Looking at the crisis from Spain
"Courage is grace under pressure."
Ernest Hemingway
Ernest Hemingway
The most significant thing about the financial crisis, up till now, is that it is universal.
Something with its origins in the US financial sector has hit the entire world economy and the numbers are horrible everywhere. Millions of people are suffering from the effects of an economic philosophy and ideology that was hatched in America's nest, just as those same millions enjoyed the economic boom that nest and philosophy produced, until the bubble burst.
For the first time in history we are all sailing in the same leaky boat.
Spain in no exception. Their wish to be a major player and to end the long isolation Franco brought upon them has been amply granted, for good and for bad.
I have known the country in austere and dignified poverty and as out of the world as Tibet and now, only a few years later, its banks are considered the best run in the world, its film directors and actors win Oscars, and Spanish athletes like, Miguel Indurain, Rafa Nadal, Pau Gasol and the European champion national soccer team have lifted the self confidence and self esteem of all the younger generations.
The Spanish people have taken full advantage of the opportunities a fortunate economic and political context have brought their way and now the best nourished and best educated young people in Spain's history will face a crisis which pales in comparison with what their much less educated and less well nourished grandparents faced with such fierce stoicism in the 1930s.
Spain is not a continental power like the United States with its huge population and endless natural resources, but neither is it Iceland or the Ukraine: Spain is being hit hard, very hard. However I would argue that Spain is a country, a society, that as they say in boxing, can take a punch. I have personally seen Spain take quite a few.
I have seen three really bad recessions here: at the end of the 70s after Franco's death, with double digit inflation, in the late 80s when 50 banks had to be nationalized and at the beginning of the 90s with unemployment as high as 24%... and life went on just the same. I was living entirely on the local economy by then and the good humored "grace under pressure" and lack of self-dramatization of the average Spanish person in times of economic catastrophe made the deepest of impressions on me.
Looking for the formula I came to this, not terribly original conclusion: the Spanish extended family is probably the country's greatest resource in troubled times.
The closest friends of most adult Spaniards I know are their brothers, sisters and cousins, closely followed by people they went to grade school through university with. This correlates with the extreme reluctance most Spanish men and especially their wives, have for moving to another town, even if there are better jobs waiting for them there, since this would mean losing their family social network. If you marry a Spanish girl you can go and work anywhere in the world as long as she can eat lunch with her mother and sisters at least twice a week.
This lack of work force mobility creates several percentage points of normal Spanish unemployment. That is the downside, the upside is the strength of the social fabric.
Spanish social life is an endless round of weddings, baptisms, first communions, pub crawls with friends and late dinners with lively conversation into the small hours over the ruins of a copious, well irrigated, meal. High consumption of hard goods and services adds to the charms of this existence based on eating and drinking with family and friends you've known since childhood, but cutting back on it all doesn't affect the basic underpinnings of this extended family life.
There is just as much pain as anywhere else in Spain when jobs are lost and payments fall behind or mortgages are foreclosed, but in Spain there are many shoulders to cry on and helping hands to turn to. And if you haven't lost your job you are supposed to help family, through the cousins by the dozens, that have.
If we add to this social fabric a modern, universal health system of socialized medicine, where no one, adult or child lacks for a free family doctor, hospitalization, pediatrician etc, even if unemployed, then it is obvious that the stress levels of a Spanish recession are very different from those in the states or even socially advanced northern Europe, where, like the states, nuclear families or single parent families are the rule.
In short people here are not alone for a minute of their lives and not afraid of getting ill, they are usually surrounded, practically suffocated, by their family and childhood friends. I imagine that not a few of my readers could get a little wistful thinking that proposition over.
So, summing up: this recession is going to be hard on everyone, everywhere, for a long time. The traditional Spanish family and social values were developed for hard times: Spain, through its history has rarely known any others. Coming into this universal mess, Spaniards are healthier, better nourished and better educated than they ever were before.
In a universal recession/depression, where there is nowhere to run to, nowhere to hide, there are a lot worse places to ride it out than Spain.
http://seaton-newslinks.blogspot.com/
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David. Thank you for the description of Spain, which offers useful advice for us all. "Family & friends" is not just a trite phrase, but rather, in tough times, is the most important practical advice one can give.
One suggestion. I believe you overweight your discussion of the "origins" of this to the US. While I believe a large % of the players, scams, philosophies & responsibility lies within those borders, this crisis has been contributed to, and - at times - even led by, those in other nations. London being the most obvious example, and contributing to its intellectual & financial roots. From Thatcher's drive for privatization in the 80's, through to the mad moneymen in the City of London. One obvious example being the way AIG's tiny London office took down the whole firm. And the fact that London is more at risk from this crisis than NYC is not just because they climbed on the bandwagon. Those little math grads from Oxbridge & the other universities weren't simply content to go along for the ride. Yhey helped create it.
