Sunday, August 29, 2010

Galicia – with a population of around 3 million – boasts three international airports, in La Coruña, Santiago and Vigo. So it’s something of an irony that the I spend so much of my time ferrying visitors from and to Oporto airport, down in northern Portugal. This, of course, is because the Galician airports – possibly out of internecine rivalry – have failed to get their act together with either Ryanair or Easyjet. One wonders if things would be better if the ultra-nationalists got their way and Galicia seceded from the Spanish state. My guess is worse.

Anyway, I went down to Oporto again this morning, taking my younger daughter for her early-ish flight to Liverpool. Crossing the Miño river, which forms the border between Spain and Portugal at the southern end of Galicia, we immediately noticed –and then smelled – the pall of smoke which hangs over the countryside as a result of a recent spate of fires there. Surprisingly, the Miño seemed to act as a barrier, not just to the fires themselves, but also to the aftermath. There was very little smoke and no smell on its northern bank.

I have two major questions about Portugal:-

1. Why can’t they design a car park entrance which allows you to take the ticket out of the machine without the need to at least climb halfway out of your window. If not get out of your care entirely?

And

2. Why is the gents’ toilet in the airport always closed because someone is (allegedly) cleaning it?

Finally . . . Reader Moscow has answered my query of the other day – about why Spain has progressed so much more than Portugal in the last ten years – with the rejection of any suggestion that it has anything to do with EU transfers. Spain, he says, is simply a richer place. Maybe so. But Britain is richer than Spain and I wonder if there’s any UK city which has seen anywhere near as much investment as Pontevedra has in the last decade. Like doubtless many other cities around the country. So, is Spain a more entrepreneurial and productive place than not only Portugal but also Britain? Not to mention France and Germany, neither of whose per capita income, I suspect, has seen similar growth. If not, where has all the money come from? And is it still legitimate to go on treating Spain as a ‘poor’ country for purposes of EU grants and subsidies?


Tailnote: Here’s the reference for the first chapter of my elder daughter’s second novel, which she describes as “A fast-paced political thriller but, above all, a personal tale of pride and paranoia.” It’s set in a fictionalized Cuba and several folk have been kind enough to say they enjoyed the first instalment. So, give it a try. And tell her if you like it. An author - well, a novelist at least - needs all the encouragment he or she can get. It's a lonely profession.

19 comments:

moscow said...

Collin,
Is Britain really richer than Spain? I am not sure about that.

And Spain is productive. Not as much as Germany. But in the second quarter exports grew considerably despite Spain being in the Euro. They grew faster than Britain's, despite Britain having a "free" currency. I think that says everything.

The only downside is - as CB from Ibex Salad says - Spain's export sector is still not large enough. Not surprising - he says - given Spain's tendency toward insularity. I agree. This is the real problem. But it is changing.

Anyway, Spain's cities were in need of a major revamp after decades of neglect during the Franco era. As for Britain's cities, don't blame the economy. That is just part of the mentality of letting things drift into neglect and dereliction that is so common in anglo countries.

Colin said...

Moscoow,

Well, I guess it depends on how one defines ‘rich’. And on what particular statistic suits one’s purpose.

Many of us foreigners here – seeing the lifestyle that middle class Spaniards have – find it hard to believe they are poorer than Germans. Even Americans. But the per capital income statistics say otherwise. Possibly because they ignore the huge ‘submerged economy’. Which no real EU member should be happy to retain. Or allowed to, some would doubtless argue.

My over-arching questions are - What has contributed to this Spanish achievement and will these factors continue to operate? Putting this the negative way – Have the Spanish been lucky and is their luck about to run out? Or at least diminish? If so, what is going to be done to compensate?

These question apply, of course, to a longer time frame than the last quarter of economic growth of 0.2%. Which, anyway, is well within the margin of error, I would have thought.

As for degeneration and dereliction in Britain, my general comment would be there in none outside the cities, in the countryside which Brits traditionally prefer to the urban alternative. Completely the opposite of the Spanish, of course.

As for British towns or cities, I can only talk about the ones I see regularly:-
London: Surely not degenerating, aesthetics aside
Plymouth: Ugly but not degenerating
Liverpool: Being regenerated with, of course, EU cash
Manchester: Much regenerated after the IRA bombings a while back
West Kirby on the Wirral. Not degenerating
Hoylake on the Wirral. A certain amount of fading charm but no real degeneration
Wallasey on the Wirral. Ditto.
Leeds: Not degenerating. Quite the opposite in the last 20 years
Harrogate: Certainly no degeneration. A chocolate box place, naturally popular with tourists
Chester. Ditto
Birkenhead: Certainly a depressing experience to visit the main shopping precinct. As awful as anything in the country. And there are certainly deprived parts of the city. But, overall, it’s probably not degenerating.

