Download Theoretical Section

The Periphery of the Center
8th Semester Project. 2013
Supervisor: Henrik Plaschke
Mario Chaparro Vera (DIR)
Alex Rodríguez Toscano (DIR, LAS)
Aalborg University
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Table of Contents
Contents
1.Introduction……………………………………………………….…………………….. ........... 1
1.1Project formulation………………………………….…………………………… ....... 1
2.Methodology…………………………………………………………………........……. ........... 2
2.1Project……………………………………………………………….…..……… ......... 2
2.2Considerations on the theoretical approach……………………………..……… ......... 3
2.3Considerations on the analysis………………………………………………….. Error!
Bookmark not defined.
2.3.1. Study Case: Spain…………………………………………………...…….
................................................................................Error! Bookmark not defined.
2.3.2. Macroeconomic variables…………………………………………………
................................................................................Error! Bookmark not defined.
2.4Validities…………………………………………………………………..…….. ........ 5
3.Theoretical Section…………………………………………………………………….. ............ 5
3.1Historical background, C-P dynamics & the Prebisch-Singer Thesis…….. ................. 5
3.1.1Historical background…………………………………….………… ............ 6
3.1.2C-P dynamics……………………..…………………... ................................. 7
3.1.2.1Technical Changes………………………………………… ........... 8
3.1.2.2Specialization & Structural Heterogeneity……………..… ............ 8
3.1.3Prebisch-Singer Thesis……..…………………………..…………................ 9
3.2The role of the different macroeconomic variables…………………………….. ....... 10
3.2.1Economic growth and Structural Changes…………………………. ........... 10
3.2.2Balance of Payments & Access to financing………………………. ........... 11
3.2.3Labor Market dualism……………………………………………… ........... 12
3.3Related theories and critics……………………………………………………... ....... 13
3.3.1Related theories………………………………….…………………. ........... 13
3.3.2Critics………………………………………………………………. ........... 14
4.Analytical Section………………………………………………….…………………….. ....... 16
4.1.Economic growth………………………………………….……………………. ...... 17
4.2Economic Structure………………………………………….………………….. ....... 23
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4.2.1Agriculture……………………………………….…………………. .......... 24
4.2.2Industry & Construction……………………………………………. .......... 25
4.2.3Services…………………………………………….……………….. .......... 27
4.2.4Technology……………………………………….………………… .......... 31
4.3Balance of Payments……………………………………………………………. ....... 33
4.4Labor market……………………………………………………………………. ....... 44
4.4.1Characteristics……………………………………………………… ........... 45
4.4.2Employment by sector……………………………………………… .......... 47
4.4.3Temporality………………………………………………………… ........... 49
4.4.4Labor productivity…………………………………………………. ........... 50
4.4.5Earnings……………………………………………………………. ........... 53
5.Conclusion………………………………………………………………………………. ........ 55
6.List of references…………………………………………………………………………........ 57
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1. Introduction
“Nothing is as powerful as an idea whose time has come”
Victor Hugo
The economic development around the globe has always been uneven, making some
nations become wealthier than others. Historically, these economic differences and, therefore,
power disparities, have determined the relationships among the countries, where the most
powerful had a clear advantage compared to the others in the terms on which they were going to
trade. These disparities among regions had a divergent tendency, increasing the economic gap
and modifying the power relations and, therefore, the terms of trade.
Furthermore, the globalization phenomenon that has been expanding throughout the
world has mainly been the enlargement of the free market system ideology, where the countries’
activities were based on the comparative advantage that they possessed on certain products.
More precisely, this specialization consisted on raw materials, minerals and low-industry goods,
that is, labor-intense products for the developing countries, and in the developed countries hightechnological, other industrial products and services, which are capital-intense products.
In recent times, the situation has improved in some of the economies in which the
implementation of these ideas occurred, through the Industrialization for the Substitution of
Imports. But the N-S dualism still exists and, in the recent economic crisis, in general, and the
consequences of it within European Union (EU), in particular, hold features of N-S relation,
which will be our focus in this project, through Spain as a case study.
1.1. Project formulation:
There are enough evidences, based on the differences of economic growth rhythms, the
disparities of economic structures, the deficit or surplus on the balance of payments and the labor
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and capital markets, to suppose that it exist a certain North-South division inside the EU.
Considering the existent bipolarity within the EU we would like to investigate, relying on the
structuralist concepts of C-P, whether Spain can be categorized as one or the other.
2. Methodology
In this section we will state the foundations of the project. Firstly, it will be shown the
aim of the project and the connexion between the different sections and concepts within them, in
order to have a general view of the extent of the project and the aim of it. Secondly, we develop
an explanation about the unit of analysis, that is, the Spanish economy through certain
macroeconomic variables; and finally, it will be explained the limitations that the project design
has.
2.1. The project.
The aim of this project is the observation of the Spanish economic reality within the
European context through the concepts and understandings generated by the Structuralist Theory
of economics. This examination has been carried out through the analysis of a certain number of
specific macroeconomic variables, which were studied in the LA context by the structuralist
defenders, especially by ECLAC authors. These theoreticians established the basic concepts on
the first half of the XX century and developed them in the following decades. Their purpose was
to portray in an unprecedented way the relations between the LA countries and the industrialized
nations. The output was a development theory based on the concepts of the separation of the
world through a bipolar perspective, the Core and the Periphery. This dualist division is due to
specific features, along with the dynamics which underlies between these two spheres, the
dependency relations. In this article we relate these two main concepts, bipolarity and
dependency, to Spanish reality, which is our case study. This is due to our belief that the certain
features of that pattern highlighted by structuralism keeps on existing worldwide, in general, and
in the EU, in particular
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2.2. Considerations on the theoretical approach: structuralism
The structuralist theory of economics generated a certain number of concepts that we
think are highly valuable as theoretical tools in order to categorize economic phenomena,
specifically in our case. We have accepted the ideas from the structuralist thoughts after having
put them into question, that is, when we comprehend that they were an appropriate approach to
our study case.
The arguments for choosing this theoretical approach are numerous. Firstly, structuralism
was focused on economic aspects, leaving out other considerations in terms of military, culture
or environment, among others, which can be misleading when searching for causes. Moreover,
there are a number of concepts that were born from the theory and which can play a key role
when explaining dynamics between countries, such as: the core-periphery division and
dependency, and additionally the model of economic growth, the structural and technological
gaps, the dualism in the labour markets and the impact of economic cycles in a country.
On the contrary, it has to be said that the theory has some specificities that can imply
distortions due to a number of facts. Firstly, as every theory, it was developed in a specific time
and space context, and consequently it could be problematic to extract it for another context. In
addition, new processes have appeared during the last 60 years such as the improvement of
technology and the reduction of its costs, the end of the capitalist-communist cleavage and the
predominance of a neoliberal globalization, the increase of the financial capital flows and the
gain of its importance worldwide, and the emergence and strengthen of new actors beyond the
state that shaped the socio-economic reality such as civil society organizations (NonGovernmental Organizations, consumer groups, lobbies, etc).
The differences among the LA countries that were analysed in the first part of the XX
century, and the empirical case that we have chosen, Spain in the last decades, are significant.
Therefore, some of the ideas originated in that context are not applicable, or at least they would
explain in a lower degree the economic situation of Spain. An example of that is the deterioration
of the terms of trade because Spanish trade with other European states is based on products that
are similar in characteristics, that is, capital intense, human capital and technical progress.
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2.3. Consideration about the analysis
2.3.1. Study case: Spain.
Nowadays it is well known the controversy about the European cohesion in economic
and political matters. Emerging debates, as the two-speeds in Europe, the N-S cleavage, or the
need of two different Euro currencies, are being discussed in different forums. The EU and the
integration of its institutions has been frequently defended in the less wealthy countries as a path
to converge with the more affluent ones, but this idea can be questioned in the light of the latest
facts with reference to the consequences of the recent crisis within the EU countries.
In order to study the possible N-S dualism and, therefore, the divergent path among the
country members, it has been established the relation between Spain regarding the EU. We
consider the EU as the appropriate context due to the substantial connexion in economic,
political, and historical aspects, and the degree of integration. Moreover, within this framework,
Spain can be labelled as a Center country regarding the world structure but as a peripheral one
considering the Center countries of Europe.
2.3.2. Macroeconomic variables
In the empirical section our objective has been to check systematically a number of
variables for the Spanish economy. Those factors have been (i) the economic growth, (ii) the
productive structure, (iii) the balance of payments and (iv) the labour market. The choice of these
variables has been mainly because they were basic for the development of structuralist ideas;
consequently our objective has been to analyse the evolution and features of these variables in
order to make the linkage between the theory and the empirical case.
Within every variable it has been chosen the most relevant indicators regarding the main
international statistical sources, observing the trends of the last decade (from 1999 till nowadays)
in an attempt of reaching the most veridical portrait of the situation. Furthermore, the
comparisons were made between Spain and the country’s most important trade partners, which
are the main economies of the EU: Germany, France and Italy. It can be assume that these
countries embodied the ‘north’ side of the so called cleavage in Europe.
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To sum up, the results of the analysis will allow us to obtain valuable information
through the comparison, and to state certain correlations but not direct causality relations due to
the complexity of the variables.
2.4. Validities
Focusing on construct validities, the project concludes by answering the main question,
which was proposed in the problem formulation. For that purpose, we have chosen the theories
that better approached our case of study, and within the analysis we selected the variables that
were most relevant in order to answer the question and make the linkage with the theoretical
section (Bryman, 2012).
Considering the external validity, it is important to be aware of two issues: if the theory
could explain the N-S dualism in other regions of the world, and if the findings, based on the
Spanish case, could explicate the situation in other regions. In the first case, our belief is that the
N-S bipolarization exists throughout the globe and within different regions and countries.