Other nations also helped create it, feed it and/or lost their head during the boom - Ireland & Iceland in housing & banking; the big money-dealers of Asia & Frankfurt & other EU cities & Toronto; even, to a smaller degree, Spain (which, yes, fed off foreign tourists, cheap oil & the mad construction of homes in the sun for all, and not just Spaniards.) Even China, Hong Kong & the developing nations, and especially their wealthier classes, played a role.
I point this out not just in the interest of apportioning blame, but because, if we are to survive & then pull out of this catastrophe, we will all need to pull together. If the world simply points a finger of blame at America, we will all go down. Or at least, all of us in Europe & North America. You can see the difficulties of division just within Europe - with England vs Iceland, France vs England, Germany against a number of players. And there are, as you know, dark social forces in your own world.
Nonetheless, thanks for the piece, which I believe is quite useful, and should be read by all.
February 7, 2009 3:21 PM | Reply | Permalink
Quinn,
You are absolutely right about London: Thatcher and Reagan were of one flesh in the mystic body of Milton Friedman, anointed by Alan Greenspan and Tony Blair and outside of their "Anglo-Saxon" church there was no salvation. In Spain the Spanish business class drank of the sacred Kool-Aid deeply and the only thing that has saved the country from worse pain has been the hostility of the powerful class unions and the skepticism of the Bank of Spain's regulators.
The big problem for the USA is that there is no substitute ideology waiting in the wings like there is in Europe.
February 7, 2009 3:40 PM | Reply | Permalink
When China could not resist offering low-cost goods to the US, and when the oil countries could not resist the easy riches of US thirst, when Mexicans could not turn down money for family by sneaking in to work under the radar, all thus staking their economies on our continued health, it is indeed global shortsightedness, pretending things will go on long enough for each to make his personal fortune, hang the future.
February 8, 2009 5:13 AM | Reply | Permalink
Tom,
A very perceptive comment. The pain of the world's decoupling from the USA after so many years of dependence is all that is keeping the US economy on its feet at this moment. Like a messy divorce with much property involved, questions like who keeps the house, visitation rights, joint credit issues, may keep a couple together much longer than it should.
The details of the separation are being worked out at this very moment. Stay tuned.
February 8, 2009 8:16 AM | Reply | Permalink
Unless of course we lead the way with a massive spending plan that gets our economy on the right track and reinstitute government oversight and transparency in our markets. Other nations will follow our plan. The dollar won't be worth as much as it used to be but it'll still be more secure than other currencies. We'll still have a large consumer market others will want to tap into because so much of of what we buy just isn't made here anymore. That doesn't even take into account the good will a sane foreign policy will engender.
There will be some decoupling, but it's not like the rest of the world is going to go out of it's way to attempt to bring down the USA economically or otherwise with Dick Cheney and George Bush out of power. The cost benefit ratio isn't there amymore.
February 8, 2009 9:20 AM | Reply | Permalink
I think you are very optimistic. I don't think the world is "going to go out of it's way to attempt to bring down the USA economically or otherwise" either, I just don't think they are going to make any great effort to shore it up. The US is already down "economically or otherwise". The greatest problem is that the ideological prestige of our system is gone in this crisis. The whole thing looks fake.
February 8, 2009 10:22 AM | Reply | Permalink
The following was supposed to be a reply to your comment Dave but I guess I messed it up.
I don't know what you mean by "ideological prestige of our system. Democracy? Market capitalism?
February 8, 2009 10:44 AM | Reply | Permalink
I don't know what you mean by "ideological prestige of our system. Democracy? Market capitalism?
February 8, 2009 10:39 AM | Reply | Permalink
"Market capitalism" as it has been defined by Milton Friedman/Thatcher/Reagan/Clinton/Blair/Bush has definitely taken a big hit, one it wont soon recover from.
As to "democracy", what exactly do you mean by "democracy"? Do you consider, for example, that 40,000,000 people (a great many of them children) having no medical insurance has any relation to "democracy" or is "democracy" just getting to vote for George Bush or Barack Obama enough to define the word? Many people around the world wouldn't think that trade off was such a great deal.
That is what I mean by the "ideological prestige of our system", being dinged up
February 8, 2009 11:05 AM | Reply | Permalink
I'm not an economist but if I remember correctly Friedman believed you could control or steer the economy by monetary policy alone, i.e. the Fed raising or lowering interest rates by shrinking or expanding the money supply. That may work ok to mitigate the effects of mild recessions but as the Japanese in the 1990s proved and we're proving now once interest rates go to zero you've exhausted that option. Now we're going to see the printing presses open up to inject some inflationary pressure into a rapidly sinking deflationary economy. Gonna make us poorer in the long run but it's better than a dead economy right now.
As for supply side, trickle down economics that was always a fraud. It never worked. It just left us with a $11 trillion nat'l. debt which makes this stimulus all the more trickier. I am encouraged by the fact that the debt we took on for WW11 was much higher than it is now. And with almost two decades of high marginal income tax rates we were able to pay down that debt to $990 billion by 1981.
February 9, 2009 12:23 AM | Reply | Permalink