6. The Sources of Spanish Regional Growth

Over the last 20 years, the Spanish economy has followed a sustained growth trend – with the exception of a very short recession in 1993 – interrupted by the current global crisis initiated in the middle of 2007. Spain’s growth has been driven both by a very intensive process of labour employment creation – accompanied by large improvements in qualification – and a great effort made in capital accumulation. Across the board the results have been positive, especially from the labour market perspective. The slashing of the unemployment rate (a chronic problem in Spain for more than 20 years) has been remarkably positive, concurrent with a fast increase in the participation of women in the labour force. The fact that Spain has turned from a country of emigrants into a country with immigrants clearly shows this process, indicating that in recent years foreigners have found good job and welfare opportunities in the country. In spite of these undeniably positive results, Spain has also shown some weaknesses that threaten to condition its future recovery. Probably the most serious problem today is the poor performance of labour productivity. The origin of this problem is twofold: firstly, a product specialisation in activities that are very intensive in labour and have low value added; and secondly, the inefficient use of the production factors capital and labour. Although both determinants are common to most of the other EU countries, they have been aggravated in the Spanish case by the high and increasing weight of the construction sector (including real estate activities) characterised by the intensive use of labour – particularly unqualified – slow penetration of technical progress; and with high risk of suffering cyclical speculative bubbles that sooner or later burst and cause the collapse of other key industries.