The Spanish House of Cards

At this point there is a high chance that Podemos, a communist party (or a party with communist leaders) will be part of a possible and probable coalition governing Spain. We, at OpSeeker, don’t like to take sides, even though we were forced to do so during the Greece “situation” as you can read in the article – Tsipras is Ending Greece’s Democracy. However, again, the necessity is here to write what follows.

Podemos is a party whose leaders have worked with and/or praised communist rulers such as Lenin, Stalin, or Hugo Chavez. So, how is it possible that in a modern and advanced country such as Spain, people are voting those who praise some of the most terrible historical figures? The economic policies pushed by Lenin in order to create a Communist economy resulted in massive seizures of food, which led to the first famine of the three that Russia suffered in the XX century.

Seriously, an European country suffering 3 famines during the XX century should already tell you how detached from the rest of the world communists were. In this first famine, in 1921, around 6 million people died. After Lenin’s death, Stalin took the lead, and under his rule two more famines hit the USSR. During 1932-33 around 8 million died, and during 1946-47 around 2 million. This brings the communist famine death toll to 16 million during a span of 26 years…

Again, SERIOUSLY, think about it. Less than 70 years ago ended a 26 years period in which 16 million people died in Russia due to HUNGER and bad economic policies. Michael Ellman, a well-known Emeritus professor at the University of Amsterdam, discusses the role of Stalin in the 1932-33 famine in the following article: Stalin and the Soviet Famine of 1932-33 Revisited

Yes friends, this is the type of leaders that the political party Podemos likes to praise in its speeches.

Let me tell you something really shocking now, especially shocking for those that do not know a lot about Spain. It is by all means completely understandable why many Spanish citizens are praising this party. It has to do with three factors: corruption, unemployment, and lack of political and financial culture.

Before I enter into that I want to clarify something. You might think that this post has nothing to do with economics or finance, but it does! Totally. The result of a government in which Podemos has anything to say would be the complete destruction of what was on the way, the Spanish economic recovery, and most likely, another big step towards the disintegration of the European Union.

 Corruption

 Picture this – In 2015 there were over 1,700 cases with more than 500 accused or being investigated for political corruption. The quantities of some of these frauds are quite colossal. In an article published in 2013 the Spanish economic diary El Economistagave the following data:

• Since 2000 the 15 biggest corruption cases in Spain cost almost 7 B, 1 B more than the whole defense budget for 2013 (we are talking about American Billions, so 1,000 M)
• The Afinsa case – 4.4 Billion
• The ERE case – 900 Billion
• The Nueva Rumasa case – 500 M
• The Gurtel case – 201 M

The truth is that the political corruption is spread among almost all the existing political parties. However, in number and quantity defrauded, the two biggest offenders were the two parties that have been governing in Spain since Felipe Gonzalez took the presidency in 1982, after two rulings from an already dismantled party known as UCD. Worth to remember that before that Spain suffered a dictatorship that lasted over 30 years.

This climate of corruption paired after 2008 with a huge global economic crisis and an even deeper European debt crisis, which left Spain belly up and showing all the miseries that were accumulating for years. As Warren Buffet once said “Only when the tide goes out to do you discover who’s been swimming naked,” well, in Spain, many politicians, businessman, lawyers, federal workers… were not only naked, but, they made sure that everyone else was missing their swimsuit as well. So, after the fake buoyancy of the 2000s the Spanish population felt betrayed and angry, ohhh, and one more thing! Out of work!

Unemployment

 The Spanish Housing bubble that started around 1997 and burst in 2007-2008 lead to humongous levels of unemployment in Spain.

Check this graph out

As you can see, the unemployment level doubled from less than 10% to over 20%, in 2 years. This levels are closer to countries such as Kosovo, North Korea, or Namibia, than to Italy, or Portugal… As you can imagine, with over 20% of unemployment, and a housing and mortgage crisis unraveling, the evictions started to be counted by the 100s of thousands…

It is worth to mention that in Spain there is a quite vast undeclared economy. However, I do not want to extend in this point because it is quite a challenge to gather data regarding this topic, and even the data that exists is hard to trust.

