Leandro Prados de la Escosura, Luis Garicano and Joaquín Almunia
The Rafael del Pino Foundation organised, on 9 April 2018 at 7 p.m., the dialogue "Analysis of economic growth in Spain. Past, present and future of our economic model", on the occasion of the publication of the book "Spanish Economic Growth, 1850-2015".(Palgrave Macmillan 2017), by Leandro Prados de la Escosura, Professor of Economic History at the University Carlos III of Madrid. The author spoke with Joaquín Almunia, former Vice-President and former European Commissioner for Competition, and Luis Garicano, Professor of Economics and Strategy and Director of the Centre for Digital Economy at IE Business School.
Leandro Prados de la EscosuraD. from Oxford University and PhD in Economics from the Complutense University of Madrid, is Professor of Economic History and researcher at the Figuerola Institute of the Carlos III University of Madrid and Rafael del Pino Professor at the Carlos III University of Madrid. He is also a researcher at the Centre for Economic Policy Research (CEPR), an associate researcher at the Centre for Competitive Advantage in the Global Economy (CAGE) and a corresponding member of the Royal Academy of History. He has been Prince of Asturias Professor at Georgetown University and Professor at the University of California, San Diego. He has also been Visiting Research Fellow at All Souls College, Oxford and the London School of Economics and Jean Monnet Fellow at the European University Institute (Florence). In 2013-2014 he was Leverhulme Professor at the London School of Economics. He has been appointed to the Maddison Honorary Chair at the University of Groningen (2015-2019).
Luis Garicano holds a degree in Economics and Law from the University of Valladolid, a Master's degree in European Economic Studies from the College of Europe in Bruges, a Master's degree in Economics and a PhD from the University of Chicago. In 2017 he joined IE as Professor of Strategy and Economics, where he directs the Center for the Digital Economy. Luis Garicano has developed his extensive teaching career at the University of Chicago and London School of Economics, where he has been a tenured professor and professor; he has also been a visiting professor at MIT and London Business School. He has also held positions as an economist at the European Commission and at McKinsey & Company. He was recently elected Vice-President of ALDE - Alliance of Liberals and Democrats for Europe, and is currently Head of Economics and Employment at Ciudadanos.
Joaquín Almunia was Vice-President and European Commissioner for Competition between 2010 and 2014, having previously been European Commissioner for Economic and Monetary Affairs between 2004 and 2010. A graduate in Law and Economics from the Universidad Comercial de Deusto, he completed his postgraduate studies at l'École Pratique des Hautes Études in Paris. He was Minister of Labour and Social Affairs (1982-1986) and Minister of Public Administration (1986-1991) in successive governments of Felipe González. After leaving the executive, he took part in the "Senior Managers in Government" programme at the Kennedy School of Government at Harvard University. In 1997 he became the party's Secretary General and stood as a candidate for President of the Spanish Government in the 2000 general elections, but after failing to win he resigned from the post. In his last legislature as a Member of Parliament (2000-2004) he was Chairman of the Budget Committee. In April 2004, he was appointed member of the European Commission. He is currently engaged in research and reflection in different think tanks and other platforms, as well as lectures, books and articles for different media. He is, among others, Visiting Professor at the European Institute of the London School of Economic and Political Science and the Paris School of International Affairs of Sciences Po.
Summary:
On the occasion of the publication of the book "Spanish Economic Growth, 1850-2015", (Palgrave Macmillan 2017), by Leandro Prados de la Escosura, Professor of Economic History at the University Carlos III of Madrid, a dialogue took place on 9 April 2018 at the Rafael del Pino Foundation between the author, Joaquín Almunia, former Vice-President of the European Commission and former European Commissioner for Competition, and Luis Garicano, Professor of Economics and Strategy and Director of the Centre for Digital Economy at IE Business School. The event began with a speech by Prados de la Escosura, who is also Rafael del Pino Professor, who pointed out that, in the history of Spain, the increase in GDP was usually due to population growth, although living standards varied little. In the last two centuries, however, the increase in GDP has been due to an increase in the quantity of goods and services produced per person. If you look at the earlier period, there are some different realities than we thought. Before the 19th century there was growth, but it was reversible. GDP increased, but crises caused the level to fall. Thus, Spain reached the highest levels of per capita income in the 14th century, before the plague, only to fall back afterwards. In the last two hundred years, on the other hand, growth has been sustained, with some moments of reversal, such as the Civil War or the Great Recession. But it is clear that the living standards we have today are the highest ever achieved in history. However, it is not a linear growth, but has three major phases: until 1950, when it was falling; between 1950 and 1975, with very strong growth; and from then until 2007, when growth was sustained, but at a slower rate. He also pointed out that GDP has grown so much because GDP per person has increased. This was because there was a change in the incentive framework from the liberal revolutions of the 19th century. These are changes along the lines of citizens are equal before the law, private property is protected, markets are liberalised, there is control over the executive. As a result, investment increases, resources are transferred from agriculture to services and investment is shifted from housing to machinery. Moreover, GDP per capita is growing because we work better, i.e. we produce more per hour worked. In fact, productivity has increased 27 times. Until 1975, GDP per capita growth was closely linked to GDP per hour growth. Since then, however, the relationship is inverse and when GDP per capita grows strongly, it is because more people are employed. This has been the case since 1975. This is because new sectors create jobs, but they do not attract innovation. We produce more per hour worked because we use more capital, but also because we use more human capital and more intangible capital. This is true until 1950. Since then, productivity has increased because we are more efficient in using these resources. Finally, he pointed out that Spain is a country that was growing before 1950, but even so, the gap with developed countries was increasing. Since then, the gap has narrowed, except during the years of the Transition and the Great Recession. Joaquín Almunia, for his part, pointed out that apparent productivity has stagnated since the mid-1960s. The Spanish economy has not combined employment and productivity growth well. When it grows, it is because employment is better utilised, but then productivity stagnates or falls. To grow, we depend on the capacity to increase employment levels. Since 1980, productivity has virtually stagnated, which should lead us to reflect on the future. There is scope for using more employment, such as bringing more women into the labour market, or as a result of ageing. But we need to think about how to grow by increasing productivity, which means that we have to address the huge shortcomings in education, human capital, research and development, the functioning of goods, services and labour markets, the excessive corporatism and lack of competition, and the productivity differences between large and small firms. We also have a lack of domestic savings, a very low rate of public investment and private investment needs that will require huge amounts of private savings. In his opinion, we are not converging with the most advanced countries due to a mixture of under-utilisation of human resources, high levels of unemployment, lack of savings, and high debt rates. Furthermore, we need to transform the business environment so that it is not small-scale. And we have to solve the problem of a scarcely innovative environment with many barriers to innovation. Luis Garicano pointed out that the "Dutch disease", i.e. a rise in prices due to inflows of wealth, is a disease that Spain suffered from after the Golden Age and which led to our country having 40% of employment in the service sector two hundred years ago, due to the high number of priests, nuns and servants. The "Dutch disease" causes productivity to stop growing and that, according to Garicano, is what has happened again to Spain at the end of the 20th century and the beginning of this one. Due to the entry into the euro, Spain lowered interest rates a lot, money came from Europe, the currency became very strong, we deindustrialised and went to the service sector. We had a different version of the "Dutch disease" in which euros came in and we spent it on bricks and mortar.
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