Monday, February 21, 2011

Emerging from Franco’s Shadow: Spanish Internationalization and Integration in the European Union

This is the outline for my European Union Econ Class.

Part 1: Dissociative Identity Disorder
The peculiar case of Spain after World War II is one fairly unaffected by significant events in European collective history. Largely isolationist until the 1970s, Spain in the post-Franco era was one of radical change. This change resulted in a new democratic government, and a new foray into the world. Economically, it opened up and embraced the structures that had been created by the now established European Community. Because of the previously isolationist policies, Spain had to make many reforms before catching up fully to the rest of the community.

Several important aspects were at play. Its isolationist history, the distinct regions and disparate sub-national identities, and its national corporations all had to be addressed to gain parity with its peers. Spain then embarked on a new national regime embracing open economics, foreign aid, capitalism, and the European community.

As a member of the EC Spain proved invaluable as an exemplary nation, showing how liberalized immigration policies, liberalized corporate policies, aggressive debt reduction, and a diverse multinational identity could work. Spain’s large migrant worker population called for many changes to the structures of how the government dealt with them. In Spain, immigration is a huge part of the work force and the government’s efforts to reduce large unemployment overall also integrated a worker naturalization policy. During the reign of Franco, many industries were state owned and run. When Franco died and a democratic government was put in place, Spain experienced a crisis. What to do with the large inefficient corporations? The resulting restructuring had many positive outcomes that increased Spain’s competitiveness and reduced its overall unemployment. To become a member of the Maastricht Treaty in 1992, Spain had to reduce its public debt significantly. After Franco, Spain could be considered a developing country, but thanks to rapid modernization and other economic factors, Spain was able to join the Eurozone. Spain’s regions are distinct in their industries, class, and even languages spoken. These differences have made for difficulties with Spanish national identity and serve as a model for the evolution of the emerging European Identity.

Part 2: Consequences
Spain’s rapid growth and astounding ability to join in the EU-15 in 1999 was not without consequences. In the years leading up to the financial crisis, Spain’s housing market grew substantially. The unemployment rate dropped below 10% and Spain was a model nation for growth in Europe. When the market collapsed in 2008, Spain was hit particularly hard. Its steadily growing economy was poorly shielded from the downturn.

Certain industries suffered more than others in Spain. Spain’s economic policies directly reflect why it was so close to the brink of financial doom like Greece, and how certain structural idiosyncrasies of Spain both aided it in the boom and exacerbated it in the bust. The skill level, transitory nature of the jobs, and education of the Spanish population all hurt the country’s ability to remain competitive. Spain tried to shield these deficiencies with supply side policies, but ultimately did not promote the right jobs or industries.

Unemployment rose to over 20% for a time, developments were abandoned, and industries were left exposed. With their monetary policy out of their hands, Spain enacted several fiscal measures to cushion the fall and successfully pulled itself from the brink of disaster. The ECB also played a large role in making sure that Spain did not collapse. The policies enacted by the ECB had direct and positive impacts. A series of reforms on labor and financial restructuring, enacted quickly in the wake of the collapse, have helped Spain recover slowly.