All public and private institutions have improved expectations for the Spanish economy in recent days. The European Commission, the International Monetary Fund, the OECD, the Bank of Spain and BBVA have revised upwards the growth forecast for 2023. The “consensus” forecasts of Funcas, which include the average of 18 institutions, predict an increase of activity to 1.7%, two tenths more. They are getting closer to the Government’s objective of 2.1%.
However, the few explanations given by experts about the causes of this improvement are surprising. Some attribute it to a significant increase in foreign tourism. If so, it would not be a gift from heaven, but the result of business management in a very competitive market and certain policies.
At the same time, criticism from some institutions has intensified for considering the rise in pensions excessive. It is the most relevant public spending, the main factor in income transfers and a reducer of inequalities. The rating agencies, Moody’s, S&P and Fitch have warned once again of the risks for public finances due to the increase in pension spending, healthcare costs and interest rates. Social analysis cannot be reduced to a simplistic quantification of spending.
It is systematically ignored that the higher spending on pensions is a direct consequence of the lengthening of the age of life derived from scientific advances. It seems that the achievements of science are at odds with its practical application.
Perhaps the two realities (better growth and more social spending) are more related than it seems. The economist Michael Pettis and the journalist Matthew C. Klein reflect in Trade wars are class wars (Captain Swing, 2023) on the importance of domestic consumption and the reduction of inequalities for the improvement of the economy. They believe that “societies do not succeed at the expense of others” and that “prosperity is not a scarce resource, because an increase in consumption favors more production in a virtuous circle.”
The authors recall that China’s renaissance did not mean the dispossession of the American middle class. Nor did the integration of Eastern Europe into the West necessarily mean that workers in France, Germany or Italy would have to experience lower wages or more unemployment. In his opinion, the problems were “a consequence of choices made around the world by the rich, the companies they control and the political leaders they influence.”
In this country, the best decision of the Government has been to stick to the European policies that have begun to replace the ruinous austerity of the previous decade by the common debt in support of those most in need. Pettis and Klein advocate going further in this direction: “Federalize European fiscal policy as much as possible.” So that the new sole treasury of the euro assumes expenses such as unemployment insurance and pensions. Social spending is increasingly seen as an engine of the economy.
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