“I don’t believe that this country has a 26-percent unemployment rate”
William Chislett, former correspondent in Madrid for 'The Times' and now a reputed analyst, gives his view of the crisis and how Spain's political class has handled it
It is a chilly day in late December when William Chislett welcomes me outside his cozy and colorfully decorated home near Madrid’s Fuente del Berro park. Chislett, born in Oxford in 1951, has had a wide-ranging career as a journalist and analyst specializing in a number of countries, including Turkey and Mexico, but the man who first came to Madrid as a correspondent for The Times to cover the pivotal moments surrounding Franco’s death in 1975 eventually settled for Spain. Now an associate researcher at the Elcano Royal Institute think-tank and the author of the recently published Spain: What Everyone Needs to Know, Chislett has closely observed Spain’s painful lurch from boom to bust, a process he has himself described as the “chronicle of a failure foretold.” He is a stickler for hard facts, and frequently uses this data to browbeat those in power, whether it concerns governments who ignore the importance of education, what he sees as bogus media reporting of a massive outflow of Spaniards fleeing the crisis, or the Popular Party’s hand in political corruption, from the launching of the property speculation bubble in the 1990s to today’s criminal probe into former party treasurer Luis Bárcenas.
Question. Is Spain out of the crisis?
Answer. Well, it’s technically out of the recession as we had growth of 0.1 percent in quarter three [of 2013]. My slogan would be that Spain has won the battle but not the war; it staved off being bailed out fully [but] it hasn’t won the war because this country has got a pretty grim future ahead of it.
Q. For you, what would represent the real end of the crisis?
A. The end of the crisis for me would be to get the unemployment rate below 10 percent, something that is not going to happen in the foreseeable future. The number one problem is job creation; where are the jobs going to come from? The construction sector and public administrations are a joke. How many more jobs can tourism soak up? Knowledge-based economy; another joke, particularly in a country where education is up the creek.
Q. But Spain has almost never had a single-digit unemployment rate.
A. Back in the glory days of 2007 it reached below eight percent, which by US and UK standards is still pretty appalling but by Spanish standards, that was an achievement. There were businessmen complaining in 2007 with unemployment at just under eight percent that they couldn’t find people who wanted to work for them. So that led economists to say that Spain was now a country of full employment because those eight percent were for one reason or another unemployable.
Q. Or perhaps they were working in the black economy?
A. Yes. That said, I should say at the outset that I don’t believe that this country has a 26-percent unemployment rate. I find it hard to believe that you and I could sit here, albeit in a fairly exotic part of Madrid, without something giving. I don’t deny that the problem is profound; I simply question the magnitude.
Q. What has happened to the frustration that bubbled to the surface in May 2011?
A. This place has been remarkably resilient. We haven’t had Greek-style protests. The indignados has kind of fizzled out; it hasn’t been channeled politically. The two-party system looks as if it has its days numbered, which probably wouldn’t be a bad thing. According to opinion polls, not only would neither side get an absolute majority, but neither could get enough seats to govern by linking up with just one other party [unless the PP and Socialists joined in an unprecedented left-right unity coalition].
Q. Could Spaniards end up supporting some kind of protest platform, in the same way that Italians voted for the comedian Beppe Grillo?
All parties were happy to go along with the construction-based model; no one was thinking maybe we should improve the education system”
A. Spaniards are innately more sensible than they are given credit for. And they are extremely resilient. I don’t know whether it is a legacy of Franco or if it’s in their DNA but they are […] sensible and, I think, probably very frustrated that there is no one on the horizon who they think may be able to improve things. I don’t hugely question the PP’s economic policy; I don’t think they had any other options. It’s very easy for the Socialists to sit back and criticize [the various cutbacks]. I do criticize [the government] for cutting education. I remember writing a book on Finland in the 1990s when they had a huge recession and I remember a conversation with the Finnish education minister, or someone senior in the ministry. And he said we really have to scale back everything -- and this was in a country with a huge welfare state -- but we’re not going to touch education. I can’t help wishing Spain had done something similar because that’s where our future lies. And even when they went into recession in the 90s, the Finnish education system was infinitely better than the Spanish one. And they’ve kept it going. Who today speaks of the Scandinavian countries being in crisis? They have just sailed through it, basically.
Q. So the political elite is to blame for Spain’s crisis?
A. I think the political class bears a huge responsibility for the crisis. For me, the rot begins with the PP’s Land Law in 1998, which opens up most of the land in Spain for building. The government mistakenly thought this would bring down the price of real estate but it had the opposite effect. The rot starts there, everything went bananas and that was thanks to the PP [but] all the political parties were happy to go along with this economic model based on construction, the savings banks were lending to their friends, the politicians [in a system which has] gone belly up [owing to] amazingly stupid lending. No one gave any thought to the idea that this might one day collapse; or what are we going to put in its place? No one was thinking maybe we should improve the education system. It was fascinating to see the wealth creation from the decade leading up to 2007, and the rate of school dropouts going up to a peak of 33 percent that same year. Those kids who dropped out of school are now screwed. […] The political class is supposed to give thought to these things and in Spain they didn’t.
