The two Spains of truth

The two Spains of truth

The traditional view of the weight of the State in an economy measures this in terms of three basic variables: the ratio public expenditure / GDP, taxes / GDP and regulations. From this point of view, the expansion of state activity has been defended and defended, since Spain has a fiscal pressure and Public Administration spending that is lower than the average for the EU and the Eurozone. Independently of that reasoning leads to assume that the current European social-economic model is an example, which is more than debatable in view of its evolution during the last three decades and its inability to adapt to new economic realities, There is a different way of approaching this issue that offers a very different picture from that of conventional wisdom.

Specifically, in Spain there is a growing gap between those who obtain their income from the market and those who receive it from the public sector. This constitutes an important burden to achieve a sustained increase in GDP per capita and the welfare of citizens. The aggregate of public employees, unemployed and pensioners adds almost fourteen million people who live off the public coffers compared to a few more than thirteen who work in the private sector. This situation will tend to worsen in the coming years-decades due to the aging of the population and its upward effect on disbursements in retirement, health or dependency to cite some emblematic examples. This trajectory does not seem the best to configure a dynamic economy and a just society.

Any critical observer will object that many of the people included in these groups also pay taxes and, therefore, contribute to finance the activities they perform. This is true, but if you subtract the taxes paid by them from what they cost, the balance is not very positive. If the calculation is made to see the annual net cost for each employee of the private sector of those who extract their remuneration from the State would be 19,127.1 euros per year. This is the conclusion of the report "Spanish Economy: The Two Spains of truth" recently published by Freemarket. In addition, the average salary of public employees is 37% higher than that of those employed in the market. If it is valued that, as a rule, productivity is higher in the private economy than in the public one, this fact is quite striking.

This situation is logical. Efficiency and productivity gains in sectors not subject to competition are by definition or, better, tend to be lower than those in which they exist. The vast majority of social programs are provided under a monopoly regime, which eliminates the incentives to make efficient use of resources. In parallel, the budgetary gains achieved by this type of policy have more repercussions in salary increases than in an improvement in quality. In short, this is the expression of the so-called Baumol Law, namely, the labor-intensive sectors without competitive pressure have low productivity. This means, for example, that the introduction of public / private competition in many fields now monopolized by the Administration would be an effective step towards an improvement in the quality-cost ratio of numerous public programs.

In short, a socio-economic structure in which more people of the State live than of the market does not seem reasonable. Nor is this situation justified by the efficiency of the Spanish public sector which is manifestly improvable or, to put it in other terms, that in view of the information available does not manage with the desirable effectiveness the enormous resources placed at its disposal. In addition, the unstoppable growth of the number of pensioners and their cost is already a problem of the first magnitude that will become inexorably worse in the future. Everything pointed out poses the urgent need to undertake a profound reform of the Spanish public sector and is a good call for those who still think that raising spending, taxes and public employment is the right way for the economy to grow, generate employment and be competitive. .

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