Monday, September 24, 2012

The demolition of Spain's welfare state

My little brain always had trouble with riddles. “Is it better to be nearly drowned or nearly saved?” An age seemed to pass before I had figured out the answer to that question.

Some day soon – assuming that newspaper predictions come true – Spain will apply for a “rescue package”. The inevitability that any such “package” or “bail-out” will have onerous conditions attached has got me thinking afresh about the riddle that blighted my boyhood. If a man is drowning, is it right to stamp your foot on his head?

Spain’s working and jobless people find themselves in the position of the metaphorical drowning man. Heartless ideologues – some based in Madrid; others outside the country – have exploited their plight to introduce “reforms” that would have not been contemplated a few years ago.

The journal Clinical Medicine has just published the results of a new study into the health effects of austerity measures in a sample of European countries. It argues that the centre-right government in Spain has “fundamentally reworked the healthcare system” within less than a year. Whereas all residents had previously been entitled to free medical attention, access to care is now being linked to employment. The upshot, then, is that Spain is becoming more like the US, where medical entitlements are also connected to holding a job. In the measured words of Martin McKee, a public health professor, and the other academics behind the study, “this creates a potentially serious situation in Spain, where over half of all youth are unemployed.”

Common sense?

Mariano Rajoy, the Spanish prime minister, insists that the measures being implemented reflect “common sense”. The rules of democracy have not deterred him. He has resorted to both the standard practice of reneging on election pledges and the more extraordinary step of having decisions enforced by royal decree. Why let pesky legislative procedures stand in the way of “common sense”?

Of course, the next question should be: who benefits from this “common sense”? Could it be the kind of individuals who are applauding the measures most enthusiastically?

Francisco González, chief executive of the bank BBVA, belongs in that category. In April, he travelled to Berlin, where he addressed the Spanish-German Forum. He availed of the occasion to advocate “a labour law reform that eliminates the problems of collective bargaining”.

What this really means is that he was urging the kind of war against trade unions that Ronald Reagan and Margaret Thatcher waged in the 1980s. According to his mindset, the hard-won right of workers to bargain for decent wages is a problem that must be eliminated.

Like a tabloid journalist, González does not allow the truth get in the way of his story. The truth is that Spain’s economic woes were not caused by collective bargaining. They were caused by financial speculation. As part of a property bubble, more houses were built in Spain over the past decade than in Britain, France and Germany combined. Who profited from this speculation? Could it have been some of those bankers that González regaled in Berlin?

A careful reading of González’s comments might leave one wondering what he has to whinge about. He bragged of how BBVA “had earnings of 4.6 billion euros in 2010, the worst of the crisis”. It is known that German banks were heavily involved in property speculation in Spain and Ireland, where a similar construction boom took place. And yet DeutscheBank made a cool 8 billion euros in profits last year.

Who will stand to gain from any new “rescue package” for Spain? Could it be a banking elite?

Concealing the truth

The sycophants who surround Olli Rehn like to give the impression he has an unrivalled knowledge of Europe’s economic history. Yet the EU’s monetary affairs commissioner is not above concealing important details when it suits him.

Rehn recently said that “Europe is undergoing a difficult but necessary adjustments of imbalances” in the 10 years preceding 2008. “Countries that have been running current account deficits for a long time need to achieve surpluses in order to begin to reduce their debt,” he added.

A little bit of fact-checking reveals that Spain was not running a budget deficit before the crisis erupted. On the contrary, it ran a surplus.

In his bid to refashion the European economy, Rehn has decided to mislead. The crisis we are living through now is not the result of profligacy in the public sector. It is the result of lax regulation in the financial sector.

Asbjorn Wahl’s book The Rise and Fall of the Welfare State shows how strong social protection can’t be done on the cheap. To pursue the kind of social policies found in Scandinavia, it’s necessary for half the economy to be “under direct political control”, Wahl wrote.

In 2007 - before the crisis - Spain introduced a subsidy for new-born babies, the kind of benefit associated with Sweden. It has now been scrapped.

These kind of advances are not being reversed because Spain can no longer afford them. They are being reversed because they clash with the pervading philosophy among the EU’s powerful. According to that philosophy, “competitiveness” and profit maximisation must be prioritised over everything else.

With full connivance from the EU hierarchy, Spain is destroying the welfare state. When Rajoy speaks of “common sense”, he means that his demolition derby makes sense if you want capitalism to triumph and Europe to become a carbon copy of the US.

●First published by New Europe, 23-29 September 2012.

No comments:

Post a Comment