation to the pre-pandemic level (in terms of the economy as a whole).
Here, as in other areas of fiscal policy, it would be advisable to draw inspiration from the experiences of countries with a federal structure that make transfers between administrative entities conditional on results. Instruments such as the systematic evaluation of large spending programs and tax benefits that reduce revenue, block transfers and the deployment of resources or partial debt write-offs according to their impact can be useful in this regard.
In short, the economy has the makings for continued growth in the short term. But the momentum can only be sustained with a renewed focus on the state, including rethinking the efficiency of the instruments of action, while reducing budgetary imbalances.