Blogging from the Highlands of Scotland until I return to the Murcia region of Spain towards the end of January 2018 for about a month
'Fair and softly goes far' - Miguel de Cervantes

Monday, 15 December 2008

Spain to invest massively in Public Works to fight the recession

The Spanish government has announced it plans to invest 33bn Euros in 'Public Works' during 2009, with 19bn Euros to be spent on transport infrastructure, 5bn Euros on environmental policies and 8bn Euros to be spent in local authorities: 'pork' anybody?

There are several things to say about this; the government wishes to try and reduce the likely future rise in unemployment, as has been happening throughout Spain recently, a worthy aim - and at least at the end of all this spending (presumably with borrowed money, or simply by the Government running the money printing presses faster) the country will end up with improved infrastructure. Keeping people in employment reduces the amount the government would have to pay out in largely unproductive unemployment benefits. It is also likely to alleviate potential social breakdown as well as keeping valuable skills active for the future when better economic conditions return.

This crisis is increasingly being compared to the Great Depression of the 1930s. There are many interpretations of what happened then and what was done to get the world out of the depression, but it is not at all clear that massive government spending alone was in any way responsible for the ultimate resolution of the problem then. Based on what happened in the United States, then as now considered the fundamental source of the recession/depression, it is clear that the Hoover administration's policies, focussing on simply spending on massive public works by government, were not working. It was only after Roosevelt became President in 1933 and inaugurated the New Deal, which combine public spending on infrastructure projects with a fundamental restructuring of the country socially and economically that recovery seemed to be beginning. However, that stalled badly in 1937 and 1938 and many consider it was only the start of World War II that finally cemented the recovery, based on a war economy. No-one needs to be reminded, though, that some of the social changes that occurred then were a lot more dramatic and unpleasant than what happened in the US, harsh as much of that was.

In summary, who can tell if the Spanish government's plans will prove genuinely helpful or simply prolong the agony. I'm afraid what is happening now makes me ponder again on what is said to be an ancient Chinese proverb (or curse): May you live in interesting times. It may well be that before the present economic downturn runs its course that the world will go through a period of considerable tubulence of which economic dislocation will be only a small component.

I'm tempted to end this with a trite 'Have a Nice Day', but that hardly seems appropriate.

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