Now the second ingredient for Podemos to be able to gain support was there. The third, has always been in our society…

Lack of Financial and Political Culture

I don’t want to be alarmist or incoherent. Spain has one of the best education systems in the world, our Schools and Universities are ranked among the best ones in the world year after year in a wide variety of specialties.

The problem is that there is a hole: political and financial culture. Young adults should be introduced to these bodies of knowledge in high school since they are going to be crucial in the life of any person living in any country in this world. However, let me say that this is not only a problem for Spain; almost every nation has a lack of financial and political culture.

How is anyone going to be capable of select the most appropriate government to run their country if they don’t have a clue about the history of politics and finance? It is impossible to learn from our past if we don’t know it. A population that doesn’t really know what happened in countries such as the USSR, Czechoslovakia, Yugoslavia, Cuba, Venezuela… made the raise of Podemos possible.

The result

 Now you see it… Spain in 2011 was a country in which people didn’t have jobs (the unemployment level is still humongous at this point), the majority of politicians seemed to be scam artists, and financial and political culture was lacking (still isn’t; if you watch some youtube videos of journalists asking young adults about economics and politics you don’t know if you should laugh or cry). The perfect nourishing substance for reactionary parties was set in place. Something quite similar happened in the last years of the 90s in Venezuela, we all know how that story unfolded!

 For now, my critics to Podemos targeted their leaders and who they look up to. Now let’s dig more in their plan for Spain.

Electoral Promises

The complete program has 394 points.

I have to be quite honest with my readers. When I cheked the program I found hard not to feel identified with most of their proposals. I agree with so many things that they want to improve. I agree with the way they want to activate innovation, scientific research, with how they want to reform the education system, and in some things about the way they want to improve the health system. The plan that they have to support athletes and culture also seems quite interesting. I also like that they want to assure minimum living standards for every Spanish citizen, or immigrant. They even propose that if they don’t meet their electoral promises there should be a clause that makes new elections a must.

As you can see I agree with most of their proposals (dealing with them more in detail would be quite tedious). I actually would really like to see if they are achievable, and how they want to pay for them, since I don’t think that the end of corruption, increase of taxes, and reduction of public officials will be enough… even though the excess of politicians that we have is alarming. Check the difference with Germany.

We have almost three times the numbers of politicians that Germany has, and only a bit more than half the population…

So, what’s my deal with Podemos? They have two big problems:

1. The things that they get wrong are too important
2. They align themselves, at least their leader, Pablo Iglesias, and some of the main heads, with the before mentioned group of rulers… They have the aroma of a totalitarian party, and that, for me, is a no-no.

What are the things that they are getting wrong?

 No Cohesion

This party is way too segregated. They have parties inside the party that even presented themselves with different names to the national elections. The problem when you have this is that there is not a general proposal to which everyone is really committed, which makes the decision making process tenacious and long. Spain doesn’t need more rigid and insecure leaders. We are at a point in which either we enter the full recovery path, or we throw ourselves from the cliff. Remember, the quarter that Syriza started ruling in Greece the country was starting to grow again, but after all the stands-off against the EU Greece got on a choke-hold.

National debt restructuring

I understand that Podemos can ask for the auditing of the Spanish national debt. But this auditing should be in order to understand what the Spanish government did wrong, in order to not make the same mistakes in the future. However, Pablo Iglesias′ idea is to limit the payments of this debt, get haircuts, extensions… The truth is that I am also terribly anger at the fact that all the Spanish citizens have to pay for the wrongdoings of a few in the banking, housing, and other sectors. But here is the deal, we should have done something to prevent this from happening, not try to destroy our international credibility as borrowers now by saying that we might not pay the debt.