Therefore, the theory used could partially enlighten the situations that other economies are
passing through. Secondly, the results grounded in the Spanish economy, would be in serious
troubles when describing the situation in other regions due to the great differences that the
countries possess in the different variables analysed.
Furthermore, the statistical validity for this project is satisfactory. That is, we consider
that the statistics as well as the sources used are appropriate for the subject, and the results
extracted from them are suitable, leading us to significant conclusions.
Finally, we consider that the linkage among the variables, in causality matters, is
reasonable and adequate. The selected variables possesses correlation between them and
complements each other in order to have a better understanding of the subject and respond in a
more appropriate way to the question posed.
3. Theoretical Section
3.1. Historical Background, C-P dynamics & the Prebisch-Singer Thesis
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3.1.1. Historical Background
In the first part of this section we are going to describe the socio-economic framework of
the context in which the structuralist thoughts emerged. This is done in order to have a better
understanding of the situation that partially contributed on their creation.
The historical context was of a great importance on the development of structuralism.
This was due to the fact that there were some events that changed the course of the socioeconomic history, as for example the two World Wars and the Crisis of 1929. This last fact was
even more crucial than the wars in the development of structuralist ideas. This is due to the fact
that, before the Great Depression, LA countries grew economically because of the constant
increment of the exports to the industrialized nations, but during the recession period imports
from the Core states decreased vastly, making obvious the fact that industrialization was a key
aspect of development, that is, growing internally without that much dependence on external
economic linkages.
Another factor that can partially explain the development of structuralism was the two
World Wars. In both cases the LA economies grew persistently due to the increase demand of
primary products in which these nations had comparative advantages that was the element that
determine the international division of labor. The reason why this fact was so crucial in the
development of the structuralist theories was that exports from these states augmented rapidly
making the nation’s economy grow. Although this increment was a positive aspect, it was linked
to another issue that played a central role in the deterioration of these economies in the long-run.
This factor was the specialization on the production of primary products, which deteriorated the
terms of trade in the long-run, as it will be explained further in this section.
The free market ideology is based the international division of labor and the
comparative advantages among regions. In this sense, Latin-American countries had comparative
advantage on the production of primary products and natural resources, which were laborintense, and the industrialized countries had comparative advantage on industrial commodities,
high-tech products and other commodities that require great amounts of capital (Prebisch, 1948).
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3.1.2. The C-P dynamics
The structuralist theoreticians made the difference between the industrialized nations, that
they called Center, and the developing ones, the Periphery, in order to analyze the diverse
development of the economies throughout the world and, therefore, improve their understanding
of the economic linkages amongst them.
The Center countries are those where the technical improvements are developed or, at
least, where these progresses penetrate first. Moreover, the expansion throughout the different
sectors of the economic structure is quite rapid, producing a homogenous economic structure.
These changes imply an augmentation of the productivity, which increases wages and, therefore,
the internal aggregate demand. These technical changes also diversify the production structure of
the economy.
On the other hand, the peripheral nations import the technological progress from the
industrialized countries due to their incapacity to create technical development. Furthermore, the
imports of technological improvements are employed on the production of primary sector goods
and those for the export sector. The fabrication of these products is, therefore, cheaper, so the
prices decrease, and the country has to export a bigger amount to the Center nations in order to
receive the same quantity of imports and keep on with the industrialization process, maintaining
the balance of payments equilibrated. This is what Raul Prebisch called ‘development from the
exterior1.
In developed nations the economic growth is guided by technological changes. Since the
tools for the creation of technical progress, such as human capital and capital accumulation, are
highly concentrated in certain regions of the world. On the contrary, in developing nations,
economic growth is driven by the capacity to adapt, with the mentioned delay, the technical
improvements, or the ability to respond to the demand for commodities from the Center. Finally
and consequently to this difference, there is a clear pattern of dualist dynamics.
Raul Prebisch, ‘Problemas teoricos y practicos del crecimiento economico’, CEPAL review, Santiago de Chile,
1973.
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3.1.2.1.
Technical Changes
There are differences between the industrialized countries and the developing ones in the
creation process of technical progress, which generate economic asymmetries. This disparity
implies repercussions in certain aspects, such as the productive structure and labor market.
The international division of labor implied that certain regions with a low or inexistent
industry specialized in the production of goods required by the industrialized nations in order to
maintain their economic expansion through the diversification of their productive structure. Due
to this fact, the technical progress originated in the developed countries is only transferred to the
developing ones with the aim of improving the production of the resources that the former
nations need for the advancement of their economies. The reason for this transference was
because the technical progress on the production of primary products in the developing countries
would lower the prices and, therefore, their costs. The cheaper imports lowered the costs of
production of industrialized goods in developed nations and, thus, augmented the margin of
benefits of producing them.
Furthermore, the gradual expansion of technical advancements to developing countries
was controlled by the industrialized nations, which monopolized the technical progress. The
mechanism of the powerful nations for maintaining under control the transfer of technological
innovations were capital accumulation, which basically came from the improvements of
productivity and that were not equally shared with developing economies, and the development
of human capital.
3.1.2.2.
Specialization & Structural Heterogeneity
The technological differences among countries bipolarized their productive structure.
Some countries specialized in the production of primary goods while others specialized in the
‘productive diversification’ (Di Filippo, A. & Jadue, S., 1976). In this sense, the developing
countries kept on with the dependency patterns towards the industrialized nations due to the need
on their imports from the latter in order to industrialize and to diversify the consumption when
the income increased. This asymmetry leads to the creation of a ‘structural heterogeneity’, which
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responds to the biased assignment of technical progress to the export sector of developing
nations.
The introduction of technical innovations in the less developed countries created
dualisms in the productive structure and in the labor market. In the first one by sharing sectors
with high productivity, the ones that are modern due to the introduction of technical progress
from the Core economies (mainly primary sector and other export industries), with other sectors
with much less productive, the industries that used antiquated techniques. In the second case, the
dualism in the labor market refers to the division where the introduction of modern techniques in
the primary and export sector increased the labor productivity and, therefore, reduced the amount
of workers employed on it. The abundance of workforce put pressure on the wages that
decreased in the non-productive sectors, lowering the relative prices of the export commodities.
(Rodriguez, O. 2001).
3.1.3. The Prebisch-Singer thesis
Raul Prebisch and Sir Hans Singer arrived at the same time to the same conclusion: the
tendency of the deterioration of the terms of trade in developing countries. This was explained
through two different hypotheses that complemented each other (Ocampo, JA & Parra, MA,
2003):
The first hypothesis was the negative effect of the income inelasticity of the demand of
raw materials on the terms of trade for developing economies. This premise is exclusively
applicable to the basic products (or at least the ones with a low elasticity on the income-demand).
The hypothesis is based on the fact that economic growth tends to modify the productive
structure of the countries, increasing the industrial sector and services. This issue is affected by
the aggregate demand of primary products and the technological changes in manufactures, which
are associated with the reduction of the raw materials costs. The developing economies are
usually grounded on the production of raw materials and the industrialized ones are based on
manufactures. Therefore, the developing nations will always grow ‘slowly’ compared to the
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industrialized ones because if they grow rapidly the excess of primary goods will press the
relative prices down.
The second hypothesis was focused on the asymmetries on the labor markets between the
Center and the Peripheral countries. This premise is applicable to every product and service
produced in the industrialized countries. The hypothesis is based on the unequal distribution of
the benefits of technical progress. In this sense the manufacture producers profited from
technical progress through an increment of their incomes, while for the developing countries, the
technical progress lower the prices of basic products. This asymmetry is the result of the
functioning of diverse markets: (i) the product market, where industrialized nations have more
power to fix the manufactures prices, and (ii) the labor market, where industrial workers are
more organized so their wages are higher, and therefore, the product’s prices augmented. In
addition to this point, there is also the view that emphasizes that in the long-run the excess of
labor in the developing economies will generate a decrease in the wages and, consequently, a
deterioration of the terms of trade.
3.2. The role of the different macroeconomic variables
3.2.1. Economic growth & Structural Changes
As Ocampo stated in one of the ECLAC’s review2, “economic growth is invariably
accompanied by changes in production structures, including changes in the composition of gdp
and employment and in international specialization patterns” (Ocampo, J.A. 2011, p.23).
In this sense, there are several reasons that can explain the link between economic growth
and the changes in the production structure. One view defends that the diversification of the
production branches opens new chances for the creation and transmission of technological
progress and, therefore, the improvement of the different productivities. Moreover, another
Ocampo, J.A. “Macroeconomy for development: countercyclical policies and production sector transformation”,
CEPAL review 104, August, 2011.
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connection between economic growth and structural changes resides in the fact that the
generation of demand of a new production activity implies the formation of new ones that
satisfies the former’s demand and, thus, the development of different activities (Hirschman,
1958).
The main variable that changes the economic structure of a developing country is
technical progress. That is, the ability of the countries to absorb the improvements from the
industrialized nations and the adaptability on the response to the Center’s demand.
The development process consists indirectly in passing from a productive structure where
the primary sector and the low-industry sector, which are labor-intense sectors, have a great
importance and contributes highly to Gross Domestic Product (GDP), to a structure where the
primary sector and low-industry sector do not contribute in the production as much as the highindustry and services, which are capital-intense sectors.
3.2.2. Balance of Payments predominance & Access to financing
The focus on the balance of payments was one of the main reasons why some LA
countries suffered financial problem. This is due to the fact that the financial sector experienced
boom and bust cycles, and because the external sector (exports and imports from the current
account more precisely) were significant (Ocampo, 2011). The effects of the economic cycles are
especially severe for the agents who are considered to have a high risk. These agents have
facility for financing during the booms, but they are in serious troubles finding financing during
the economic busts.
