Liberal voices. Economic liberalism in Spain, the case of Madrid.
Isabel Díaz Ayuso, Esperanza Aguirre, Daniel Lacalle, Carlos Rodríguez Braun and Diego Sánchez de la Cruz
The Rafael del Pino Foundation organised, the 18 January 2022 at the headquarters of the Foundationthe event "Liberal Voices. Liberalismo económico en España, el caso de Madrid" on the occasion of the publication of the work entitled "Liberalismo a la madrileña" by Diego Sánchez de la Cruz, published by ediciones Deusto.
The event took place according to the following programme:
María del Pino, President of the Rafael del Pino Foundation Roger DomingoEditorial Director of Ediciones Deusto
Isabel Díaz AyusoPresident of the Community of Madrid
Esperanza AguirreFormer Minister of Education and Culture, Former President of the Senate and Former President of the Madrid Regional Government Daniel LacalleD. in economics, chief economist and manager at Tressis. Carlos Rodríguez BraunProfessor of History of Economic Thought, Universidad Complutense de Madrid, Spain Diego Sánchez de la Cruz, Economic and Political Analyst, Associate Professor at IE University (moderator)
On 18 January 2022, the Rafael del Pino Foundation organised the event "Liberal voices. Economic liberalism in Spain, the case of Madrid", with the participation of Esperanza Aguirre, former Minister of Education and Culture, former President of the Senate and former President of the Community of Madrid; Daniel Lacalle, PhD in Economics, Chief Economist and Manager at Tressis; Carlos Rodríguez Braun, Professor of History of Economic Thought at the Complutense University of Madrid, and Diego Sánchez de la Cruz, economic and political analyst and Associate Professor at IE University.
Diego Sánchez de la Cruz: What can be measured, what can be demonstrated, what is increasingly empirically evident is that Madrid has become the capital of capitalism. We can take different metrics, we can measure the tax burden, public spending, the efficiency of basic services, regulation, the political environment and political risk. The important thing is to bring together all the indicators that we have at our disposal and put them into one single index, one single ranking. This is the regional freedom ranking, which compares the different autonomous communities.
Madrid scores eighty points out of a hundred. It is twenty points above the national average. But it is also twice as high as the results obtained by communities with a socialist economic system. If we take the communities that come out best in the index, not just Madrid, and compare them with those at the bottom of this ranking, we find that where there is more economic freedom, there are four points less unemployment, six thousand euros more income per capita, a rate of entrepreneurship that is double that of the socialist regions, a risk of poverty thirty percent lower than in the rest of Spain and, furthermore, they are territories to which people come from other autonomous communities or other countries. The regions at the bottom of this ranking are territories from which people leave, voting with their feet because they want more freedom.
How is it possible that Madrid is what it is today when, forty years ago, socialist policies prevailed, when the growth rate was similar to the national average and when we were a region that did not stand out in terms of economic performance? There are three factors that explain this. Firstly, there have been twenty-five years of centre-right political hegemony. There have been other regions that have had socialist hegemony and the results are well known: they are leaders in unemployment and poverty and have fallen far behind. In Madrid, just the opposite has happened. Evidently, different policies have different results.
Secondly, Madrid is an open community. Four out of every ten people living in Madrid come either from other countries or from other autonomous communities. Five out of every ten employed people also come here. Therefore, all this attraction is human capital that comes to nourish Madrid's economic success, but also the cultural and social life of our region. There is no stopping this. This is an open society on which you cannot impose a way of living, a way of thinking, as is unfortunately happening in Catalonia. This explains why, when people in Madrid are asked how much they trust each other, the figures are fifty percent higher in Madrid than in Catalonia. This is because freedom generates trust and favours understanding. At the same time, nationalist, socialist projects, as we are seeing more and more in Catalan economic policy, end up undoing all these ties and generating confrontation and rupture.
