From: puerta@mcs-next-10.stanford.edu (Angel Puerta)
Newsgroups: soc.culture.spain
Subject: Re: DATOS sueltos
Date: 20 Nov 1992 20:27:04 GMT
Organization: Stanford University
Distribution: world
Reply-To: puerta@camis.stanford.edu
NNTP-Posting-Host: mcs-next-12.stanford.edu

In article <1992Nov20.185938.13261@cognet.ucla.edu> pablo@eye1.cognet.ucla.edu  
(Pablo Lapuerta) writes:
> In article <92322.183327ALIAGA@EVALUN11.BITNET> <ALIAGA@EVALUN11.BITNET>  
> writes:
> 
> > * Si las cifras de crecimiento economico de los tres ultimos a~os de
> >   mantuvieran, en unos 12 a~os la renta percapita de los espa~oles
> >   superaria a la de los britanicos (nosotros avanzamos y ellos  
> retroceden).
> 
> Unfortunately I don't think the Spanish per capita income will catch up  
> with the UK's in 12 years.  Spain's period of growth will end in a  
> recession, whereas the UK's economic recovery will begin soon.

I agree that projecting growth rates for the next 12 years based on the last  
3-4 is silly. However, in the comparison UK-Spain, I would have to say that the  
fundamentals of the Spanish economy are more solid than those of the UK  
economy. For one thing, just in September, the British saw their per capita  
income plunge due to the de facto devaluation of the sterling. In fact, for a  
few days in September, the per-capita income of the british WAS LOWER than that  
of the Spaniards (dollar figures), so no need to wait 12 years for that.  
Obviously, there has been an adjustment of the Peseta after that (still the  
Peseta has come out ahead of the Sterling during all of this).

The problem with the British economy is that they are the last holdover of  
economic policies that have run their course (Reagan-Tachter). The British  
elected the wrong party in their last election and they will pay for it with an  
even longer recession.

The Spanish economy, on the other hand, is in a slowdown due to outside  
factors, mainly the US-German-Japan recession/slowdown. I fully expect that  
when those centers pick up speed again, so will Spain. Unlike Britain, Spain  
has a plan, and the political will to implement it, to carry out the economic  
reforms that are needed to reach the goal of a common currency (the policy is  
useful even if the common currency does not materialize).

Also, economic growth in Spain has been higher than in Britain for the last  
nine years, and the trend will hold in 1992 and is projected to hold in 1993.

> 
> I was in Spain last summer and I saw high real interst rates, large budget  
> deficits, a tax structure that favors inefficient investments, a real  
> estate boom that was ending, and a foreign investment boom that was also  
> coming to an end.  It all looked so familiar--  the USA was in the same  
> situation before its recession. Spain isn't in a recession yet (growth is  
> near 0), but I expect the GDP will contract soon.

A questionable causal relationship within the framework of a global recession.  
Also, the dynamics of the US economy cannot be compared with those of Spain. 

> 
> The USA's recession, as measured by changes in GDP, ended in 1991. Growth  
> predictions for 1992 range from 2 to 3 percent, which is close to the  
> economy's average growth throughout this century, although disappointingly  
> small for a post-recession year.  The American economy still has many  
> problems, but gloomy reports by the media have perpetuated incorrect ideas  
> about our economy.  We are not in a recession.

I, for one, don't have any doubts that the Commerce department, as well as the  
Labor department have "cooked" the books for 1992. The reported 2.7% growth  
rate for the 3rd quarter was laughed at by many analysts. A drop of 0.1% in  
unemployment in September after four consecutive weeks of rising unemployment  
claims also raised plenty of eyebrows.

Finally, for many economists recession does not equal only negative growth  
rates. Instead, negative, or anemic growth rates + depressed consumer  
confidence = recession.
Under that definition, Spain is alreay in a recession, the US still is.

--
Angel Puerta
puerta@camis.stanford.edu