Q. The crisis has at least brought the issue of corruption to the fore…
A. I don’t know if we’re ever going to get to the bottom of the Bárcenas thing, but it’s a story that cannot be brushed off as one man feathering his own nest. No one believes that. Then there is the UGT scandal in Andalusia, which incidentally is more serious than Bárcenas because it’s a larger volume of money, and it’s public money. At least Bárcenas was money from companies; it wasn’t public funds. One likes to think that trade unions are whiter than white; you expect unions to behave more ethically than corporate Spain but it hasn’t been the case in Andalusia. The PP is getting to grips with macroeconomic fundamentals proven by the fact that we’re out of the recession and the debt yield is lower, but they haven’t done anything significant on, shall we say, restoring confidence in the political class, such as passing a decent transparency law, improving internal democracy within parties, the electoral law itself and all this kind of stuff.
Q. But the government can hardly get other parties around the table while it is still in denial about the Bárcenas scandal.
A. Yes, and the Socialists are in denial as well, which is why I have never made a great distinction between the two main political sides. I put them in the same basket, with a few individual exceptions. But as political parties, they have both disappointed voters. They are still in denial and living in cloud-cuckoo-land. They seem to think that “we’ll come of this: the elections will come and people will kind of forget and we’ll still get the votes of a large chunk of the population…” Which they may well do, because I don’t think people want to be ruled by Izquierda Unida.
Q. Is it any surprise that so many Catalans want out?
A. I find any form of nationalism profoundly depressing because I think you always end up contemplating your navel. Specifically on the Catalan issue, I can see reasons why they might feel they’ve had a bad deal from Madrid, but you could say the same about other regions that don’t have independence movements. Catalonia, of course, does for historical reasons. You only need to go back to the Republic and they enjoyed a degree of independence, which was pretty short-lived. I personally don’t think it’s necessary. I think that [Catalan premier] Artur Mas has boxed himself into a corner, which he is now unable to get out of and [the issue] has escaped his control. […] If they had just wanted a Basque-type tax deal, I would imagine that would be negotiable. But they’ve gone further than that. I don’t think it would make any difference if the Socialists were in the Moncloa; I think the response would be pretty well the same. Rajoy’s tactic is almost stonewalling them […]. He hasn’t really changed his chip on this; he hasn’t risen to the bait.
Q. So we have an impasse. What will happen now?
A. Mas has let it be known that the referendum will only happen if it is legal. Quite clearly, it is not legal and, therefore, one assumes on that basis that it is not going to happen. […] The [European] Commission has made the consequences clear. Even the head of the European Council [Herman Van] Rompuy, who had kept quiet [until he visited Madrid in mid-December] has come out with a statement. [Luis María] Linde of the Bank of Spain has said the Catalan banks would be screwed if they come out, and NATO has said you are going to have to renegotiate.
Q. Going back to the economy, is there anything positive to have come out of the crisis?
A. On the positive side, there is export success. Exports create sustained jobs […] but how many jobs can be created with exports? Nowhere near enough to soak up that huge pool of unemployment. The export success is nothing to do with the government. It is just that private-sector companies have got off their asses and exported. Wages have come down; in real terms they are lower. People are either now on wage cuts or wage freezes. You can’t devalue currency so you become more competitive through an internal devaluation. Productivity has risen, largely because if you’re producing more or less the same amount of goods with a lower number of workers, productivity has to rise. It’s a quite curious effect of the current crisis in that you have the negative factor of massive unemployment and the positive factor: greater productivity.
Q. So how do you feel about the abandonment of plans to build the so-called Eurovegas mega-casino outside Madrid?
A. I am glad that Eurovegas didn’t come off. On the one hand, even those who were against it were coming round to it, saying it would create a large amount of employment, but I think there were huge potential social costs in terms of prostitution, crime, the mafia and that kind of stuff. But more important than that for me is that this would have sent out the signal that this country is not going to change its economic policy and it is going to continue to rely on bricks and mortar. […] Turning round the economy here is like turning round an oil tanker. Just to get an improvement in the education sector is going to take a decade, assuming you think that it is going in the right direction.
