August unemployment levels in Mallorca were the highest for more than ten years. You might think with all that seasonal work that summer would be a time of high employment. Yes and no. The current set of unemployment figures are related not to seasonal work but to the ending of various construction projects. It isn’t necessarily doom and gloom as there are plenty of potential projects in the pipeline; indeed planned investment in public works, as set out in official bulletins, is up by nearly 60%, while the private sector, including hotel modernisation, is knocking out good figures as well
But the rise in unemployment highlights an underlying weakness of the Mallorcan economy. The non-residential construction sector has buoyed both the local and the national economy for the past decade or so. European money and advantageous interest rates have assisted the modernisation of infrastructure - roads, hospitals, schools etc. - that has transformed the island and much of the mainland from what was little more than Third World status at the start of the 1990s. So construction has been both necessary and vital in creating the economic boom of the past few years.
There are though clouds on this economic horizon, notably the interest-rate situation, turmoil in the credit markets and the potential for bust in the economy as a whole. Though planned investment in public work is high, it doesn’t necessarily follow that it will be implemented. Both government and the lenders (the banks) are facing a squeeze. “ ‘Spain's economic growth will slow down next year as turmoil in credit markets undermines investor confidence and stokes uncertainty’, Pedro Solbes, finance minister, said yesterday.”
Though the Zapatero government has sought to tighten public spending, politicians of all hues, at national and local levels, have generally adopted a spend ideology which, though it has created many benefits, has neglected structural deficiencies within the national and local economies and the business sector as a whole. In the Balearics, the level of investment in research and development is the lowest of any part of Spain; productivity has fallen every year since 2000 (with the exception of 2003); and training and development is lacking. These are not problems confined to the Balearics. " ‘Spain has not tackled a fundamental problem, its declining productivity,’ says Jordi Canals, dean of the IESE business school in Barcelona. ‘We are stuck in the middle, a high-wage economy with no ability to innovate.’ “
Taken as a set of competitiveness indicators, these leave much to be desired. Were there to be a drive to attract inward investment (apart from the sideshow of the residential real-estate sector), such lack of competitiveness would be a serious obstacle. While the average salary in the Balearics is a little above 18,200 euros net, the additional social costs (social security is typically around one-third of salary) are also a deterrent to such an investment. The question arises though, investment in what?
Take away construction and tourism and there is not a lot left. Sure, there are plenty of support industries and others, but they are highly dependent upon activity in these prime sectors. Even the agriculture industry faces its own problems with respect to cheap imports. While poor harvests are hard to prevent, technological investment and increased productivity can help to create the circumstances for greater competitiveness. It is not as though all these imports come from cheap sources. The almond market faces competition from, of all places, California.
A downturn in any one of these sectors is harmful. Were there to be simultaneous downturns in each sector, Mallorca would face difficulties. Add, if you will, climate change to this potentially volatile mix, and there is scope to question the island’s sustainable economic model unless there is diversification. But into what?
(Acknowledgements for some of this: FT.com, Ultima Hora.)
SOMETHING COMPLETELY DIFFERENT
I do, from time to time, look at what is being said on the myriad holiday froums lurking on the internet. I wouldn’t normally lift like this, but I can’t help it. Here is what someone said the other day:
“Why do the British like to go all the way to Mallorca to spend the day drinking in a bar watching reruns of Only Fools and Horses? With their big bellies jutting out and no tops on, it so does not look nice.”
I don’t know the answer to that. All I would say is that I am quite heartened that someone else raises the Fools and Horses thing (10 August: It’s Coming Home, It’s Coming Home ...).
Yesterday was Jimmy Nail. Today’s title - it’s the first line from a song by?
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