What to do with Spain

The past year has seen a great deal of controversy about the causes of the economic problems in Southern Europe. These problems have become so large that they have threatened the continued existence of the Euro, maybe even the EU in its current form. What caused them?

There is broad agreement on some of the proximate causes, like fiscal deficits and speculative bubbles in housing markets. But what lies behind these things and why are they so much worse in Spain, for example, than Northern Europe?

Some are proposing cultural explanations for why the South is different than the North. Readers of Why Nations Fail will not be surprised that these are not our favorite. We do not believe that Spain is in trouble and Germany isn’t because the Spanish are Catholic or Mediterranean or “Spanish”.

Fortunately, a more plausible narrative has emerged in Spain and it centers on the role of extractive political elites.

This view was first articulated by César Molinas in his September 2012 article in the Spanish newspaper El País, called the “Theory of Spain’s Political Class,” which you can read here in English.

Molinas used the framework of Why Nations Fail to provide a penetrating analysis of Spain’s economic problems and how they have resulted from the political dynamics set in motion by the democratization in the 1970s.

He has now developed his ideas into a full-blown book which has just been published called Qué hacer con España “What do to with Spain”.

We hope it will be translated into English soon.

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