In Madrid we have elites who have been rowing for free enterprise for a long time. Business elites, intellectual elites, elites that have given an intellectual substratum to everything that ordinary Madrileños basically wanted, which is to be allowed to live in peace, to get ahead and build a future for themselves.
On the basis of all this, there were three major reforms, which began to develop in the years of Esperanza Aguirre, and which have been maintained over time. These reforms are basically three. The first is lower taxes. In Madrid, until the outbreak of the pandemic, sixty-five tax cuts have been approved. Two, regulatory reform. In Madrid there are fewer and fewer obstacles. This is transformative because in Madrid a million pages of new legislation are passed every year and the fact that Madrid is committing to removing obstacles is, of course, groundbreaking. It started with the freedom of business hours and now it has a much longer way to go. Thirdly, it was the involvement of the private sector in the provision of basic services. It is essential to underpin education, health, transport and that is precisely why we cannot afford to do without free market forces. By allowing companies to play a role in the provision of these very important services, by encouraging within the public system itself freedom of choice, even competition between different schools, health centres and so on, what we are creating is a culture in which the taxpayer has more freedom of choice.
In Madrid, 65 tax cuts have been approved and tax collection is growing year after year, so that we have less and less tax pressure and, nevertheless, we have more and more tax collection. In other words, the Laffer Curve is based in the Community of Madrid because we have shown that, with lower taxes, much more favourable incentives are generated for investment, entrepreneurship and the generation of wealth. This, in the end, generates a much larger economic pie, which, paradoxically for some, ends up producing more revenue. There are fewer taxes and more growth and, as a result of more growth, it ends up generating more revenue.
Speaking of regulation, Esperanza Aguirre approved freedom of business hours. She was the first to opt for freedom of business hours and opening days, which, to date, no other Spanish region has, even though there is a national law that favours greater availability to set opening hours and opening days in large capitals. Madrid has just passed a very ambitious Land Law, which introduces various changes and flexibilities, for example, the automatic change of land use, the elimination of licences, etc. It also has an open line against over-regulation. More than two hundred files have already been processed to remove a specific obstacle, improve a procedure, reduce bureaucracy, and all of this will give rise to legislation. One of these is the Omnibus Law, which is currently being processed in the Assembly. Its very name indicates that, in a flood, it is going to mean thirty-five flexibilities, liberalisations, in different areas. There is an Open Market Law that will automatically recognise licences granted in other autonomous communities. In Madrid, European funds are being used to make the Administration lighter, simpler, to digitalise the citizen's procedures with the Administration.
Esperanza Aguirre was accused of wanting to dismantle the health system. It turns out that, in the end, dismantling meant opening twelve more public hospitals and one hundred and forty-two health centres. In other words, as Madrid grew more, it was able to invest more in health. One out of every three new hospitals was privately managed. One model and the other can go hand in hand, they can collaborate. The most important thing here is the patient, and the patient satisfaction rate in Madrid is around 90% for all services offered. Waiting lists are, on average, thirty-five percent below the regional average.
Something similar happened with education. Today Madrid has better results than the rest of Spain and the OECD average. Something similar has happened with the pandemic, when everyone was closing in, Madrid decided to open up and show that believing in these ideas requires commitment in good times and bad, when it is easier and when it is more difficult.
All this leads to a Madrid that will prosper greatly. Madrid Nuevo Norte is one of the symbols of the growth that Madrid is experiencing. This Operation Chamartín alone is going to bring about a huge urban transformation. It is the perfect demonstration that Madrid is attracting capital, generating opportunities, seeing itself as a model to follow and realising that freedom works, it yields better results and by the path of freedom Madrid has found a formula that hopefully can soon be extended throughout Spain because, ultimately, more economic freedom is more prosperity and more development for all.