Le me be truthful here, despite of what I just said, I agree that banks should not have the power that they do and that there should be a separation between commercial and investment banks, Podemos proposes this, another point that I support. Further more, I agree that the way the debt was incurred shows how the EU needed Spain, Greece, and other nations to be big borrowers. The fact is, the housing bubble was fed with German surplus, which means that the Germans needed, among other things, the Spanish bubble to keep up their “not so free market” competitive practices. But no one put a gun to Spain’s head and obliged to build more houses and grow the bubble. They just gave the country a lot of money, and did not care about the consequences. It is time for Spain to put its big boy pants and deal with the consequences, this should be a lesson for the future.

 A couple more things and we are done!

Job termination Laws

Podemos is also trying to toughen the law in regards to firing. This is quite a conflictive subject. The problem here is that no one wants the business owners to take advantage of workers. At the same time we want business owners to hire workers… If Podemos gets elected and gets those laws, SMEs will not be so willing to hire employees. SMEs are the real engine of the Spanish economy; they represent the 73.4% of the employment excluding the financial sector. If you mess with them you mess with the whole economy.

The lack of vision and analysis by Podemos is what makes them believe that making the firing process tough for companies will increase employment. In an economy that needs job creation and that is dominated by PYMES what you need is proposals that foster growth and that give entrepreneurs the courage to hire more workers, if what you do is try to make it really hard to fire them, the SMEs will not hire anyone.

Nationalization of key sectors

Podemos is thinking about nationalizing companies in diverse sectors, such as telecommunications, transport, energy, health, pharmaceuticals, education… Pablo Iglesias doesn’t even believe in private media companies. This is not only against European law; it is also another major step towards becoming a totalitarian country. I agree with harder regulations for those companies that create products of first necessity. I agree with harder non-monopolistic laws in order to protect the consumer. I do not agree with a bigger government that brings inefficiencies to the market place.

I don’t think that Podemos is ready to govern. I believe that it would take less than 4 years, less than 1, to throw Spain in deep trouble (yes deeper than the already existing situation). In the other hand, I think Podemos has a purpose

What can Podemos do for Spain?

This party is bringing to the media’s attention all the old politics’ problems that Spain is suffering, and creating the opportunity for Spain to have a brighter future. They would be a great opposition that keeps in check the governing party, however, they are not ready to govern yet. Their political youth keeps their heads blurry and their policy can quickly turn into hell for Spain. They need to be able to keep their good characteristics without falling into those practices that they condemn and dropping the totalitarian discourse. If they are capable to do this, they can be a great party for the future. 

What would be the best for Spain? 

PP and PSOE have lost all their credibility through the years. Not only due to the corruption cases, but also due to their inability to put forward better policies in crucial dimensions such as:

• Financial system regulation
• Scientific research
• Support to professional athletes
• Culture
• Environmental Law

 It will be hard to tell people: “Look, what you should do is vote the same people that stole from you and that let the bubble house to form and burst. Don’t worry, because now since they have a decent opposition, those things will not happen again.” As you can see, making that recommendation is quite tough. So, we don’t have much left!

There is a party that might also be a little too radical in its ideas (due to their youth as well), but that its proposals are way more in line with a modern system. This is Ciudadanos, a neoliberalist party. They also advocate for a better-regulated system, for the end of corruption, and more modern policies. This party would also make sure that Spain stays in line with Europe, something that diametrically opposes to Podemos view, and that, for me, is the right path for Spain, at least for now.

The reality is that none of these parties have the majority right now. The most voted was PP, followed by PSOE. The third one was Podemos, and the last of these big four Ciudadanos. Now the dancing is starting, Who is going to be in office? Who is going to be the next Spanish prime minister? At this moment is impossible to know. One thing is certain, the future of Spain, and most likely of the European Union is at stake. Spain politics should be in the international radar for a while!

By the way… the more this uncertainty lasts the more some companies delay their projects and the more the Spanish GDP growth will be affected! Let’s hope things get resolved soon.