How bad is the youth unemployment crisis in Spain? Worse than you can imagine.

History Future Now has been tracking the expanding numbers of young people who are unemployed in the European Union with great concern. Both Greece and Spain have youth unemployment rates that are well over 50%.  Most European Union youth unemployment levels are over 20% and 10 European countries have levels over 30%.  But statistics are relatively cold and don’t give you a full impression of what life really is like at those levels of unemployment.  Two quotes spring to mind, Harry Truman’s truism that “Its a recession when your neighbour loses his job; its a depression when you lose yours” and Stalin’s quip: “a single death is a tragedy; a million deaths is a statistic.”  I have just spent a week in Spain and can report that the reality on the ground is far worse than you can imagine.  And, that there is no light at the end of the tunnel.

Riots in Madrid against austerity measures.

The youth of Spain are particularly affected, with very high levels of unemployment and even higher levels of mis allocated employment where young people are doing jobs that they are over qualified to do, or are working with little job security and no benefits.    If you are unemployed when you are young it is going to be even harder to get a job when you are older. When parts of the economy improve there will be a preference for people just out of university rather than people in their mid 30s who have never had a proper job.  There is a real risk that the youth who unemployed today will remain unemployed or employed in jobs that are lower than their aspirations for their entire lives.  This will have an impact on the tax revenues of their economies and their family lives as fewer of them leave home and start families of their own.

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I was in Spain because my father, aged 81 and who lives in Andalusia, had fallen and broken his hip.  This has given me a direct exposure to the public health system in southern Spain.  Firstly, it is worth noting that the staff at the hospital were incredibly helpful, friendly and ultimately successful in getting my father back on his feet again.  They have my greatest thanks.  It is also worth noting that the hospital system is seriously under funded.  It took 5 days for my father to get his hip operation, lying on bed with a broken hip in great pain.  After the surgery it took 7 hours after he was discharged 2 days later for an ambulance to take him home.  The hospital staff noted that they have had staff cuts, are working longer hours and have seen their salaries cut as well. The ambulance drivers noted that 7 hours was remarkably fast – and that normally it takes far longer.  Austerity measurements have a direct impact on people’s well being.

Outside the hospital was a building site.  The hospital was supposed to have several new wings built – all of which were bigger in total than the original hospital.  Bags of cement, tiles, bricks and other building materials were stacked up, ready to be be picked up and used at any time.  Except for the fact that the workers had abandoned the site 18 months ago, due to lack of funds.  All throughout the area were dozens of buildings and residential developments that had been abandoned,  half built. Weeds were growing in some of the older abandoned buildings, one was covered with graffiti proclaiming that the police in the area were corrupt.

I spoke to one Spaniard on my flight, who in his late 20s, and who said that of the four men in his family, his father, himself and his two brothers, only he had a job. He added that his job was actually in London and that he worked as a waiter in a restaurant in London for 3 weeks per month and then came home for a few days.  He said that in his small village of 1,500 people he would be exaggerating if he claimed that 100 people had a job.  Of those that had a job, many would work for the police or the army and a large number would work for the government.

The Spanish office of national statistics believes that Spain will lose about 500,000 people per year up until 2020 as they emigrate abroad, in search of a better life.  Many would be the better qualified members of society.  Many are never expected to return to Spain.  This would seem to tie in with what I had been told by my travelling companion: he claimed that in the restaurant that he worked for in London half were English and the other half were Spaniards, Greeks and Italians.  Au Pair World, a website for matching want to be au pairs and families, reports that there has been a huge shift over the past two years in terms of who is likely to be an au pair.  It used to be mainly Eastern Europeans.  Now it has switched to Western Europeans, mainly from Spain.  Women who are highly qualified in their late 20s and early 30s are becoming au pairs: in return for lodging, food and a small allowance they look after young children for 20 hours a week and then hunt for jobs, mainly in the UK.

Some people dismiss what is going on as just another recession.  Spain, Italy, Greece, Ireland and others will simply bounce back and recover.  Jobs will return.  The people I met in Spain were not so optimistic.  They had just been through a huge housing bubble, which had enabled people to see a rise in their perceived wealth.  This enabled them to borrow more money for household goods or get better educations.  But this housing bubble was based on a huge financial bubble, which has now burst, and EU grants, which have dried up. The result is half finished buildings and bridges from nowhere to nowhere.

