The late Jude Wanniski once observed about Spain that its headline rate of unemployment had little to do with actual unemployment. Wanniski’s point was that the 20% official rate was merely a sign of Spaniards aggressively hiding their work from tax collectors.
Wanniski’s analysis from decades ago was hard to forget while reading Michael Reid’s (former editor and writer at The Economist) new book Spain: The Trials and Triumphs of a Modern European Country. Early on Reid quotes French writer Theophile Gautier as observing that “The only serious thing for Spaniards is pleasure” in the same paragraph that he references “English romantic” Richard Ford as describing Spaniards as “a noble people who were held to be routinely betrayed by bad government.” What a combination! Realistically there can be no pleasure without work (relaxation is a consequence of production), and work in Spain has historically been hidden from errant governments presumably as a way of freeing up more funds for pleasure. Good for the Spaniards.
Still, the contrasts speak to something bigger about Spain that Reid aims to convey. In his words, “Spain has served as a mirror, an often distorted one, onto which observers have projected their own visions and fantasies.” It’s hard to blame them in light of the volatility that’s long defined Reid’s subject. Reid writes that “Between 1812 and 1975 Spain saw six different constitutions, seven successful military pronunciamentos (bloodless coups), four royal abdications, two dictatorships, and four civil wars.” He reports that at least 40,000 books have been published on Spain’s Civil War alone!
Reid’s aim is to make sense of it all, and in a reasonably slim, 274-page book. Does he? It’s beyond your reviewer’s ability to conclude not because the book isn’t good, or interesting, but because Reid’s account reads as very much an insider’s analysis of a country that he’s come to love. In my case, I purchased Reid’s book because I wanted to know more about Spain’s economic and political history. Reid has delivered there, though at times he resorted to fallacy to do so? And since Reid’s book is arguably much more of a book for those who already know Spain, I kept finding myself wondering how other insiders would feel about his analysis. In my case I’ll critique it at times without being able to comment knowledgeably about Spain itself.
Reid’s feelings about Spain are apparently as conflicted as the quotes from the above paragraph. While he’s made Spain his home (he lives in Madrid), he notes that his adopted country is “where, superficially at least, progress has largely halted.” Which is Reid arguably overstating his own pessimism. The country has clearly evolved, and progressed. My source: Reid himself. He writes of how upon visiting Fernan-Nunez in 1971 that he laid eyes on the poorest place he’d ever seen. But by 2017, Fernan-Nunez was thriving. Reid writes that in modern times, “There are few better places in which to live in Spain.” In concert with the evolution of that which used to be the picture definition of poor is the broader truth that Spain is only behind Germany in the manufacture of cars (surprising), plus it houses 14 of the world’s 500 biggest (by market value) companies, up from eight in the year 2000. This isn’t the stuff of a halted country.
Better yet, policy in Spain shows why. That it does speaks loudly to the myriad contrasts that Reid unearths, and that define the country. Underlying Spain’s poor governance, or the long-term perception of poor governance, is how very federalist the country is in ways that would likely please libertarians in the U.S. Reid reports that as of 2017, “the regions were responsible for 38 percent of total public spending,” and “local governments a further 15 percent.” Getting more specific, Reid writes that the prosperous Basque region of Spain is even more independent of the country itself, whereby the regional government “not only runs public services,” but “also collects its own taxes” that it “hands over a small slice of” to the central government to pay for very few services. Yes! That’s how it should be. Taxation should be local so that people can choose the government and so-called government services they want. This was the old U.S., or better yet it resembled the old U.S. model, and it’s one that would surely improve the already spectacular U.S. were we to ever return to an actual federalist structure.
Catalonia is another prosperous Spanish region that’s been prone to occasional outbursts related to independence. Its people sometimes vote with “emotional impulsiveness” on the matter of independence, but it reads as spoiled whining more than anything? Reid writes that international law supports “right to self-determination in cases of colonization, invasion, or gross denial of human rights,” but none apply to the free and creative people (El Bulli was long viewed as the best and most advanced restaurant in the world) of Catalonia. This is true even on the subject of language: while Catalan is the official language of Catalonia, 52.7% speak Spanish. Lots of freedom. Good.
Yet with Spain, there are always contrasts. Or a “Yes, but” to every positive. While it’s apparent that there’s regional autonomy that would please the libertarians in our midst, Reid cites a World Economic Forum Competitiveness Index from 2019 which rates Spain 114th (“well below countries such as a Guatemala and Paraguay for example”) when it comes to the burden of government regulation. Well, it probably makes sense: in a country that can presently claim a population of 47 million, Reid reports that 3.3 million are employed in various public administration roles.
The 3.3 million number looms large in light of Reid’s quip that there’s “a cast of hundreds of thousands of politicians who run Spain,” and “it is politicians who boss around business people.” There’s your regulation again, but as always, there’s a “but.” An overregulated Spain exhibits all manner of libertarian qualities, and those qualities extend well beyond the country’s federalist-style lean. While it reads as excessive today, it’s notable that homosexual relations ceased to be a crime in 1979, not to mention that right-of-center Popular Party (PP) regional president Diaz Ayuso proclaimed “I don’t care how people live organize their lives in their home and in their bed.” Imagine what Spain could be if it could combine a free-thinking attitude about personal issues with one about regulation.
Reid asks “How can and should countries deal with a traumatic and divisive past?” It seems with the question he’s looking for an answer to the inevitable questions about the implications of the Francisco Franco era, but the answer even with regard to Franco is for governments to not do anything. Was the Franco era traumatic? No doubt it was. Regarding the number of deaths, Reid notes that in a country of 25 million, 300,000-350,000 died during the Civil War from 1936-39 which, while tragic, it in no way comes close the suffering of South Koreans from their own warring with North Korea, or China’s Mao-induced agony. And then all of the latter sidesteps what happened to Germany, the Soviet Union, England and other nations that endured the much greater hell that was World War II. Thankfully for Spain, it didn’t participate.
