The Economy I: Bricks and Golden Eggs

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Where better place to start than with construction? Bricks and mortar have been the driving force of the Spanish economy with the skyline of every town and city broken by the skeletal sight of several cranes. Construction has produced a huge amount of wealth for Spain, for local government and of course for the developers and speculators. A wealth generator yes, but personally I believe it has led to a myth of economic development. The economy hasn’t developed in a wider sense and the idea that construction could keep on pushing the country forwards forever was always going to be impossible. Of course it’s very easy to say that now, but it was clear before the start of the recession that it was an unsustainable policy. Understandably the banks, politicians and developers kept working the golden goose until it collapsed. Why bother changing something that works well for them?

There are a million people in construction without work because of the recession. 350,000 new posts will be created the new project for the renovation of old buildings. This will be encouraged by reducing VAT for these projects, reducing taxes and costs and increasing particular loans. Attractive incentives, but who is actually going to fund these works? Is it really profitable for the developers to realise this kind of labour? Does this mean rehabilitating empty buildings to sell on? To whom? Or if they are already inhabited, will the occupants want to pay? What about the rest of the people?

It seems that all of the political parties are waiting for construction to pick up again. It won’t work. It’s an economic model that is fundamentally unsustainable in a country that has a million unsold and unoccupied flats. Spain is in an awkward position as this is affecting everyone: there are a million unemployed in this sector and many people from the middle class who thought they could make a fast buck buying and renting/selling a second property. Now that the bubble’s burst, they’ve got problems: they want to sell but no one wants (or can) buy. Or if they want to buy, the price is inflated because the owners need to recoup as much money as possible. Prices are high compared to salaries and there are too many flats –what is the point in building more? The younger generations are being held to ransom by the speculators. Add to this the fact that many homes in the south were being bought by foreigners. These foreigners have enough problems in their own countries with unemployment etc and won’t be looking to buy a second home soon. Similarly, the British expats are seeing their pensions steadily fall in value because of the euro and consequently life is getting more and more expensive, with the result that many want to return home.

What is needed is a fundamental shift in the focus of the economy. It will be painful and hurt a great number of people, but I feel it is necessary in order to give work to the 1,000,000 unemployed construction workers, get the economy moving again and create a sustainable economic model. This requires investment, not cuts. The biggest problem of the economy is unemployment and the idea of cutting public spending is an absolute no-brainer. What is required is targeted and controlled investment.

Construction has led to a myth of development. Many people have got rich with the construction boom, but that hasn’t developed the economy in any way. The people at the bottom continue to struggle along as best they can with astronomical mortgages. It has been a golden goose for some, but the eggs are no longer being laid. The problem is that the politicians, who for a long time have benefited from part of the construction contract egg, are not willing to shoot it.

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