Monday, February 22, 2010

The Cádiz lesson

I've been arguing for a while that Spain may well represent the Obama Administration's ghost of Christmas future. With its auto industry bailout, universal health care, three stimulus packages, high-speed rail, green energy initiatives and even a program similar to "cash for clunkers," Spain has adopted the hope and change agenda lock, stock and barrel. The result has been unemployment of 19 percent and government deficits of 11 percent.

Today's New York Times takes a look at the Spanish city of Cádiz, where unemployment is roughly 30 percent. It's rather revealing:
Over lunch in a restaurant with a view of the port, Miguel Cervera García, a grizzled 47, explained how he made ends meet. He said he had picked olives and worked as a plumber, but never officially. “I’ve always worked, but without a contract,” he said amiably. He added that jobs with contracts were better, “since you get social security and paid sick days.”

Payroll taxes and unemployment benefits are high in Spain, and many people avoid them by hiring workers under the table or by offering them temporary contracts that avoid the high costs of hiring and firing. Always popular in the Mediterranean, tax fraud has grown during the economic crisis, to the point that many experts see it as the biggest reason why high unemployment has not translated into mass protests.
In other words, the government has imposed such onerous regulations and taxes on the hiring and firing of workers that it has served to drive much of the economy underground, which may be enough to live on but is hardly setting the stage for an economic boom (try getting a loan for a company which operates without the government knowing). Government has reached such a ridiculous point that people aren't even paying attention to it, instead preferring to operate in the informal economy.

Despite the economic hardship life does seem to go on:
Officials say that one-third of Cádiz Province’s 170,000 unemployed people are no longer receiving state unemployment subsidies, indicating that the underground economy and families must be taking care of the rest.

Officials estimate that Spain’s underground economy equals at least 20 percent of the official economy. In Andalusia, it is believed to be higher.

Families remain a strong support network. Home ownership is highly valued, and even out-of-work Spaniards often live on the cheap in homes their families paid off long ago. “If one person in the family works, he’s a net for the whole family,” said Juan Bouza, Andalusia’s point-person for employment in Cádiz.
Just as libertarian theory would predict, absent government benefits people turn to family and other societal social structures for help. In fact, those government benefits appear to be fostering a dependency mentality:
To some, the cultural acceptance of unemployment is part of the problem. “For most people here being unemployed and — while it lasts — living off state benefits is perfectly natural,” said David Pantoja, 36, an out-of-work carpenter who founded an association for the unemployed in Cádiz. “It’s just a fact of life, like love or death.”
Government officials, meanwhile, have a plan to rescue Cádiz and Andalusia from its economic struggles with -- what else? -- green jobs:
Cádiz is on the windier Atlantic side. In an office with a stunning ocean view, [Juan Bouza, Andalusia’s point-person for employment in Cádiz] spoke of the region as a centerpiece in the government’s plan to turn Spain into a hub for renewable energy projects. “This will be the Silicon Valley of renewable energy,” he said.

He added that 75 cents of every euro the region spends on unemployment is for courses to help train the workforce for its future in renewable energy.

But not everyone is buying it. “They said that by 2012, Cádiz would be a bedroom community” for nearby industrial areas, said Esteban Vias Casais, 58, a retired factory worker who lives on a disability pension. But the city already is one, he added with a wink. “Here, everyone sleeps, and no one works!”

Mr. Pantoja was not convinced by the courses, either. Sitting in a cafe after a children’s carnival parade wrapped up nearby, he said he had taken courses on business management and computer literacy, but that new skills were not the issue. After two years without work, “Enough training,” he said, “we want jobs.”
The skepticism on the part of the workers is well-founded.

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