Spain used to be involved in low cost manufacturing and agriculture.  The agriculture part of their economy remains, but as anyone in farming will tell you, the numbers of people needed in farming has been declining due to improved technology.  Manufacturing is in free fall as cheap goods from China and the rest of the world flood their market, resulting in closed factories and increased ranks of the unemployed.

Spain is going through a period of austerity which has not just economic impacts, but political ramifications.  There have been riots in Madrid, where people have tried to storm the parliament building.  In Catalonia, the rich province to the north east of Spain, encompassing Barcelona, the local government is making plans to make Catalonia independent of Spain, resulting in the break up of the country – the first time since 1492 when Ferdinand and Isabella unified Spain after the fall of Islamic Andalusia.

The question that people in Spain ask themselves is where will the new jobs come from?  With jobs there is income, with income there are taxes, with taxes the government can provide services and pay off its interest payments and debt.  With no jobs there is nothing.

Prior to joining the European Union, and the euro after that, Spain had a pretty basic economy underpinned by agriculture and low cost manufacturing.  Membership of the European Union resulted in huge transfers of wealth from the northern part of the European Union, facilitating the construction of new roads, bridges and other infrastructure.  The ecosystem of construction jobs helped spawn a wave of developments that were perfect for rich northerners as holiday and retirement homes.  Bankers, accountants and lawyers, benefited from this boom too.  Easy access to the rest of the European Union did wonders to their agriculture sector.

But the European Union is not going to be funding lots of projects in Spain anymore.  In any case, much of the infrastructure is now there – including 5 major new airports with no planes and famously winding roads from point A to point B whose only reason for being so winding was because the European Union paid by the mile – the windier the road, the greater the EU grants.  Housing developments for rich northern Europeans are left abandoned and it will be a long time before the people of the north contemplate building down south again.  As construction stops, bankers, lawyers and accountants will also suffer.

Meanwhile, as Spaniards flee Spain in their thousands every week for northern countries, another question arises: how many economic refugees can northern countries absorb?  Britain, which is such a magnet for people from all over Europe, is heavily dependent on the financial services sector, and the huge ecosystem of lawyers, accountants and consultants that are directly involved in it.  Germany remains a big exporter and manufacturing powerhouse, but how many people can it absorb?  Most young people across Europe have a good grasp of English, but few speak German.

And as Spaniards flee, refugees from north Africa and sub Saharan Africa quietly enter the country, also in search of a better existence.  While northern European migrants to Spain are welcome as providers of income and jobs, Africans are desperately poor and are associated with crime and stealing the few jobs available to Spaniards.  That will turn nasty.

So what is the right fix for Spain?  What should it do?

As a Eurozone member, and unlike Britain or the United States, it cannot print money and devalue its currency, making it cheaper and thus boosting exports and decreasing the relative value of its debts.  Saying that it needs to go into more high value markets where education is key is unhelpful as most of the young in Spain are now very well educated and still have no jobs.  And that is the mantra that politicians in most countries are now advocating: when everybody has a university education the value of a university education plummets.

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Keynesian stimulus measures are impossible as the country is broke.  Austerity measures shrink government expenditures, but also decrease government tax receipts as the economy contracts.  This might result in an increase in government expenditure to pay for increased levels of interest on increased levels of debt.  Boosting manufacturing exports is only possible if the currency devalues, which they cant do if they are in the euro.  And even if they could, Chinese goods still would be cheaper so this would be futile.

Spain’s problems are almost identical to the issues that are occurring in Portugal, Greece, Italy and Ireland: EU funded growth, lots of new infrastructure that enabled them to catch up with richer northern European countries, and a general housing and financial bubble.

My father, fortunately, is now back on his feet and is on a good path to recovery.  I wish I could say the same for the youth of Spain today.

 

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History Future Now is starting to develop the basis of comprehensive plan for many of the inter related problems that we are facing today.  The plan is radical and will be controversial. Hopefully it will both solve the problems and do it in a humane way.  Stay tuned.

 

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