Liberal proposals for the Spanish economy

Luis Garicano and Daniel Lacalle

On 23 April 2019, the Rafael del Pino Foundation organised the dialogue "Liberal proposals for the Spanish economy" with the participation of Luis Garicano and Daniel Lacalle.

Luis Garicano is an internationally recognised figure for his research on issues such as the impact of technology on global economic development and the organisation of economic activity, and the future of employment in the knowledge economy. In 2017, he joined IE as Professor of Strategy and Economics, where he directs the Center for the Digital Economy, which will promote and finance the development of studies in the fields of economics, business, sociology and law. The Centre will design courses for IE Business School students and organise conferences to disseminate the results of his research. Garicano has developed his extensive teaching career at the University of Chicago and the London School of Economics, where he has been a full professor and professor; he has also been a visiting professor at MIT and the London Business School. He has also held positions as an economist at the European Commission and McKinsey & Company. Garicano focuses his research on the impact of business management and technology on aggregate economic variables such as wage distribution, productivity and economic growth. His research interests also include the analysis of the Eurozone economic crisis. In this line, he has made economic proposals on the design of the Eurozone, such as the European Safe Bonds, which are currently under consideration by the European Commission and the ECB. He 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. He was recently elected Vice-President of ALDE - Alliance of Liberals and Democrats for Europe, and is currently Head of the Economic and Employment Area of Ciudadanos. He has collaborated as a columnist in international and Spanish media such as the Financial Times, Wall Street Journal, El País and El Mundo. His research has been published in prestigious international publications such as The Quarterly Journal of Economics, The Journal of Political Economy, The American Economic Review, The Review of Economic Studies, Management Science and Organization Science.

Daniel Lacalle is an economist, international advisor and Chief Economist at Tressis. He holds a PhD in Economics, a degree in Business Administration from the University of Madrid, a CIIA (Certified International Investment Analyst), a postgraduate degree from IESE (University of Navarra) and a Master's degree in Economic Research. His career in portfolio management and investment began at the hedge fund Citadel, in the United States and London, and continued at Ecofin Limited, covering equities, fixed income, private equity and commodities, and later at PIMCO. He has been voted for five consecutive years in the Top 3 best managers in the Extel Survey, the Thomson Reuters ranking, in the general, oil and power categories. Prior to his time as a manager, he worked as a financial analyst at ABN Amro (now RBS), and held various responsibilities at Repsol and Enagas, where he received the award for best IPO (IR Awards 2002). Daniel Lacalle writes regularly for El Español and is a regular contributor to La Sexta, CNBC, CNN, Epoch Times, Hedgeye, Mises, The Commentator and The Wall Street Journal. He is also a lecturer at the Instituto de Empresa, UNED, OMMA, IEB and the London School of Economics and Political Science. He has also written the books Nosotros, los mercados, Viaje a la libertad económica, La madre de todas las batallas, Acabemos con el paro, La Pizarra de Daniel Lacalle and La Gran Trampa, all of them published by Deusto and bestsellers both in their original Spanish edition and in their translations into English and Portuguese.