Q. And are we going in the right direction on education?
A. I think the current reform is the seventh package we’ve had since democracy started. [Education] has been like a football being kicked around as the two sides never agree on what is a fundamental issue. […] The PISA results, which are about the best indicator we have, show that basically not much has happened over the last decade. Unless kids are competent in what used to be called the three Rs — reading, ’rithmetic and ’riting – you don’t get very far. […] I was lucky enough to put my kids through the English system here. It cost me an arm and a leg but I don’t have too many regrets really because they then went to a good university in the UK and were on the labor market by the time they were 21. I don’t know of any children of my Spanish friends who can say the same. I suppose that this may change under the Bologna system, but as things stand at the moment, your average Spanish university student takes far longer to graduate than your average British student. […] One answer to that is that ‘Ah, but university degrees here are far tougher than a British or American one,’ to which the response could be ‘But does it really need to be that tough?’ This is keeping students there until they are 26, 27 and also getting them involved in all sorts of extraneous subjects.
Q. The university system is not helping the labor market.
A. Far too many people go to university in Spain who would be far better off doing vocational courses, which is still something that is looked down on socially, far more than in Britain. Every [Spanish] parent wants their child to go to university for the social status even though the degree they take may be totally useless. I gave a talk at the journalism department at [Madrid’s] Complutense [University] in 2012 and the person who invited me there said that of the thousand or so students who were going to graduate that year, less than one percent were going to find jobs in journalism. And this, I think, is a four- or five-year course… So people graduate late here; they repeat - they might be in the third year with an exam from the first or second year hanging over them. Let alone the repeating that goes on at secondary school level, which demotivates so many kids – particularly if they are from families where the parents were also demotivated; it’s a vicious circle. And so you end up by dropping out of school at 16, where of course before you could go and earn a living by carrying a bucket of cement or being a waiter. In 2007, 33 percent of people in Spain aged between 18 and 24 had dropped out of school at 16. In 2012 that figure was down to 25 percent, which is quite an achievement, but nothing to do with the government. It is because they have nowhere to go to. Kids have to stay on at school and parents are presumably getting more pushy about their kids staying on at school. But 25 percent is still much higher than the European average. It’s a very strange labor market in this country. On the one hand, you have people who are overqualified for the job that they end up doing, like those five-year journalism students who certainly aren’t going to end up working for a newspaper, given the culling that has taken place [in the media]. And then at the other end, you have a huge number of kids who are unqualified to do anything except maybe being a waiter or doing a menial job in the countryside.
Q. So we get this massive rate of youth unemployment we hear so much about…
A. The official figure is 56 percent, which is taken as a percentage of the labor force under the age of 24. Which is not the same as taking the unemployed as a percentage of all the people under that age, which I think is much fairer as many people are studying at that age. […] Eurostat produces month after month this horrendous figure but what they don’t publish as regularly, but which is worked out every year, is what’s called the unemployment ratio, which gives you a figure of 24 or 25 percent – still horrendous but not as bad as 56 percent.
Q. You have also disputed the extent of what has been portrayed in the media as an exodus of Spaniards in search of work.
A. The flow of Spaniards and naturalized Spaniards -- who are a significant number, some 900,000 -- is enormous, but the stock, i.e. the number who remain in the country they go to permanently, is small. What I have argued is that yes, the flow out of Spain is big, but so is the flow back. A lot of people go for a month or two and come back. And the press certainly gives the sensation that there is a massive exodus, but if you look at the information - the figures the INE [National Statistics Institute] produces and cross-check them with those from the main countries to which Spaniards go, such as Germany — you come up with a surprising figure that the net increase in the stock, not the flow, is a mere 40,000. […] The media gives the impression that this is a really dynamic, mobile society; it’s not. Because the stock figure is a better one to take for mobility. Those are the guys who go, get a job and stay. And some people say, William don’t you realize you’ve got your figures all wrong because Spaniards don’t bother to register when they go abroad. Bullshit. It’s the same argument for immigrants who come here; there’s an incentive to register. And in Germany, which is such an efficient society […] you have to register; otherwise they will be on to you if you are not. This idea that the Spaniard doesn’t register, it’s like saying the Romanians who come here don’t register; they register for health reasons and for education.
Q. Is Spain to blame for all of its own ills?
A. When times are bad I think Spaniards get too pessimistic and when times are good they get too optimistic. 2007 [in Spain] reminded me of when I was in Mexico for six years with the FT [between 1978 and 1984] and I had a boom-to-bust story there for very different reasons to here. The Spanish crisis is homegrown and you cannot blame it on outside factors. The spark for the crisis came from outside factors: the global credit squeeze, the collapse of Lehman and all that. But compare the crisis here to that of other countries. Why are we taking much longer to come out of recession? Because there are no areas of growth as the economy was so based on bricks and mortar. Nothing has come along to replace it. Why is unemployment so abnormally high here?
Q. Is there a kind of deliberate defeatism that people use to justify their own selfish behavior, and I am thinking especially of tax dodging?
A. There is a sort of schizophrenic attitude to tax in that a lot of Spaniards expect Scandinavian-style public services but they are not prepared to pay Scandinavian-style tax rates, or even to be totally honest on their tax declarations. Why there isn’t this culture [of honesty] 35 years after Franco’s death isn’t easy to explain.