At a national level, the Small & Medium Enterprises (SMEs) and low-income households
are the ones that suffer the most the consequences of the cycles, while, at the international level,
the developing countries are the ones that are more affected by them. In this sense, LA nations
are placed in the high-risk category and, thus, they are exposed to the cyclical shocks (Frenkel,
2008 as quoted by Ocampo, J.A., 2011).
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The volatility of the financing is reflected in the supply and maturity profile of the
financing, which has procyclical characteristics. Risk degree is higher in developing countries
due to the lack of credibility on the return of the credit and interests, generating problems on the
balance sheets of the developing country’s companies.
These cycles pressure policy-makers to follow procyclical monetary policies, as they
lower the interest rates during booms in order to facilitate the financing and raise them during the
busts with the aim of reducing it. Moreover, countercyclical monetary policies pressure the
exchange rate, which fluctuates, modifying the national currency value and, therefore, the
balance of payments that deteriorates during booms and improves during busts.
3.2.3. Labor Market dualism
The international division of labor and the differences in technical development and
economic structure led to a labor market dualism in the world, in general, and in LA countries, in
particular.
Within LA economies the introduction of technological progress, which was mainly done
in the primary and the export sectors, segmented the labor market into two: the high-productivity
sectors, in which the wages were elevated, and the low-productivity ones, whose workers
obtained a low wage (Márcio Holland y Gabriel Porcile in Cimoli, M. 2005).
In the first ones, the introduction of technical changes increased the labor productivity,
creating certain alterations, such as an increment of average wages and, at the same time, the
reduction of the demand of workforce in the sector. On the contrary, the sectors where the
technical improvements has not arrived yet or in a weak way, that is, they use an antiquated
technology in the production process, the labor productivity was low. Moreover, the wages stay
steady (or even reduce) due to the collision of forces that takes the wages up or down. The
modernization process creates a dynamic of transfer of workers, the high productivity sectors can
not satisfies the great supply of labour, consequently producing a surplus that decrease salaries
and increase the dependency patterns through an enhancing of the decline of terms of trade.
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3.3. Related theories and Critics
In the late 1960s different conceptions about the role of LA in the international sphere
appeared. They were heritance from the original and main proposals of Raul Prebisch and the
early ECLAC authors. Those theories were: the Dependency Theory, the World System Theory,
and the Neostructuralism; having all similarities and differences regarding its predecessor.
Consequently we will explain the similarities (A) and thereafter the critics and disagreements of
each one of the theories (B), subsection including classical market approach critics.
3.3.1. Related theories
The Dependency Theory encompasses the Marxist view, whose main proponent is A.
Gunder Frank, and the Sociological one with Faletto and Cardoso as main authors. Both
branches confirm the explanation of LA underdevelopment was due to the external factors,
especially those related to the international economic system. The idea of defending the need of
trade for an equal improvement of the economic conditions for every country does not take
place. Through the mechanism already explained above, just the Core economies make profits
from the world dynamic, whose main features are: the international division of labour, the
country specialization and the monopolization of key technological sectors. Moreover, the
capitalist system tended to the stagnation and, politically, to the impoverishment of the masses
and to antidemocratic government (Guillén,2007).
From this perspective, the main dynamics underlying the international economic system
are: firstly for achieving a minor improvement of the conditions of LA, the countries have to be
subordinated to the Core (Reyes,2009). Furthermore, the Periphery had its greatest economic
development when the relations with the Core were weaker (Ibid.) The subsequent period, when
the Core recovered, had a strong impact in the balance of payments and the stability of the
peripheral countries. Finally, another idea is the correlation between the level of
underdevelopment and the intensity of the historical links to the Core in the form of colonies,
being the former deeper when the latter was stronger (Ibid.).
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Considering the World System Theory , I. Wallerstein is the most remarkable author. His
ideas take the legacy of the division of the world in different spheres along with the International
Division of Labour and the role of technology. However the main features of this theory are
slightly different to the structuralism, consequently explained in the critics section.
Finally, Neostructuralism, whose main proponents are J. Ramos and Jose Antonio
Ocampo, is understood within the work of the ECLAC during the end of the1980s till nowadays.
Their research was considered as an opposition to the neoliberal policies accounted in the “lost
decade” of the 1980s. The authors utilize the study of the variables through a similar approach to
the structuralist, but without tackling the foundations of Neoliberalism. Further clarification is
done in critics section.
3.3.2. Critics
Considering the dissension of the different approach within the literature, those are the
main arguments: from the Marxist conception of the DP, the Center (or Core) countries exploit
the Periphery even within the industrialization of developing countries scenario. Industrialization
perpetuates the imperialist expansion and strengths the foreign capital and, consequently, the
control of the Core to the rest of the nations system, obtaining a surplus from Latin-American
workers with the connivance of national elites. (Guillén, 2007). The road to development for the
developing nations is through the complete disconnection breaking any relation with the Core.
On the other hand, the Sociological approach proclaimed a more reformist way to
development, the associated dependent development (Kay, 1998). They put into question the role
of national bourgeoisie as an actor encouraging a holistic strategy for development in a country.
They based their hypothesis in the study of the historical path of insertion of LA in the world,
focusing on the role that the internal social groups had taken during that time, and how the social
structure appeared during the process, perpetuated by the underdevelopment path. Also, authors
as Celso Furtado or Osvaldo Sunkel have explained how dependency can be seen in cultural,
financial and commercial activities.
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Besides, the World System Theory, similarly to the Sociological approach to dependency,
tackles the historical variable, drawing a cycle of hegemony along the history of capitalism.
Within that cycle the focus went from the underdeveloped states to the analysis of each part of
the system: Core, Semi-peripheral and Peripheral countries; breaking with the bipolar vision. The
emergence of this theory is closely related to the globalization process understood as a timespace compress phenomenon, within the neoliberal market-leading organization of the society as
base.
To continue, the reformulation of the structuralist ideas by the Neostructuralist includes
the following issues: firstly, the excessive importance and confident on the state as resource
allocation agent; secondly, the underestimation of the exterior sector that took places during the
whole process; and finally the need of short-term fiscal and monetary stabilization policies added
to the long-term prospect that characterized the ISI strategy (Berthomieu,2005).
Considering state, this one should be the provider of public goods, macroeconomic
stability and the basic infrastructure in order to allow the correct functioning of the market
(Guillen,2007). Moreover, the economy should tend to open, becoming export oriented
economy. External competitiveness should be enhanced through improvements in productivity; a
high and constant exchange rate for promoting selective exports; and selective restrictions in
imports for the modification of the balance of payment’s equilibrium, but being far from the
protectionist measures implemented in previous decades. Another aspect lied in the study of
inflation: the structural explanation against the inertial one.
Overall, Neostructuralism proposes a middle way between the state main role for the
structuralists and the marginal role that plays for neoliberal authors (Guillen, 2007), who
represent another set of critics towards structuralism.
Structuralism appeared as an alternative explanation to the classic market economy and
the theory of trade inserted in it. The main concerns were related to the great participation of the
state in the economy, opposing to the principle of self-regulation of the market and private
property as microeconomic foundation of the social order (Filippo, 2009). State represents
inefficiency in several areas: in the allocation of resources due to manipulated interest rates and
because of the creation of monopolies and oligopolies. Along with that, the problems in the
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balances of payments:
imports increased after the first stage of industrialization; and if
traditional export decreased, a devaluation policy to incentive those exports would made more
expensive the industrial production (Grunwald, 1970).
Critics also underlies in regard of the national market due to the fact that in some
countries the absolute size of population
along with the structural factor, led to a weak
expansion of internal demand (Grunwald, 1970); and a weak profitability of the economies of
scale. In terms of financing, the domestic savings financed a limited part of the needs of capital,
with the consequent increase of foreign debt. Finally another problem is the one related to the
spreading of technology, being it still imported decades after the first policies were implemented
(Ibid.); and the capacity of labour absorption of the new activities, leaving great parts of
population in unemployment and self-employment situation in the informal sector.
4.
Analytical Section
This section consists in the examination of the economic reality of the Spanish economy
in the last decade through the analysis of diverse macroeconomic variables. Furthermore, we will
also state which of the features of the variables used in the analysis, correspond to a Peripheral
nation and which are more characteristic of a Center country.
The Spanish economic performance will be analyzed within the EU context because the
country is one of the members. Due to this fact, the economic cycles are parallel in Spain and the
rest of the nations. This is because the European countries are the main recipients for the
country’s exports and they are also the main donors of imports. Furthermore, it is also
remarkable the role of the political integration that these nations has experienced in order to have
a better understanding of the nation’s economic situation.
In addition to this, we believe that it exists a North-South dualism within the European
nations. This is due to the different economic growth rates, the dissimilar economic structures
that these countries possess within the EU27, the diverse balance of payments and the disparities
that exist among the countries’ labor markets.
19
In the next part of the empirical section we will go deeper on analyzing the
macroeconomic variables that will help us defining if Spain is a peripheral nation or a Center
country. The Subsections that follow are divided in (i) the economic growth, where it will be
described the Spanish GDP tendency and the components of this variable comparing them to the
German case; (ii) the economic structure, in which we will comment about its configuration; (iii)
the balance of payments, where we will go deep on studying the diverse tendencies of the
spheres that shape this variable; and (iv) the labor market, in which we will analyze the existent
dualism and the productivities in the different sectors.
4.1.