So, all in all, I’d have difficulty – once again – in agreeing with your point about Britain and Anglo Saxon cultures. I regard the degeneration as social, rather than architectural. But maybe that’s just my age.

moscow said...

So British cities are being re-generated - and with EU cash on top of it. I beg your pardon, what was your previous point about then?

Spain has a future if it goes out more. I have more than anecdotal evidence that this is actually happening. But I can give you the anecdotal account as well. The evidence about growth in exports during the 2nd quarter is not trivial at all. It is actually what truly counts at the end.

Colin said...

We're trying to establish what has happened in Spain. And why? You brought in the decline of British cities. My answer to your point is that I don't see it. But, anyway, it's irrelevant to my questions about Spain and where it goes from here. It's also irrelevant that some (or possibly only one) British city receives (matched) EU funds for urban regeneration. There's poverty in every EU country, I imagine.

I don't understand what you mean by "if it goes out more?"

Who said the evidence was trivial? Who has denied that Spain has exports and that they are growing?

If (as you said earlier) the export sector isn't large enough and therefore can't compensate for the loss of larger drivers of economic growth in the near to mid term, what is going to happen? How quick and deep will be the change you say is happening? Will Spain's (unimproved) low productivity continue to act as a barrier?

Ultimately, will Spain prove to have been lucky or unlucky to have had a boom built largely on construction of properties? Many of which have cotributed to the despoliation of its coast. And are currently largely empty.

Traction Man said...

Portugal is a difficult place to do business. The rules and regulations surrounding almost everything in life were never adequately cleared off the statue book. I assume that the dictatorship of Salazar was closer to that of De Valera in Ireland than it was to Franco's. Portugal is still very agrarian and subsistence living persists. The EU would like to see this stop by jacking up the prices for everyday commodities such as water, food and public transport. However, the Portuguese are very stubborn and it's fair to say the work ethic or wage slave mentality just hasn't caught on. Goodness knows what will happen but being such a small country on the fringe of Europe is may escape the EU's attentions and be allowed to rub along in much the same way as Ireland.

moscow said...

It was you who brought Britain into it, not me. "Get out more": I meant to say it needs to become less insular, learn languages, gear its economy even more toward exports. I personally have no doubt that Spain will achieve this even if I am aware of the shortcomings. And I think its a bit harsh to say that Spain's success is down to luck. And what do you mean by productivity? Do you really know what you are talking about? Whatever else Spain does badly it still manufactures and exports more cars than Britain (even if this a sector of the economy that is set to decline in the near future), the tiny Basque country makes more machine-tools than the whole the UK, and Britain imports many of its wind turbines from Spain (because it doesn't make them itself). Sorry for comparing again with Britain, but I wasn't going to compare Spain with Japan or Germany, was I?

Colin said...

Moscow,

You say I don’t know what I’m talking about. Maybe I don’t. But I do know that I’ve read many times over the years that low productivity is a general problem for Spain. Perhaps the commentators didn’t know what they were talking about either. And with inflation here having been so much more than in other EU countries, I assume this impacts on costs/prices and thus competitiveness. Indeed, I read regularly about Spanish goods having lost competitiveness to, eg, Germany over the last decade. And I assume this will make the export challenge tougher. But, as I say, I could be wrong.

One thing I certainly don’t know is why you quote selected bits of the Spanish economy and compare them favourably with the UK. I imagine I could find things that the UK exports more of than Spain – say high value pharmaceuticals – but so what? It all seems to merely support your theme that the UK is a pretty rotten, exhausted place, going to the dogs. Maybe so but this has no bearing on the questions of where Spain’s growth of the last decade has come from and where the future lies. As I live in Spain, I’m rather more interested in these than how parlous the state of the UK economy might be. Especially as my pension will come from one of the UK’s major exporters whose business in unlikely to go down the drain. Or evaporate as quickly as a Spanish construction company.

I appreciate that you are positive about Spain’s future but what I’d appreciate more is your observations on the last ten years. And any conclusions you draw on their significance for future challenges. But I will understand if you don’t have the time to produce these just for me (plus, of course, anyone who might be reading this exchange).

