Catalonia, without room to maneuver in economic crisis

We find ourselves immersed in the biggest economic crisis of recent decades, and, without focusing on the causes, we have been prescribed austerity as a cure. As much as this concept may be considered of personal value, austerity has nothing to do with the proper functioning of the economic system in which we live. Quite the opposite. To understand this, let’s take it to the extreme. To be austere, we could decide to produce and consume only that which is strictly necessary; as such, with food, clothes and shoes, housing, and a little bit of energy, we would have enough. In this case most workers would clearly lose their jobs. A return to the caves would be just around the corner.

The logical trap is that austerity on a personal level (micro) is not comparable with austerity on a governmental level (macro). I’ll expand on this. If a family or a business, as has been happening extensively in recent years, loses a good part of its income, the only applicable recourse is, ultimately, forced austerity. But that is not so for a state and a government! The reason is that the policies of public spending, if the critical mass is sufficient, can at the same time determine public revenues. The individual economic agent, however, cannot influence his level of income via his spending decisions. For example, a family, even by the most extreme measures, cannot guarantee that one of its members will find a job. The state, on the other hand, can. The key lies in how to do it.

With this in mind, in my opinion, budgetary policy must focus on two questions. First, on dealing with urgent needs and the three main elements of the welfare state-- that is, education, healthcare, and social benefits-- which independent of the drag effect they have on the economy, are a question of justice. But it’s also true that both the distribution of wealth and education are essential for collective forward progress in a knowledge economy. And second, in addition to necessary investments, budgetary policy must focus on dedicating a good part of available resources to promoting economic activation. In this sense, it has been empirically demonstrated that one euro invested in a specific sector can, thanks to the process of direct, indirect, and induced spending involved, generate many more euros than were invested initially. Throw a pebble onto the slopes where there is more snow, and the final snowball will be larger. Austerity, more than an economic policy, means not doing anything.

However, a specific budgetary policy is insufficient if it’s not accompanied by another essential instrument, fiscal policy, which focuses on tax revenues. It is the combined effect of both that becomes a powerful and noble weapon, which can lead to public revenue equaling public spending. And not only to meet urgent needs, but also for important needs, the spending required for good economic, social, and cultural development.

Catalonia, unfortunately, is more like a family than a state. Its very limited capacity in fiscal policy-- and I’m not referring here to its fiscal deficit, widely studied and documented, which we also need to keep in mind as a handicap-- do not allow it to strengthen itself, despite having a certain budgetary leeway. As such, Catalonia, with the only instrument available to it, the budget, can only hope that the fiscal environment, dictated from outside will become favorable. It’s like a family struggling on while it waits for better times. When they arrive, however, the challenge of returning to times of high collective prosperity is so huge --even if I’m convinced that it is possible to do so--, that it would be necessary to add the private dynamic to the public, and get rid of harmful prejudices and antiquated ideas. Ferran Adrià, in the El Convidat TV program, summarized it brilliantly when he said that if all the people who could afford to -- and there are many-- had a chauffeur, this would provide many jobs. What more can I say?

Austerity is the dish that we have served to the economic crisis so that it felt comfortable. In our country, however, this is practically the only dish that can be made in the tiny kitchen that we have available. Nevertheless, with the magnificent chefs that we have (and products, too), we know how to serve with care, and we’ve had the table set from time immemorial. Perhaps it is time we enlarged the kitchen.