Economic Growth
The economic growth tendencies that the Spanish economy has experienced in the last
decade possess different features among the period before the financial crisis and the one
afterwards. As it is shown in Graph 1, in the first years of the last century the production
multiplied almost by three, passing from 580,345 million dollars in the year 2000 to 1,593,421
million dollars in 2008, which was the pick. After that year and as a consequence of the global
economic crisis, the GDP had a decreasing tendency, reducing until 1,350,907 million dollars in
2012.
Graph 1: Evolution of the Nominal GDP in Spain between 1999 and 2012 (at current prices in millions of
US dollars).
20
Source: UNCTADSTAT
In Graph 2 we can observe the evolution of the GDP in Germany in the same period. We
include this information in order to be able to compare the economic growth trend with what it is
considered a ‘Center’ country in Europe. As we can note, the size of GDP is greater than in
Spain and the tendency, before and after the financial crisis, is flatter. This results show that
German economy depends less on the international framework.
Graph 2: Evolution of the Nominal GDP in Germany between 1999 and 2012 (at current prices in millions
of US dollars).
21
Source: UNCTADSTAT
The percentage of growth in Spain in that period is represented on table 1, where we can
appreciate an increasing tendency for the production rate in the first part, which fits with the
description above of the GDP evolution, passing from an average of 7.734% in the period
between 1999 and 2007 to an average of 0.06% for the period between 2008 and 2012. On the
contrary, Germany grew more constantly but with lower rates over the whole period,
experiencing fewer problems after the crisis. The average growth rate for this nation between
1999 and 2007 was 2.46% and the average after the crisis, between 2008 and 2012, was 1.76%.
The divergence of tendencies appears as a result from the wider multilateralism that Germany
has compared to Spain and the stronger export sector of high-valued products.
Table 1: GDP percentage growth in Spain between 1999 and 2012.
1999
2000
2001
2002
2003
2004
2005
2006
2007 2008
2009
2010
2011
2012
7.5
8.6
8
7.2
7.4
7.4
8.1
8.4
6.9
-3.7
0.1
1.4
-0.8
3.3
Source: Statistics from the Economic Outlook of the Organization for Economic Co-operation for
Development (OECD).
22
Table 2: GDP percentage growth in Germany between 1999 and 2012.
1999
1.9
2000
2.6
2001
2.8
2002
1.5
2003
0.7
2004
1.8
2005
1.5
2006
4.2
2007
5.1
2008
1.6
2009
-4.0
2010 2011 2012
5.0
3.9
2.3
Source: Statistics from the Economic Outlook of the Organization for Economic Co-operation for
Development (OECD).
The economic growth is based on the analysis of the GDP (GDP). This variable comes
from the following equation:
GDP = C + I + G + (X – M); in which C refers to private consumption (which includes
Household and Non-Profit Institution Serving Households (NPISH) consumption); I denotes the
Gross Investment (Gross Capital Formation (GCF) in our analysis); G indicates the Public
Spending from the general government; X refers to exports to other countries; and M denotes the
imports from other nations.
In tables 2 and 3 it is shown the evolution of each of the GDP components. From the data
we can appreciate some similarities between the economies of the two countries, such as for
example that the component that contributes the most to the GDP in both cases, as it normally
does, is the private consumption. Moreover, the GCF and the public spending have, more or less,
the same percentage of contribution in both countries’ GDP.
On the contrary, there are also some disparities among both nations. Firstly, there is a
great difference between the size of the economies and, therefore, among the magnitude of the
variables. Secondly, the net exports (that is, exports minus imports) over the whole period are
positive for the German economy, but negative for the Spanish one. Finally, the public spending
has reduced in the Spanish economy since the economic crisis hit the nation (in 2008), but has
continued increasing in the German case for the whole period.
Table 3: Evolution of the components of the GDP in Spain between 1999 and 2013 (at current
prices in millions of Euros).
23
Year\Components
C
I (GCF)
G
X
M
1999
345,366.00
145,695.00
99,616.00
154,677.00
165,412.00
2000
376,052.00
165,618.00
107,951.00
182,992.00
202,706.00
2001
402,392.00
179,380.00
115,816.00
194,142.00
211,333.00
2002
425,425.00
194,240.00
125,065.00
199,280.00
214,752.00
2003
451,445.00
214,624.00
135,610.00
206,084.00
224,681.00
2004
487,367.00
238,107.00
149,419.00
218,201.00
251,800.00
2005
525,267.00
268,575.00
163,358.00
233,387.00
281,289.00
2006
566,151.00
304,945.00
177,121.00
259,130.00
321,800.00
2007
604,654.00
326,236.00
193,059.00
283,331.00
354,119.00
2008
622,368.00
316,697.00
212,003.00
288,217.00
351,497.00
2009
592,404.00
251,575.00
223,603.00
250,667.00
270,189.00
2010
608,105.00
239,266.00
224,511.00
285,110.00
308,109.00
2011
620,012.00
229,054.00
222,721.00
321,819.00
330,251.00
2012
621,170.00
206,209.00
211,446.00
338,014.00
327,314.00
612,335.8
190,537.7
210,388.8
352,979.5
(f)
(f)
(f)
(f)
2013
315,165.7 (f)
Source: Table created by Alex Rodriguez & Mario Chaparro, extracting the data from Eurostat.
(f) refers to forecast, that is, the prediction that this Organism made for 2013.
Table 4: Evolution of the components of the GDP in Germany between 1999 and 2013 (at
current prices in millions of dollars).
Year\Component
C
I (GCF)
G
X
M
1999
1,161,860.00
435,980.00
384,780.00
588,130.00
570,550.00
2000
1,195,040.00
456,590.00
389,570.00
683,550.00
677,250.00
2001
1,233,430.00
427,650.00
399,140.00
731,230.00
689,550.00
2002
1,240,580.00
385,340.00
410,380.00
760,570.00
664,670.00
2003
1,264,510.00
383,390.00
415,450.00
767,080.00
682,930.00
2004
1,283,610.00
387,120.00
414,200.00
846,440.00
735,670.00
2005
1,306,980.00
384,130.00
417,300.00
919,070.00
803,080.00
24
2006
1,339,540.00
419,620.00
424,690.00
1,053,140.0
923,090.00
2007
1,356,730.00
467,750.00
434,040.00
1,145,410.0
975,430.00
2008
1,389,620.00
476,430.00
451,920.00
1,191,190.0
1,035,360.00
2009
1,391,550.00
390,720.00
475,300.00
1,006,540.0
889,610.00
2010
1,433,160.00
436,540.00
487,600.00
1,173,340.0
1,034,440.00
2011
1,487,660.00
473,510.00
499,770.00
1,300,810.0
1,169,150.00
2012
1,521,590.00
455,250.00
515,430.00
1,362,590.0
1,210,960.00
2013
1,558,312.4 (f)
445,251.4 (f)
537,022.9 (f)
1,391,898.1 (f)
1,238,291.6
(f)
Source: Table created by Alex Rodriguez & Mario Chaparro, extracting the data from Eurostat
(f) refers to forecast, that is, the prediction that this Organism made for 2013.
In this sense, even if the Spanish economy possesses one of the highest GDPs in the
world (the 12th more precisely3), the size is less than a half of the German one. Moreover, from
the larger fluctuations observed in the Spanish economic growth we can extract that the country
is more vulnerable to international cycles, rising with a higher rate when the economic
framework is favorable and reducing more when the global economy contracts. In this respect
we can state that the Spanish economy possesses characteristics from Peripheral nations because,
as Raul Prebisch noted, the effects of international economic cycles are especially severe for the
agents who are considered to have higher risk, which is feature of these kinds of countries.
Furthermore, as we can observe from the data analysis developed above, the
consequences of the economic crisis have been greater in Spain than in Germany. This is due to
the fact that Germany had a more developed economic structure and higher productivity (as it
will be deeply analyzed in the following subsection) and, therefore, the country experienced a
more stable growth during the boom and felt less the consequences of the crisis. Finally, the
private indebtedness was lower than Spain, as we will show further in this section, and the
nation’s investment on Development and Research (D&R) in Germany was larger than in the
Mediterranean country.
3
The World Bank databases (http://data.worldbank.org/data-catalog/GDP-ranking-table)
25
4.2. Economic structure
The Spanish economic structure regarding GDP per sector clearly shows the pattern of a
developed economy. The 65, 5 %4 of the GDP (in current prices) is produced by services, 15,6%
by industry, while construction contributes 8,4% to the total production. The primary sector
formed by agriculture, cattle industry and fishing produces the 2,5%.
Regarding productivity of the whole economy within the framework of the main trade
partners, during the last decade Spanish Total Factor Productivity5 (TFP) has grown in a slower
pace than its neighbours’ during the whole period, excluding 2009.
Graph 3: TFP Growth in percentage, for the sample of countries, from 2000 to 2011
Total Factor Productivity Growth (ln difference,
percent)
4.00
3.00
Growth %
2.00
1.00
Spain
0.00
Germany
-1.00
France
-2.00
Italy
-3.00
-4.00
-5.00
Source: The Conference Board Total Economy Database™
The increment of the TFP in 2009 was due to the lower utilization of factors of
production as a consequence of the economic crisis and the job destruction (Fernandez, 2011). In
4
INE (National Institute of Statistics), National Account statistics 2012. The 8,1% left represents net taxes
“TFP growth is often defined as “technological progress”. It captures the effects of a set of heterogeneous
factors, including the capacity of the economy to innovate and the impact of the quality of the institutional and
business environment, such as the regulation of labour and product markets, on the productive use of capital,
labour and other inputs” ( Mora-Sanguinetti & Fuentes, OECD 2012:12)
5
26
order to have a broader scope of the situation, the following subsections will analyze the
economic structure of the Spanish economy in terms of activities and productivity.