So far, all I know is that the export sector will continue to improve but that this won’t be enough. But does this mean the government will fail to achieve its growth forecasts? And, if so, with what consequences?

moscow said...

I mentioned those just to illustrate that there are parts of the Spanish economy which are competitive, and these will be the drivers to get the country out of recession. I mentioned them because you seem to imply that Spain is out of options and has no where to go.

And sure, there are parts of the British economy that are flying high. The aerospace engine maker Rolls-Royce for a start. British Aerospace. BP, HSBC, Glaxo, Tesco. The angloswedish pharmaceuticals company AstraZeneca. Shell, although it is Anglo-Dutch, as is Unilever. Corus and Cadburys went out to foreigners. BAT, Diageo. Rio Tinto, BHP-Billiton, Anglo-American (although I am not sure how British they really are).
And there is the niche sectors:
the obvious, Scotch Whiskey, and the less obvious, Formula 1 technology and (surprise) Vacuum cleaners. Perhaps, it is no so great that so much of it is linked to defence, tobacco, mining, alcohol and oil, but hey, its profitable. I bet your pension is embedded in some of the above.
Have I left something out?

Colin said...

"You seem to imply Spain has no options"

With respect, this is a (wrong) inference of yours and not something I am implying.

I'm perfectly aware (especially as you've previously supplied data) of the star performers in the Spanish economy but I was asking, effectively, if it was these which had really driven the growth of the last 10 years. If not 1. What had? and 2. What did this mean for the future?

moscow said...

Colin,
Frankly I don't know what you are getting at. The USA had a similar housing/boom/bubble/crash and nobody is suggesting that growth was due exclusively to construction, or that the country has no alternatives for future growth. A part of the growth was phony/virtual/crazy, a large part was not. Same as Spain.

PS: I forgot to include Vodaphone, Barklays, Lloyds TB, Easyjet and Virgin Air in the list. Also the auction industry (Christies, Sothebys), the magic circle, and all those hedge-fundistas.
So where is your pension?

Mike the Traditionalist said...

Well whatever happens I am glad to see the supermarket is still showing pesetas on my bill so I won't lose sense of what things cost should we ever have to revert.

Colin said...

Moscow,

“nobody is suggesting that [Spanish] growth was due exclusively to construction, or that the country has no alternatives for future growth.”

Neither am I. You seem to make a habit of rejecting claims I haven’t made.

Of course Spain has options for future growth. I’d just like to know more about these and whether there should be as much confidence in them as the Spanish government (and possibly yourself) attributes to them.

As for my pension, whichever company it comes from – and I really can’t see why you insist on knowing – the fund will be invested widely. As you well know. Very possibly including investments in Spanish companies such as Santander and Telefonica. After all, the latter appears to make very good profits on what sometimes seems to me to be abuse of a dominant position. See yesterday’s reports on its prices for the internet and its plans to increase them.

So, do you believe the official forecasts of Spain’s growth over the next 3 to 5 years? Whether or not the UK forecasts are credible.

moscow said...

Colin,
Well if that is the case, then my answer is that Spain has some tough times ahead, 2 or 3 years of low or lowish growth. Everything would be much better if Spain didn't have the autisitic idiot of PM it has, or the leader of the opposition was not the happless Rajoy.

Colin said...

See, I knew we were really in fundamental agreement. Even if you don't actually answer the question about the official IMG and/or Spanish government forecasts.

For the record, I don't believe them and suspect Spain has an even tougher challenge ahead of it than you do.

But we will see . . .

Colin said...

Sorry, IMF

moscow said...

Ahhhh, but the IMF got its forecast for Germany totally wrong? Didn't it? Did you factor that in?

Colin said...

Whether I did or not, you still haven't come out of the long grass with your own opinion . . . . .

moscow said...

Sticking my neck out:
There was 0,1% growth in the 1st Q, 0,2% in the 2nd Q. I am saying 0,3-0,4% in the third, and back to 0,1-0,2% in the 4th Q. The 1st Q of 2011 will also be paltry: 0,1%-0,2%. Happy? Will if Krugman could get his predictions topsy-turvy, who am I?

Colin said...

Well, yes. I didn't expect you to be that specific. Just to say whether you agreed with the IMF/Spanish government predictions and their components.

So, thanks. I won't hold you to them.

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