Andrés Rodríguez Pose: "One of the main areas in which Catalonia continues to excel in Spain is scientific training and production"

 

The impact of decentralization on growth is generally fairly unclear and often negative. Does this mean that decentralization is a bad thing? Not necessarily. Whether the economic impact of regional autonomy is positive or negative depends on the type of decentralization that takes place. In many countries of the world, a top-down decentralization has been applied that reassigns more powers than it does actual resources, which are transferred from the central government to the individual regions. This gives rise to a series of new mechanisms: the autonomous regional governments often find themselves with less funds than before the change, making it more difficult to establish effective policies and, in many cases, leading them to take on debt. How can this problem be solved? One of the possible solutions is precisely the direction Catalonia wants to move in, although it should not only be applied to Catalonia. It involves granting each region greater fiscal autonomy in return for more responsible policing of tax revenue. In countries where autonomous regional governments raise most of their funds through local taxation rather than transfers from the state, the medium- and long-term impact is far more positive and the system is more robust. Placing greater weight on local taxes encourages fiscal responsibility, as local politicians are more directly answerable for inappropriate spending.

 

 

In theory this does not have to be the case. Unquestionably, the more decentralized the fiscal model the less money is available for transfers from richer regions to poorer regional governments, meaning that each region becomes more dependent on its own resources. Is this necessarily a bad thing from a purely economic perspective? I would say that it depends on how you look at the issue. The situation we have at the moment is one in which some regions of Spain are making substantial contributions to maintain the revenue of others - not to develop, but simply to maintain their revenue. This is damaging in the medium term, because it has helped to create a system in which fewer and fewer regions are open to the market and regions become more dependent on transfers. Protected economies are being established, and whether we like it or not, such a situation is not sustainable. It is not sustainable for the production base to gradually diminish. But what can be done? In the short term, changes to the system of intergovernmental transfers could squeeze living standards in some regions. However, looking to the medium and long term, this could encourage many regions to start using their resources and economic potential more intelligently, leading to structural policies more in line with the demands of sustainable development.

 

 

There are two types of crisis: one is structural, the other circumstantial. There are countries mired in a structural crisis and others affected more by a circumstantial crisis. The second group comprises those countries with largely healthy economies that have been affected by the crisis or continue to suffer to an extent because their buyers cannot go on buying. These countries include Germany and the Scandinavian nations, which have had to redirect their market strategies but are able to find solutions thanks to solid and competitive knowledge-based economic foundations. The countries with a structural crisis include Greece, Italy, Spain, Portugal, the UK, the United States and so on, which are embroiled in more than a simple debt crisis; in their cases, it is a crisis based on a lack of competitiveness. The ins and outs of the crisis in Spain are common knowledge: a rigid labour market, the housing bubble, the trade deficit, excessive levels of debt, in particular among families, major skills deficiencies in the workforce… In such a scenario, it will be necessary to go much further than implementing the stop-gap measures and cosmetic changes we have seen so far, to introduce more fundamental structural reforms. Two types are possible: short-term structural reforms, which must begin with a serious restructuring of the labour market, which is long overdue; and medium-to-long-term reforms that place greater emphasis on the quality of human resources, continuous professional development in areas that can boost competitiveness (above all in technical and scientific sectors), increasing the competitiveness of Spanish businesses and boosting our capacity for innovation. The future competitiveness of Spain depends on our ability to compete at the level of knowledge, an area in which we are, unfortunately, behind many of the countries around us. How will these reforms affect regional imbalances? In the short term, they will exacerbate them; in other words, those regions with a stronger position in the market, with healthier economic foundations and better human capital, with more extensive infrastructures, greater accessibility and greater capacity for innovation will be the ones to benefit. To an extent, the property bubble served to mask the disparities that already existed. When you have a housing boom that is focalized in certain regions, and not necessarily wealthy ones, once this completely artificial bubble bursts there are regions that become more vulnerable.

 

 

In Catalonia, as in the rest of Spain, the situation is unsustainable; it is not sustainable to have such a large trade deficit, for levels of youth unemployment to be so high, to have such a marked disparity between the education system and the demands of the labour market... In addition, living standards in Catalonia cannot be maintained indefinitely by debt because lenders will eventually stop lending. Sustainable development is reliant on being more competitive and basing this competitiveness on knowledge. In Spain as a whole, Catalonia has traditionally been in a more advantageous position than most other regions: it has strong industrial roots, more competitive companies and a history of being more open than other parts of the country… However, a number of things should be taken into account. First of all, in relative terms Catalonia is not as well placed to carry out reforms at it was some twenty years ago. Catalan companies, with a few notable exceptions, are generally less competitive because costs have risen and productivity has not increased at the same rate. In addition, the world is an ever more integrated place; a lot of Catalan products are manufactured in other parts of the world where costs are generally lower and quality may well be better. What can we do about this? One of the advantages we have, and one of the areas in which Catalonia continues to excel in Spain (where the competition is increasingly concentrated in Madrid) is scientific training and production. Catalan universities and research centres remain ahead of their national counterparts. Catalonia has research centres of European and international standing and a significant capacity to produce highly-qualified individuals. A serious commitment is needed, and it is important that budget cuts do not affect these types of activities, because they provide the platform for a more competitive future and a more strongly knowledge-based economy. Nevertheless, choices will still have to be made, and that is always a difficult task. It is not a question of “coffee for all”[*]. It is about supporting sectors which - because of the companies we have in Catalonia, the workforce, the training and the capacity for innovation - are the best placed to compete in increasingly open markets and generate the private and public revenue on which a much more sustainable model of development can be built.

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