4.2.1. Agriculture
The primary sector has followed a declining trend, surviving thanks to the protectionist
policies of the EU which have altered the world prices of commodities. The CAP (Common
Agricultural Policy) has supported Spanish primary sector since the inclusion of the country in
the EU until nowadays, mainly through subsidies, market support, direct aids, and rural
development and decoupled payments6. The future program will distribute between the members
more than 40% of the EU expenditures7. Following the words of the present ministry of
agriculture, the 30% of the income of farmers has depended on the European funds 8,
consequently the prediction for this sector is negative due to the reformulation of the
requirements for applying to the funds along with the competence generated by the most recent
EU enlargements. As it will be shown in our analysis of the current account of the balance of
payment, agricultural products have a remarkable importance considering exports.
4.2.2. Industry and Construction
According to the UNECE, Spain is listed in a low position regarding to percentage of
GDP by the industry sector, solely above Luxembourg, Greece, and United Kingdom within the
EU.9 The decreasing of this sector has followed a constant tendency for decades; however and
similarly for agriculture, the products within this sector play an important role on foreign trade.
6
Web page of University of Dublin: “Exploring links between EU agricultural policy and world poverty “
(http://www.tcd.ie/iiis/policycoherence/eu-agricultural-policy/protection-measures.php)
7
OECD database (http://www.oecd.org/eu/evaluationofagriculturalpolicyreformsintheeuropeanunion.htm)
8
Webpage Newspaper “El Pais” 6/05/2013
(http://economia.elpais.com/economia/2013/05/06/agencias/1367856454_623384.html)
9
UNECE. Statistical database webpage:
(http://w3.unece.org/pxweb/quickstatistics/readtable.asp?qs_id=11&lang=1)
27
Diagram 1. Percentage of GDP over total economy per country, 2010
% GDP Secondary sector.2010
35
30
25
20
15
10
5
0
29.3
23.8
19.3
15.9
15.5
7.4
Source: UNECE
During the last decades and previous to the world economic crisis, the construction sector
has created a great part of the national’s wealth, following the figures of the industry (12,6%
GDP for 2006 reaching its peak10). The graph 4 shows the evolution of that sector in comparison
to the EU. As a product of the real state bubble and the credit bubble, thousands of dwellings
were built during consecutive years. Also a great impulse to the public civil engineering
happened, developing a great number of infrastructures for transport, tourism, culture, etc; not
always fulfilling the requirements on general interest and long-term economic viability11.
Nowadays the sector suffers a great adjustment to its natural supply value provoking losses in
terms of jobs, but increasing the productivity at the same time.
10
(INE)
Webpage Newspaper “The Telegraph” 15/02/2012
(http://www.telegraph.co.uk/news/worldnews/europe/spain/9084202/Castellon-airport-Spanish-ghost-airportsunused-runway-to-be-dug-up-to-meet-regulations.html)
11
28
Graph 4: Production in construction over total economy for the sample of countries, 2010
Production in construction (%2010 = 100)
200.00
180.00
160.00
140.00
120.00
100.00
80.00
60.00
40.00
20.00
0.00
European Union (27
countries)
European Union (15
countries)
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
Spain
Source: Eurostat
Focusing on the productivity, the graph above represents the trends followed in the last
years in comparison to the trends of the main trade partners:
Graph 5: Percentage of growth in productivity by selected sectors and sample of countries,
2000-2009
MANUFACTURING
ELECTRICITY GAS AND, WATER
SUPPLY
10
20
5
15
10
2009
2008
2007
2006
2005
2004
2003
2002
2001
5
MINING AND QUARRYING
2009
2008
2007
2006
2005
-10
2004
-15
2003
-5
2002
-10
2001
0
2000
-5
2000
0
CONSTRUCTION
29
20
20
15
15
10
5
10
2009
2008
2007
2006
2005
2004
2003
2002
2001
-5
2000
0
-10
5
0
-15
-5
-20
-25
-10
Source: OECD Statistics (Stat Extracts, via OECD’s iLibrary)
Graph 5 show the evolution of the growth of multi-factor productivity (%) for Spain
(Orange), Germany (Green), France (Blue) and Italy (red) for the four subsectors. The decreasing
trend for the Spanish figures is the common fact in all of them, independently of the crisis. The
exception is the construction sector, whose trend shows its anomalous nature within the Spanish
economy, reaching great levels of productivity related to the large job destruction.
Before the economic crisis, Spain reached a lower level of growth in productivity than
Germany in every sector, except for mining during various years, and for construction in the
early years of the housing bubble. Considering France, both countries have similar trends and
values, excluding manufacturing in which France achieved higher levels. In the case of Italy,
there are disparities depending on the subsector, having Spain superior growth rates for
manufacturing.
To sum up this subsection, there is a latent problem for the Spanish economy due to the
importance of manufacturing on foreign trade, subsector in which the country has stayed below
its trade partners during the whole decade.
4.2.3. Services
The tertiary or services sector is characterized by a great degree of diversity in terms of
output of product and nature of its activities. As a result, it is shared the vision of the existence of
duality within the sector between activities with low productivity, which are intensive in labour
30
and the ones with high productivity, which are capital intensive. The productivity for 2009 of the
whole sector was two thirds the average of productivity of the EU-15 (Maroto,2009).
Figure 1: Spanish.Gross value added at current basic prices (in millions of Euros), by subsectors
of services sector, 2010
Spain.Gross value added at current basic prices (in
G.WHOLESALE AND RETAIL
millions of Euros).2010 TRADE; REPAIR OF MOTOR
VEHICLES AND MOTORCYCLES
H.TRANSPORTATION AND
STORAGE
I.ACCOMMODATION AND
FOOD SERVICE ACTIVITIES
71,096, 16%
117,007, 26%
J.INFORMATION AND
COMMUNICATION
71,156, 16%
45,383, 10%
43,092, 9%
K.FINANCIAL AND INSURANCE
ACTIVITIES
L.REAL ESTATE ACTIVITIES
37,980,
8%
69,191, 15%
M-N.PROFESSIONAL,
SCIENTIFIC, TECHNICAL,
ADMINISTRATIVE AND
SUPPORT SERVICE ACTIVITIES
Source: EUKLEMS database.
Those subsectors that on average have higher and increasing productivity as the subsector
J,K and H (Maroto,2009) do not represent a large part of the production whereas the activities
characterized in the opposite way as the ones encompass in the group G and I, conform a quarter
of the total production of the services.
Focusing on the trends about TFP (Value added based, with 2005 as base year) for the
main European economies, it can be seen the following facts: for every subsector except G and
K, there has been a decrement in the TFP, especially in H, I and M-N. The reason underlying that
31
tendency was the large use of factors of production, both labour and capital during the expansion
years (2000-2008) of the Spanish economy (Fernández,2011)
Graph 6: Percentage of growth in productivity by selected sectors and sample of countries,
2000-2009
G.WHOLESALE AND RETAIL
H.TRANSPORTATION AND
TRADE; REPAIR OF MOTOR
STORAGE
COMMUNICATION
130.0
140.0
120.0
130.0
2,009
SERVICE ACTIVITIES
2,008
J.INFORMATION AND
2,009
I.ACCOMMODATION AND FOOD
2,008
2,007
2,006
2,005
2,004
80.0
2,003
80.0
2,002
90.0
2,000
85.0
2,009
100.0
2,008
90.0
2,007
110.0
2,006
95.0
2,005
120.0
2,004
100.0
2,003
130.0
2,002
105.0
2,001
140.0
2,000
110.0
2,001
VEHICLES AND MOTORCYCLES
120.0
110.0
110.0
100.0
K.FINANCIAL AND INSURANCE
2,007
2,006
2,005
2,004
2,003
2,002
2,000
2,009
2,008
2,007
2,006
2,005
2,004
2,003
2,002
80.0
2,001
80.0
2,000
90.0
2,001
100.0
90.0
L.REAL ESTATE ACTIVITIES
ACTIVITIES
32
2,009
2,008
2,007
2,006
2,005
2,009
2,008
2,007
2,006
2,005
2,004
2,003
2,002
2,001
2,000
60.0
2,004
80.0
2,003
100.0
2,002
120.0
2,001
115.0
110.0
105.0
100.0
95.0
90.0
85.0
80.0
2,000
140.0
M-N.PROFESSIONAL, SCIENTIFIC, TECHNICAL,
ADMINISTRATIVE AND SUPPORT SERVICE ACTIVITIES
140.0
130.0
Axis Title
120.0
Spain
Germany
110.0
France
100.0
Italy
90.0
80.0
2,0002,0012,0022,0032,0042,0052,0062,0072,0082,009
Source: EUKLEMS database.
The crisis context would change the decreasing trend in certain subsectors because the
TFP for Spain is counter-cyclical (Timmer etal., 2007, Boldrin et al. 2009)by Mora-Sanguinetti
& Fuentes, 2012:16) due to large number of temporary workers in low-productivity activities,
being those the ones fired in the recessive scenario (Mora-Sanguinetti & Fuentes, 2012).
Furthermore, the productivity problems are related to the specialization in lowproductivity sectors, low uses of information, technology and communication (ITC) and the
33
inefficient use of human capital (Fernández, 2011) along with other political and administrative
considerations. As a consequence, the gap between Spain respect the main countries within the
EU in terms of GDP and standards of living could be wider if we have in account the divergent
trends of productivity within the sectors and if those trends does not transform.
4.2.4. Technology
The structuralist theory gave great importance to the technology as way of progress for
the society, idea shared by the liberal thought too.
In the Spanish case it can be observed different trends depending on the variable to study.