Esperanza Aguirre pointed out that her political life has always been guided by the deep conviction that only liberal ideas could bring greater welfare to the greatest number of citizens, especially the most disadvantaged. From minute one, when she was elected as a councillor on Madrid City Council, she started something very radical. She was councillor for Culture and the La Vaguada theatre came to her. She decided to put it out to public tender to award its management. She had a demonstration against that privatisation and, nevertheless, someone who came after her, who was also from the PP, decided to manage it privately. This also happened with the law on sustainable rural housing. Then a law was passed in the Madrid Assembly that allowed a house to be built if it was not protected or agricultural land. Then someone else came along and repealed it. He also approved freedom of choice of educational centre. He wanted freedom and responsibility, to encourage study and effort. And, as her political adversary, Ángel Gabilondo, who was also a former education minister like her, said, what is not evaluated is devalued. She hopes that the Consejería de Educación will reintroduce tests of knowledge and skills. He also introduced free business hours, or bilingual education. These are not good times for liberalism. Therefore, we must defend liberal ideas, which are not in fashion, in order to get this social communist government we have to go as soon as possible.
According to Carlos Rodríguez Braun, we must have two messages. The first is not to be entirely happy with our politicians, not even with those we like, because they can become numb if we don't prick them. It is our duty to prick them. The second lesson is not to take anything for granted. If there is an example of not taking good things for granted, it is Chile. Chile used to be like the community of Madrid but in a different way, with decades of applying these lessons with very good results. Now it is over. We must be optimistic, but not idiotic. All of us must be fully aware that the lesson that the price of freedom is eternal vigilance still applies.
For Daniel Lacalle, the first thing we are wrong about in the debate on interventionism is whether the wealth tax generates the estimated revenue. Wealth tax is immoral because it is a tax on the future of citizens, on their ability to save, and it is a transfer of savings from those who manage capital well to those who are bad at it. It is not collected, but they know it, just like the Tobin tax, which has only served to make the Spanish stock market irrelevant. You have to defend the people who manage wealth, who make the richest countries. The fundamental problem with this tax is that it is based on an empirical fallacy, which is that, as we have spent a lot, we must collect for the pandemic when the problem is the excess structural deficit incurred in 2019 with the most expensive government in history. The battle of ideas is the battle of ideas. Liberalism is the only system that truly defends the poor.
Esperanza Aguirre also recalled that the first thing she did was to reduce spending in the Community of Madrid as much as possible, to have fewer ministries, to reduce everyone's salaries. Many entities were abolished, all those daughters and granddaughters of the Administration that are growing were abolished, and we abolished taxes. We cut taxes as much as possible. We did not decide to blame the real estate sector and, therefore, to expropriate the houses that were built. On the contrary, we stimulated the economy to keep growing.
Carlos Rodríguez Braun commented that removing inheritance taxes has an important validity and has a paradoxical history. Inheritance tax was promoted by nineteenth-century liberals, notably John Stuart Mill. Then the race was steadily upwards until a combination of public opinion and lack of revenue saw it disappear, although it now seems to be making a comeback. Protests to lower taxes, that's a change in public opinion. The state does everything it can to make sure taxes are not noticed, hence the demonic idea of withholding taxes. If they were abolished and everyone had to pay directly to the Treasury after receiving their pay cheque, the invention would really come to an end. It is not true that the tax burden can rise without consequences. It has consequences.
For Daniel Lacalle, Madrid is an example. Yesterday he took a taxi and the driver had arrived in Madrid ten days ago. He asked him and he told him that everyone is comfortable here. The advantage with the autonomous communities is the ability to compare different models in the same country with the same currency, the same legislation, which leads to very obvious conclusions. For example, in Castilla y León. Some people say they are concerned about the empty Spain, but they put the self-employed and livestock farmers on the highest quotas in the EU because a man who has never set up a business thinks that this will reduce the increase in the structural deficit of the social security system. You see how the former Baltic countries beat Spain in per capita income, Greece reduces unemployment much more than us in the middle of a pandemic. A farmer cannot afford the absolute bureaucratic and fiscal monstrosity that is being imposed on him. What we must not do is fall into the error of buying into the 20% of the enemy's message. Chile's big mistake is to accept the 20% of what communism says.
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.