On 23 April 2019, the Rafel del Pino Foundation hosted the dialogue on "Liberal proposals for the Spanish economy", which featured Luis Garicano, Professor of Economics and Strategy, Director of the Centre for the Digital Economy at IE Business School and Vice-President of the European Liberal Democrat Alliance, and Daniel Lacalle, Chief Economist, Manager at Tressis and candidate for the Spanish Congress of Deputies for the Partido Popular. For Daniel Lacalle, liberalism means wanting prosperity for all in our country, which results from the sum of individual freedom, respect for private property, the rule of law and the market economy. Luis Garicano, for his part, considered that individual and market freedom are key elements, but that very strong institutions are also required, a state capable of solving the problems that the market cannot solve, a policy of competition, a powerful central bank and a social state capable of insuring individuals against economic shocks. Spain is a country for which these ideas are extremely useful, since monetary and fiscal orthodoxy benefits us. It is the structure that our companies need to be able to compete. Lacalle added that liberalism is the most social situation that exists to solve the complex problems of the economy. To do so, we must avoid the greatest danger of all, which is socialism. The temptation to intervene is enormous and detracts from growth potential. Liberalism, Lacalle continued, is important for Spain because our country historically needs to seek that maximum commonality generated by individuals, that potential that anyone who comes from abroad can appreciate, given that problems such as unemployment are not endemic. In order to achieve this common maximum, we need lower taxation, sensible and simple regulation that facilitates and improves things for everyone, and market unity, in Spain and in the EU. In the case of Europe, this unity implies going beyond the concept of national champions. Garicano continued in this vein, adding that planning and subsidies are not a way forward, because wealth is created by the market. To facilitate this process, three key reforms are needed in Spain. The first concerns human capital and training for employment. There are problems in vocational training and training for the unemployed, in primary, secondary and university education. In the latter case, he denounced the fact that universities do not provide information on the employability of their graduates so that, with it, a person can make the right decision about which studies to choose. The second reform would affect the labour market, where it is necessary to put an end to excessive temporary employment, precariousness and duality, which would be achieved, in Garicano's opinion, with the single contract. The third reform is that of the institutions, so that they work, and that includes public companies, starting with the selection process for their directors, which should be carried out by means of public competition. Lacalle denounced the fact that current education is oriented towards a labour market that existed before, but not now. In this field, we are once again looking for the common minimum, not the maximum. There is no company-university collaboration, nor company-vocational training. As a result, young people are entering the labour market without training, while the world is moving in a different direction. This is why we must stop penalising the collaboration of companies with the education system. We must also stop deifying qualifications as a guarantee of permanent employment and a salary. We must invest more in R&D and orient education more towards the reality of the world. With regard to regulators, Lacalle pointed out that they must be genuinely independent, but we must also think about how we want them to be so that they do not become more regulatory and bureaucratic. And we must also prevent governments from using the balance sheet of companies for their own purposes or for what they want. We have many rules that are not complied with, Garicano added, and, moreover, they are very many and different in each autonomous community. Therefore, independent regulators have to advocate for fewer rules and for compliance with those that exist. The same applies to state revenue and expenditure, particularly taxes. To raise more money, it is not necessary to raise tax rates. On the contrary, we must lower them, but we must also plug the regulatory loopholes to make taxation more efficient. If we don't do this, we will be left without a welfare state. The problem, Lacalle continued, is that, in Europe, when talking about taxation, the idea is to raise revenue, not to increase the capacity to raise revenue by encouraging business activity, etc. Furthermore, taxation cannot be used for xenophobic discrimination, nor can it be used for covert protectionism, because the problem is not the companies that have been successful, but rather that Europe does not create these companies. In this respect, it should not be forgotten that Europe has emerged from the crisis thanks to exports. If the world's giants are taxed on the basis of their nationality, the United States or China can respond with similar measures. Moreover, Europe is not going to be a technological leader if it starts with protectionist measures. Luis Garicano shared the view that Europe has got it wrong when it comes to technology companies. The reality is that in artificial intelligence, the strategic sector of the future, there are no European companies. This is a very worrying situation in the medium and long term, and something will have to be done because, if not, Europe will not be able to catch this train and will have to face problems of dependence on companies from other countries, with all that this entails. With regard to the risk of the Japanisation of Europe, i.e. the consequences of demographic ageing, Garicano explained that ageing implies very low productivity, very low real interest rates because there is no need for investment, very little economic growth and very little innovation. In this sense, Spain has the advantage that the economy and productivity can improve a lot if structural reforms are carried out and, in addition, it has the potential of immigration from Latin America. Daniel Lacalle added that the problem is that we lack two things that Japan has: iron discipline and a huge volume of savings in foreign currency. The fundamental problem is the abandonment of reforms and the reliance on monetary policy.

The Rafael del Pino Foundation is not responsible for the comments, opinions or statements made by the people who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their sole responsibility. The contents included in the summary of this conference, written for the Rafael del Pino Foundation by Professor Emilio González, are the result of the debates held at the meeting held for this purpose at the Foundation and are the responsibility of the authors.

The Rafael del Pino Foundation is not responsible for any comments, opinions or statements made by third parties. In this respect, the FRP is not obliged to monitor the views expressed by such third parties who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their own responsibility. The contents included in the summary of this conference, written for the Rafael del Pino Foundation by Professor Emilio J. González, are the result of the discussions that took place during the conference organised for this purpose at the Foundation and are the sole responsibility of its authors.