Regarding the Diagram 2, the country invests remarkably less than their main trade partners, and
also it is below the EU average. During the last decade the investment has increased, reaching a
1,39% maximum, starting to decrease in 2010 in the context of the economic crisis.
Diagram 2: Research and development expenditure, by sectors of performance,% of GDP .2011
Research and development expenditure, by
sectors of performance,% of GDP .2011
2.84
3
2.5
2.25
2.03
2
1.5
1.33
1.5
1
0.5
0
EU (27
countries)
Germany
Spain
France
Portugal
Source: Eurostat databases
The backward position can be seen in Graph 7 too, in which the trend, increasing
positively and in a greater path than in the main countries, is still above the EU average. The lack
of correlation between the level of education and the opportunities offered by the labour market
can be one of the causes of this situation. Further analysis will be made in the Labour Market
section.
34
Graph 7: Employment in knowledge-intensive service sectors. Share of total employment, €
per person, for sample of countries, 2000-2008
Employment in knowledge-intensive service
sectors. Share of total employment
40
35
30
25
20
15
10
5
0
Germany
Spain
EU (27 countries)
Portugal
France
200020012002200320042005200620072008
Sources: Eurostat databases
Furthermore, in table 5 about the output of the economy, it is seen the share related to the
innovation. In this case, Spain is above the average, and over France and Portugal.
Table 5: Turnover from innovation % of total turnover
geo\time
2004
2006
2008
EU (27 countries)
13,7
13,4
13,3
Germany
17,6
19,2
17,4
Spain
13,8
15,9
15,9
Portugal
10
13,3
15,6
France
11,7
:
13,2
Sources: Eurostat databases
35
However, the economic crisis is affecting strongly to the budget for R&D and it is
predicted that the resources allocate to those activities will continue decreasing, impacting again
in the increasing of the gaps respect the main European economies for the more important
indicators.
4.3.
Balance of Payments
In this subsection we will analyze the balance of payments between Spain and the rest of
the world. Firstly, we will compare the evolution of this issue with the German case in order to
set a more appropriate context to examine, through this variable, the North-South dualism that
we consider it exists in Europe. Secondly, we will go deeper on studying the components of the
Spanish balance of payments, that is, the current account (goods, services and rents), the capital
account, the financial account (from Spain to the rest of the world, from the rest of the countries
to Spain and the financial derivatives), the reserves of the Bank of Spain and the national debt.
Finally, basing on this feature and relating it to our theoretical section, we will suggest if the
country is a peripheral nation or a center one.
As it is shown in table 6, the balances of payments between Spain and Germany with the
rest of the world differ in size and in sign. In the German case, even if in the first years of the
period the nation experienced a negative balance of payments, due to specific political decisions
taken at that time12, the evolution of the country’s balance is positive. This is due to the strong
export sector that the country possesses in high-valued products and services, which exceeds the
internal demand, but also because of the lower value of the imports, the increment of private
savings, and the high productivity in the nation’s productive sectors. The balance augmented
significantly in the economic expansion period, contracting in the two first years of the crisis due
to the negative shock experienced in the region (in the commercial partners more than the
internal one), and growing again in the following years as a result of the impulse of the export of
goods and services and the solidity of the country’s productive sector.
12
Siebert, H. “The Germany Economy. Beyond the social market”. Princeton University Press, New Jersey, 2005.
36
On the contrary, Spain faced a negative balance of payments throughout the whole period
mainly because the value of imports of goods and services was higher than the exports. The
deficit incremented meaningfully during the economic expansion due to the increment of highvalued imports. It also was influenced by the lower value-added of the exports, due to the lower
productivity in the export sector, the decrement of national savings and the disparities in the
financial account. After the economic crisis the negative balance reduced as a consequence of the
economic problems that the nation experienced, that is, the impossibility for importing as many
products and services as before, due to the contraction of the aggregate demand for foreign
products and services, and the decrease of incoming financial flows in the country, as we will
show further in this section.
Table 6: Evolution of the Balance of Payments in Germany & Spain from 1999 to 2012
Year
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Germany
-25 834
-35 459
-12
42 669
40 525
102 368
112 591
144 739
180 914
153 634
141 538
155 992
161 196
185 425
Spain
-16 967
-24 949
-26 823
-23 764
-27 476
-44 164
-66 860
-88 313
-105 266
-104 676
-50 539
-46 963
-39 787
-11 268
Source: OECD Statistics (Stat Extracts, via OECD’s iLibrary)
As we can corroborate in Graph 8, the total exports decrease in the first year of the crisis,
augmenting in the last period. In the same direction but under the level of 2007 (opposite to the
export tendency), the total imports reduced in the first years after the economic shock in the
region, experiencing an increasing trend in the last years.
37
Graph 8: Evolution of percentage of imports and exports of services from Spain to the
rest of the world (with base on 2007=100)
Source: Spanish National Institute of Statistics (INE, taken from the Ministry of
Economy)
In order to keep on contextualizing the Spanish trade performance we include diagrams 3
and 4, in which we examine the total exports and imports that the country has had with the main
European partners in 2001 and in 2010, that is, before and after the recent economic crisis. In this
respect, we can observe that the balance in 2001 showed a deficit in the balance with almost
every country, except for Portugal. Contrary, in 2010, the balance varied depending on the nation
that we focus, having surplus with France, Great Britain and Portugal, and deficit with Germany,
Italy and the Netherlands.
On the comparison among the mentioned years we can extract some features of the
consequences of the crisis in the balance of payments. Firstly, we can observe a change of the
sign in certain nations. This can be partially explained by the contraction of the aggregate
demand for foreign products in Spain. Secondly, the difference in deficits among years has been
reduced. This happened due to the increment of exports in every case due to the lower prices of
the Spanish goods. Finally, the imports have increased in practically every case. This increment
partially occurs as a result of the difference of time in the series.
38
Diagram 3: Spanish total imports and exports with the main European partners in 2001 (in
millions of Euros)
Source: Spanish National Institute of Statistics (INE database)
Diagram 4: Spanish total imports and exports with the main European partners in year 2010 (in
millions of Euros)
39
Source: Spanish National Institute of Statistics (INE database)
On Diagram 5 it is shown the evolution of the Spanish deficit in the current account of
the balance of payments. In the chart it can be seen that a great percentage of the deficit on the
balance of payments is due to the deficit experienced in the current account of goods and
services. This great deficit in the current account is the result of the lower prices of the country’s
exports and the lesser volume of them. Moreover, the goods and services that the country
imports, even if they are from the same sectors as it will be demonstrated, are more expensive
and larger in quantity.
Diagram 5: Spanish current account from 2003 to 2011 (in millions of Euros)
40
Source: Spanish National Institute of Statistics (INE, taken from the Bank of Spain)
Due to the great percentage that the current account represents out of the total balance of
payments we are going to go deeper on studying it, as it is shown in table 7, in which the main
components of the account are displayed. On it we can observe that there exists a surplus on
tourism and trips activities, which is the variable that contributes the most on this account. On
the other hand, the deficit on rents is basically created by the deficit on the investment rents.
Table 7: Evolution of certain components of the current and capital account in Spain from 2003
to 2011 (in millions of Euros)
2003
2004
2005
2006
2007
2008
2009
2010
2011
Net
Net
Net
Net
Net
Net
Net
Net
Net
Current Account
-27909.9
-44163.7
-66859.7
-84736.3
-105378.2
-105973.1
-54481.3
-47427.3
-37765.9
Trade balance
-39838.8
-53660.2
-68603.2
-80142.2
-91245.8
-86723.5
-42175.5
-47778.8
-39701.4
Services
23300.9
21753
22239.7
22142.6
23076
26143.8
25503.4
27514
33997.2
1.Turism and trips
27037.2
26604.2
26433.1
27444.3
27700.9
28066.6
26038.7
26957.8
30604.1
2.Other services
-3736.4
-4851.2
-4193.3
-5301.7
-4624.9
-1922.8
-535.3
556.2
3393.2
Rents
-11603.6
-12139.5
-17103.3
-20983.1
-30141.5
-36033.8
-29787
-19849.5
-26134.2
1.Labor
54.1
-148.2
-177.7
-287.7
-277
-54.7
-129.4
-39.4
-115.2
2.Investment
-11657.7
-11991.3
-16925.5
-20695.4
-29864.6
-35979
-29657.7
-19810.1
-26018.9
Current transfers
231.7
-117.1
-3392.9
-5753.5
-7066.8
-9359.6
-8022.3
-7313
-5927.6
Capital Account
8165.3
8427.9
8180.4
6174.6
4577.8
5474.4
4275
6289.2
5487.5
41
Current
+
Capital
Accounts
-19744.5
-35735.8
-58679.3
-78561.7
-100800.4
-100498.6
-50206.4
-41138.2
Source: Statistic databases from the Bank of Spain.
Within the current account the highest contributor to the negative balance is the deficit on
products. This is represented in table 8, in which we can observe the increasing negative ratio
between exports and imports throughout the last decade. The deficit augmented until the
financial crisis due to the larger size (in value) of the imports compared to the exports. This ratio
reduced afterwards due to the contraction of the Spanish economy and the increment on the
country’s export sector, as we can see in Diagram 6.