The simple truth is that countries have emerged from much worse than what Spain endured with Franco. It really doesn’t even come close. Writers too often well overstate how the past informs the present. If it were as powerful as some think, Germany, Japan, China and the Soviet Union would still be basket cases.
How does Franco come off in the book? The question has to be asked, and it has to simply because no book about Spain is complete without commentary here. Allowing once again for the fact that your reviewer is no Spanish insider, Reid’s analysis read as fair. In other words, he didn’t seem to take sides. It would be easy for a journalist to side with the anti-Franco Republicans, but instead he’s clear that both sides had their demerits, that the Civil War was in no way an “epic and heroic conflict between good and evil.” It brings up even more contrasts. Communism has killed more human beings than any other ideology, and Reid is clear that Franco disdained communism. At the same time, he disliked liberalism, along with Catalan and Basque nationalism. Franco was about control, until he wasn’t about control.
Indeed, the most interesting parts of Reid’s book focus on the elder Franco. Reid reports that when President Nixon and Henry Kissinger met with him in 1970, Franco fell asleep! Yes! And while Franco disdained liberalism as previously mentioned, he very fascinatingly told Nixon envoy General Vernon Walters to tell Nixon “to trust the common sense of the Spanish people, there won’t be another civil war.” Before those comforting words, Franco told Walters that Spain would (post Franco) “go a long way down the road that you people, the English and the French, want: democracy, pornography, drugs and so forth. There will be a lot of crazy things but none of them will be fatal for Spain.” Liberal assertions about the future from someone who apparently disdained liberalism. More contrasts yet again.
At the same time, it makes you wonder. The assertions to Walters by Franco were not only prescient, but they revealed confidence in the genius of personal choice. Why then, all the death in the Civil War? How needless it all was, surely how needless was all the killing (20,000+) by the Franco regime. It had me wishing for more, and more in particular from Walters. Did he ask, or did he think about asking Franco why, if the people had common sense, did Franco feel the need to rule with such force and occasional violence?
Pivoting more to the economics of the book, Reid is hard to argue with when he contends that Spain began to grow during the Franco years when “the economy became increasingly open and market-oriented,” only for the same Reid to suggest that growth came of “airports with no flights,” “motorways with few cars,” and museums that remained “mostly empty.” Sorry, but government spending is a cruel tax whereby politicians substitute their limited knowledge for that of the marketplace. There’s no real growth to be had as much as readers can wonder just how much more prosperous Spain would have been (and would be) had government spent less.
While Reid doesn’t hide from the fact that tourism-reliant Spain saw visitors drop from 84 million in 2019 versus 20 million in 2020, he reported with no irony that “The Spanish government offered credit guarantees to businesses totaling E80 billion,” and “it paid most of the salaries of furloughed workers who numbered 3.4 million at the peak in 2020.” So while he acknowledges that the coronavirus lockdowns gave Spain (per Jose Luis Zoreda) “’the most catastrophic summer in 50 years,’” he doesn’t connect the obvious dots that all the government waste subsidizing the latter just added gasoline to the fire. Worse, he remarkably contends that Spanish officials “were a few days too slow in imposing the lockdown.” Really? Why? Does Reid seriously believe absent governmental force that Spaniards were going to engage in activity that would have sickened them or killed them? And if his belief that Covid was a killer of unknown lethality, why the need for lockdowns? Does he know free people who routinely risk their lives unless locked into their houses?
So, while it’s hard to take Reid seriously on the necessity of lockdowns, most damning is his expressed view that all the government spending somehow boosted economic growth (it implies central planning of resource allocation is stimulative so long as there’s crisis…), and worse, that a failure by the Spanish political class pre-Covid to reduce spending “meant that Spain had less fiscal space than other European countries to take compensatory measures.” Sorry, but that’s just incorrect. Government spending is an economy-sapping tax. Always.
At one point Reid writes that in response to a ECB rate hike, “The economy sank into recession, and credit flows dried up.” That’s not serious. Credit is produced globally, and is directed to its highest use around the world. Reid’s analysis would pretend that country economies are reliant on generous central banks. No. Having embraced fallacious notions of central banking, Reid then writes that “Spain was caught naked: a current account deficit of 10% of GDP could no longer be financed” as though there are “current account” securities being actively traded in global markets. No, once again. Imports and exports are a consequence of capital flows that governments can’t reasonably control. In the real economy, there are no “trade deficits” or “current account balances.” There’s just production, and exchange of that production.
At the same time, it wasn’t always fallacy with Reid. As his discussion of Franco makes plain, he ties economic progress to freedom. On the matter of falling birthrates, instead of pretending that the latter signals cruel destiny for countries, Reid is rightly of the view that it in fact signals progress of the wealth-building kind: as prosperity rises, birthrates decline. This only rates mention because so many on the Right in the U.S. claim that falling birthrates signal doom. They don’t get it.
Notably, another answer to the point made by Wanniski at this review’s beginning made it into the book. Reid writes early on that when “redundancy pay” was cut from 45 days per year to 33 per year per worker, work opportunities more readily revealed themselves. Well, of course. When you lower the cost of adding human capital, it’s easier to employ it.
In short, Reid’s book answered all manner of questions, and enhanced knowledge of others. Having read his book I feel much more knowledgeable about Spain, while cognizant that its contrasts and volatility require quite a bit more reading in order to understand it.
Reprinted from RealClear Markets