Table 8: Evolution of Spanish total imports and exports of products and the ratio between them
from 1999 to 2011 (in thousands of Euros)
Imports
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Exports
139093706
104788627
169468101
124177336
173210117
129771013
175267866
133267678
185113677
138119047
208410704
146924723
232954466
155004734
262687190
170438627
285038313
185023218
283387764
189227851
206116175
159889550
240055850
186780071
263140741
215230371
X-M
-34305079
-45290766
-43439104
-42000189
-46994630
-61485981
-77949732
-92248563
-100015096
-94159913
-46226624
-53275780
-47910370
Source: Spanish National Institute of Statistics (INE databases)
Diagram 6: Spanish total imports and export of the main products in 2001 and 2010 (in
thousands of Euros)
42
-32278.4
Source: Spanish Institute of Statistics (INE database)
Services are the other main component of the current account of the balance of
payments. In this case, the followed trend was similar to the product industry leading to
a surplus in the last year, as we can observe in diagram 7, in which the Spanish total
import and export of main services is represented.
Diagram 7: Spanish total exports and imports of main services in the last term of 2012 (in
millions of Euros)
43
Source: Spanish National Institute of Statistics (INE database)
Opposite to the current account there is a surplus on the capital account, as it is shown in
Diagram 8. This surplus means that the Spanish economy has been receiving more capital flows
than the ones that the country has been dispatching abroad. In this sense and contrary to the
current account, it means that Spain has obtained more borrowings or sold more of the national
assets. These sales include the foreign direct investments, which can be Greenfield projects or
fusions and acquisitions, portfolio investments, which refers to the purchase of bonds and shares,
other investments, as for example loans of flows to banks, and bank reserves, which denotes the
purchase or sales of foreign currencies from the central bank of Spain . The different contribution
of these variables is shown in table 9.
Diagram 8: Spanish capital account from 2003 to 2011 (in millions of Euros)
44
Source: Spanish National Institute of Statistics (INE, taken from the Bank of Spain)
The financial account of the balance of payments is represented in Table 9, in which the
evolution of the components of this account is shown. At a quick glance, we can determine that
the investments from Spain to other countries have been lower than the ones received in the
nation from the rest of the world during the whole period.
Resulting from the deficit on the addition of current and capital accounts, that is, more
Euros are going abroad than the foreign currencies are flowed in the country, the Bank of Spain
credits the financial account through its reserves in order to equilibrate the final balance of
payments13. The evolution on the reserves had follow a decreasing tendency, passing from
positive to negative in the previous years to the crisis and increasing negatively in the years that
followed. The positive sign means that there is a reduction of the reserves, and vice versa.
Table 9: Evolution of the International investments, financial derivatives and reserves in Spain between
2003 and 2011 (in millions of Euros)
Investments from Spain
13
2003
2004
2005
2006
2007
2008
2009
2010
2011
116851.5
123199.1
164292.4
169638.2
145407.2
41848.7
9640.8
-38868.6
30488.4
Dodge, E. “AP Macroeconomics and Microeconomics”. Mc Graw-Hill, 2005.
45
to other countries
Investments from other
countries in Spain
125536.1
152829
223304.8
251475.9
250795.9
151788.6
71376.8
-1973.6
71844.5
Financial Derivatives
..
..
..
..
..
-862.9
329.7
17.1
2499.4
13625.9
5147
1439.5
-480.4
-164.2
-644.6
-1563.5
-813.6
-10009.7
Reserves in the Bank of
Spain
Source: Spanish National Institute of Statistics (INE, taken from the Bank of Spain)
The Spanish companies and the national government searched for credits abroad in order to
finance their operations. As we can see in Table 10 the national debt was decreasing (in percentage of the
GDP) during the period before the crisis. But in 2008 started increasing largely achieving to surpass 80%
in 2012 because part of the private debt became public. This increment was also due to the increase of the
size of the nominal interests and the European monetary and fiscal policies integration, which make the
country incapable to follow the correct policies and depreciate the national currency.
Table 10: Evolution of the Spanish total debt and the percentage of it in the GDP between 1999 and 2012
Years
DIC 1999
DIC 2000
DIC 2001
DIC 2002
DIC 2003
DIC 2004
DIC 2005
DIC 2006
DIC 2007
DIC 2008
DIC 2009
DIC 2010
DIC 2011
DIC 2012
Total debt
Debt % of GDP
361775168
374033184
378246752
383434976
382031840
389141760
392497120
391054816
382306944
436984000
565082304
644692067
736468088
883872944
62.4%
59.4%
55.6%
52.6%
48.8%
46.3%
43.2%
39.7%
36.3%
40.2%
53.9%
61.5%
69.3%
84.2%
Source: Bank of Spain (Eurosystem)
46
Finally, we can conclude by saying that the Spanish balance of payments possesses some of the features
that the structuralist thoughts linked to the Peripheral countries. In this respect, the negative balance of
payments during the whole period analyzed would be the most clear example. This is due to the fact that
structuralist emphasized the dependency pattern that the Peripheral countries had with the Center ones,
highlighting the deficit in the developing countries’ balances account. This could be explained by the
higher value of the imports compared to the goods and services that Spain exports.
Furthermore, from a structuralist view, the current account was significant in peripheral countries,
as it is the case of Spain in recent times. In this sense, peripheral nations were highly dependent of trade.
The following data, table 11, shows that trade in Spain is also a great contributor to economic growth.
Table 11: Evolution of the ratio of trade in market prices to GDP between 2000 and 2011
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
GDP
629,907
680,397
729,258
783,082
841,294
909,298
985,547
1,053,161
1,087,788
1,048,060
1,048,883
1,063,355
X
M
182,992.00
202,706.00
194,142.00
211,333.00
199,280.00
214,752.00
206,084.00
224,681.00
218,201.00
251,800.00
233,387.00
281,289.00
259,130.00
321,800.00
283,331.00
354,119.00
288,217.00
351,497.00
250,667.00
270,189.00
285,110.00
308,109.00
321,819.00
330,251.00
((X+M)/GDP)*100
61.23%
59.59%
56.77%
55.01%
55.87%
56.60%
58.94%
60.53%
58.81%
49.70%
56.56%
61.32%
Source: created by Alex Rodriguez & Mario Chaparro, extracting data from the Bank of Spain
and the Spanish National Institute of Statistics (INE database)
4.4. Labour Market
47
The structuralist authors gave a great importance to the dynamics of the labour market,
as an evidence of the position that a country has within the centre-periphery division. One of
the effects of dependency was the great amount of workforce unemployed in the labour
market, that is, a surplus of labour and the dynamics that it generated. Moreover, the dualism
that underlies within the labour market was the reflection of the differences of the economic
structure: workers in high productivity sector received high salaries in opposition to workers
in the low productivity sector who obtained low wages. In order to determine if those features
are implicit in the Spanish labour market, certain number of indicators will be used.
The Spanish labour market has a number of specificities within the European
countries. To understand them, we will see the main characteristics of the labour market, the
distribution of employment through the different sectors, along with the productivity, the
short-termism and the retribution of the factor of production labour.
4.4.1. Characteristics
To begin with, it is shown that the economic cycle strongly affect the unemployment
rate of Spain in comparison to its European neighbours. This fact implies that a great
percentage of the Spanish employment depend in subsector which suffered of great volatility
in terms of demand such construction and accommodation and food activities. These causes
also reside in the great percentage of temporary workers. These phenomena are going to be
tackling in following parts in this subsection.
Graph 9: Unemployment rate (% of the total active population), sample of countries, 2003-2012
48
Unemployment rate
% of actives
30.0
25.0
Spain
20.0
Germany
15.0
10.0
France
Italy
5.0
0.0
European Union (27
countries)
Source: Eurostat databases
The same causes behind the total unemployment rate are the ones behind the youth
unemployment rate. This follows a similar pattern as the total one, but in a greater extent, with
unemployment surpassing the 50% of the total active youth population. This fact has a
remarkable impact in sociological terms.
Graph 10: Unemployment rate under 25 y, annual average (% of total young active
population) for the sample of countries, 2003-2012
49
Unemployment rate under 25 annual average, %
% total young active population
60.0
50.0
European Union (27
countries)
40.0
Spain
30.0
Germany
20.0
France
10.0
Italy
0.0
Source: Eurostat databases
4.4.2. Employment by sector
In this section it is studied the employment by sector, with the purpose of showing the
percentage of workers regarding the importance of each sector.
As we can observe the percentage of employment of each sector over the total active
population amongst our countries share similar patterns. The greatest differences can be found
in agriculture for Germany, with the lowest percentage while Spain has the largest, close to the
EU27 average. Secondly, in the manufacturing subsector, both Germany and Italy reach almost
a fifth of their workers employed within the subsector, while France and Spain perform under
the EU27 average. Finally, for the wholesale and retail and accommodation and food services
Spain achieved a greater percentage, remaining over the EU27 average, and practically doubling
the rest of the country in the latter subsector analysed in this part.
Table 12: Percentage of employment (% of total active population) by main e onomic sector for
the sample of countries, 1st Q of 2012
50
2012 Q1
Agriculture,
forestry and gas,
fishing
Mining
and
steam
quarrying
air
Electricity,
and
Construction
Manufacturing
Wholesale
and retail
trade;
conditioning
repair
supply
motor
of
vehicles
EU 27
4,83%
0,79%
0,39%
7,11%
15,72%
14,01%
1,64%
0,95%
0,24%
6,62%
19,94%
13,45%
4,45%
0,48%
0,22%
6,81%
12,64%
16,35%
2,85%
0,76%
0,10%
7,19%
13,02%
12,64%
3,57%
0,71%
0,14%
7,79%
18,73%
14,73%
Germany
Spain
France
Italy
2012 Q1
Transportation Accommodation Information
Financial
Real
Professional,
and storage
and
estate
scientific
and food service and
activities
communication insurance activities and
activities
technical
activities
EU 27
5,06%
4,32%
2,96%
3,03%
0,81%
5,08%
4,78%
3,82%
3,21%
3,32%
0,64%
4,96%
4,85%
7,19%
2,95%
2,52%
0,56%
4,73%
5,12%
3,65%
2,99%
3,27%
1,28%
5,44%
4,60%
5,07%
Source: Eurostat databases
2,42%
2,85%
0,60%
5,97%
Germany
Spain
France
Italy
51
As a consequence of the figure showed above, Spain does not differ from its European
neighbours in the most of the sectors, therefore the importance of those sectors considering that
productivity would impact in a similar way in every country. However, on the one hand, the
significant differences in the manufacturing sector situated the better performing countries in an
advantaged position within the overall of the economy, due to the key importance of it; while on
the other hand, the supremacy of Spain in the services sector shows that an important part of the
Spanish workforce is employed in this subsector, whose outputs is relatively weaker than in other
subsectors.
4.4.3. Temporality
Another specificity of the Spanish labour market in comparison to EU countries is the high
level of temporary workers. As it can be observed in the chart, the peak was reached in 2006, with
almost a 35% of the total workforce; decreasing after that due to the effect of job destruction
caused by the economic crisis, being the temporary workers the first in being fired (Bonhomme &
Hospido, 2012). In spite of this new situation, the ratio of temporary workers is still clearly above
the one of the main European economies.
Graph 11: Percentage of temporary employees (% of total number of employees) for the sample
of countries, 2003-2012
52
Temporary employees as percentage of the total number
of employees (%)
(% of total number of employees
40.0
35.0
Spain
30.0
25.0
20.0
Germany
France
15.0
10.0
5.0
0.0
Italy
European Union (27
countries)
Source: Eurostat databases
4.4.4. Labour Productivity
The importance of studying the labour productivity is due to two main reasons: on one
hand the levels of productivity between countries can determinate the dynamics among them. On
the other hand, the level of productivity within the subsectors of an economy can show us the
argued dualism that conform the essence of a peripheral country. This phenomenon will be
explained in the following parts:
Firstly, considering labour productivity (defined as GDP per hour worked by the
OECD14), Graph 12 shows that it has grown for every country in a moderate path, except for Italy.
However, the growth has been more intense in Germany and France than in Spain, country that
has the lowest labour productivity of the sample.
Graph 12: Labour productivity in € per person for the sample of countries, 2000-2011
14
OECD Databases
(http://stats.oecd.org/OECDStat_Metadata/ShowMetadata.ashx?Dataset=PDYGTH&ShowOnWeb=true&Lang=en)
53
50
45
40
35
30
25
20
15
10
5
0
Spain
Germany
France
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
Italy
2000
€ per person
Labour productivity
Labour productivity
Source. OECD Statistics (Stat Extracts, via OECD’s iLibrary)
This tendency is also patent in graph 13, in which the first years of the decade both
France and Germany reached higher levels than Spain. However, the economic crisis had
different impact in the countries. Similarly to other indicators that have been already analyzed in
the case of Spain the crises increments the value of them, that is, labour productivity improves
during the recession, and consequently it behaves as a counter cyclical variable.
Graph 13: Percentage of Annual growth of labour productivity
Labour productivity annual growth
rate
4
-2
2011
2010
2009
2008
2007
-1
2006
France
2005
0
2004
Germany
2003
1
2002
Spain
2001
2
2000
% of growth
3
Italy
Labour productivity annual growth rate
-3
54
Source. OECD Statistics (Stat Extracts, via OECD’s iLibrary)
Finally, Diagram 9 shows the Apparent Labour Productivity15 for the main subsector of
the economy. The sector with highest productivities for the majority of the countries are
electricity, gas, steam and air conditioning supply, mining and quarrying, information and
communication and real estate activities. On the contrary, accommodation and food service
activities are the sector with lower productivities.
Diagram 9: Apparent labour productivity in Euros by NACE Rev. 2. 1 000 EUR. 2013, by main
economic sector for the simple of countries
Euros
Apparent labour productivity by NACE Rev. 2.
1 000 EUR. 2013
400
350
300
250
200
150
100
50
0
Spain
Germany
France
Italy
Source: Eurostat databases
In comparison with table 12, about employment by sector, it can be stated the following
assumptions. From the four sectors with highest productivity, Germany has the highest
percentage of employment in all of them except for the real state activities, in which France has
the highest employment rate. Secondly, Spain has the highest employment rate in the sector with
15
Apparent labour productivity is defined as value added at factor costs divided by the number of persons
employed. This ratio is generally presented in thousands of euros per person employed (Eurostat)
55
the lowest productivity. In addition, Spain is in the last position when we regard the employment
in two of the four sectors: electricity, gas, steam and air conditioning supply and real state
activities. Finally, Spain has its highest employment rate in one of the sectors with lower
productivity as it is the wholesale and retail trade and repair of motor vehicles.
As a result of those findings, for Spain, the weakest subsector regarding productivity has
certain relevance in terms of employment and in the economy in general when comparing to their
European counterparts. However, it cannot be confirmed the ideas of the structuralist thoughts,
which legitimate the fact of a two rhythm economies in Europe, with activities with remarkably
high productivity and other with lower. Although, it has to be considered that because of data
correspond to 2013, the zenith of the economic crisis; this one has a strong impact modifying the
trends as it happens similarly for the other variables.
4.4.5. Earnings
The difference in the monetary retribution of workers is another cause that enhances the
dualism of a labour market. As it can be seen in the Diagram 9, in which it is shown the
difference between the 9th decile of workers by earnings and the 1st, they differ approximately a
3% for every country, except for Italy, close to 2%.
The implication underlying these facts is that, even when considering a certain degree of
differences between the workers of different deciles in each country, all of them shares a similar
pattern, and thus it cannot be considered as a cause of dynamics of dependency between Spain
and the sample of countries.
Diagram 9: Gross earnings: decile ratios. Decile 9/Decile 1 for the sample of countries, 2002-2010
56
Gross earnings: decile ratios.Decile
9/Decile 1
4
3.5
3
Spain
2.5
Germany
2
France
1.5
Italy
1
0.5
0
2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: OECD Statistics (Stat Extracts, via OECD’s iLibrary)
Furthermore, comparing these results to the data from the Spanish Central Bank regarding
the ratio decile 9 and decile 1 for the country, the figure shows that the difference between
deciles reached by far the 4% percent (unlikely the OECD date, in which the highest peak
reached is 3,5.
Graph 14: Salary distribution, ratio between deciles 9-1 in Spain by sex, 1988-2010
Source: Bonhomme & Hospido, 2012, p 4.
57
This trend is countercyclical due to the effect of the construction during the expansion
context: incentivizing people with low qualification and education to get into the labour market
for a relatively high wage, destroying this kind of employment during the depression
(Bonhomme & Hospido, 2012).
5.
Conclusion
Human beings have bestowed a vast range of labels to the world and its regions
throughout history, creating an infinite number of divisions since early times. Each name and
category, as Center and Periphery concepts, in which a territory was defined, had a great relation
to its features, that is, to the reality that they had in front of their eyes.
What the structuralist did in the early first decades of the XX century was nothing but
continue with the practice of defining those parts that are constantly reshaped and reformulated,
but for the first time in a way that nobody had done before: going deeper on understanding the
features of the existent divisions and the relations among nations that perpetuated the socioeconomic development divergences. The core idea is the C-P division. Putting in question the
liberal theory of trade through the observance of decades, they concluded that the gap between
the peripheral countries and the Center would never be reduced if the terms of commercial
relationship patterns continued in the same way, remaining dependency patterns.
Inspired by structuralist thoughts, our attempt has been to use their concepts and applied
them to the current context, certainly continuing with the aim of labelling the world. It can be
argued that structuralist left behind different aspects that have to be considered when defining
the reality, therefore having limitations, which we mentioned in the methodology. However,
considering their economic approach, the results were and are adequate for the chosen case
study.
In Spain, derived from our analysis, there can be found a certain number of features that
shows correlation between a possible nature of Spain as peripheral country within the EU:
firstly, the Spanish economy, although being developed according to its economic structure, it is
strongly vulnerable to the international cycles (partially as effect of the construction sector) as
the peripheral nation definition. These variables are altered even more remarkable in value when
58
they are compared to its European neighbours considered by us as the ‘North’, in which some
variables behave in a countercyclical way as for instance the labour productivity or the wage
dispersion.
Secondly, the role of trade within the whole economy is relatively significant, fact that is
relevant considering the chronic deficit in the balance of payments of the country and the
weakness of a key sector as it is the manufacturing one. It suggests that certain dependency
pattern is followed regarding the main trade partners.
Thirdly, the average productivity in Spain is lower than the one in its trade partners, and
this account also diverges in terms of productivity growth throughout the sectors. These
phenomena imply that in the long-term Spain would worsen its situation regarding its
neighbours, making impossible to decrease the gap between them, but probably not in the way
the structuralist stated, through the decline of the terms of trade. However, the data regarding
productivity does not show that the Spanish economy can be labelled as peripheral, due to it can
not be found great differences in productivity between sectors as the structuralist stated.
Furthermore, this can also be applied to the technical progress, in which Spain is not especially
backward, even though the country scores lower in certain indicator such as expenditure in R&D
as percentage of GDP.
Fourthly, a different idea can be stated for the labour market. In Spain there are certain
features as temporality, concentration of workers in low productivity sector, and wage
disparities, which shows a strong degree of dualism within the labour market greater extent
than in the European neighbours. This dualism has an enormous impact in numerous aspects of
the societies; deepening the differences among them and generating a surplus of labour that
lower salaries.
To sum up, the study of our analysis through the structuralist ideas allowed us to be
aware of the structural differences between the Spanish and the major European economies and
how they would not be eliminated unless changes in certain key variables such as productivity
would occur in order to diminish the gap and achieving similar levels of economic welfare.
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