The Vain Search For Competitiveness

The European Union produces a regional competitiveness index every three years. The latest one, for 2016, comes replete with a colour-coded map. Deep purple denotes low or negative competitiveness. A bright green shows the highest levels of competitiveness. On the purple to green with a sort of grey in between spectrum, there is almost no green in the Mediterranean. In Spain, of two regions with shades of green, the more vibrant is for Madrid. The Balearics Islands are in the purple zone. Not as low as Sicily, nearly all of Greece, Romania and Bulgaria, but in the slightly less purple category. In other words, not terribly competitive.

The competitiveness is evaluated according to three dimensions. Basic covers institutions (such as government), macroeconomic stability, infrastructure and basic education. Efficiency deals with higher education and lifelong learning, labour market and market size. Innovation is for technological readiness, business sophistication and actual innovation.

Of these, the Balearics score well on only two. Health is one. The other, and there will be some relief here, is basic education, which does therefore offer a brighter perspective than the normal gloom that surrounds the education system. But any positivity is not carried on to higher education. In all, the islands find themselves in 200th place out of 263.

The usual other Spanish suspects join the Balearics towards the bottom of the ranking - Andalusia, the Canaries, Castile-La Mancha, Extremadura, Murcia and the north African cities of Ceuta and Melilla. These are ones which, for instance, have levels of unemployment higher than the rest of Spain. The Balearics are different in this respect, yet the region does not find itself well ranked for labour market efficiency. Nor are business sophistication and innovation particularly good. Lack of competitiveness therefore defines the Balearics.

And there is a further definition, one given by the report. Regional competitiveness is the ability of a region to offer a sustainable and attractive environment for business and residents to live and work Attractiveness for residents is unquestionably a factor in the Balearics. But a positive physical environment is as much a weakness as it is an intangible strength. It has bred a mono-economic culture of distorted tourism seasonality and other distortions - social, wealth and incomes, property ownership, land usage.

The apparent strength of the Balearic economy - 4.1% growth in 2016 - disguises so much. The inefficiency of the labour market, as highlighted by the report, is one of the most obvious. Improved employment there has been, but it is not stable employment. Nor is it well paid. The fact that economic growth has not been matched by improved pay suggests that an ingredient of growth - consumer demand - is limited. And where it exists, its source is more likely to be foreign - tourists and property owners.

Factors of Balearic growth are inconsistent. High levels of investment (private sector) are not matched by the public sector. The government, island councils and town halls are constrained by Madrid's requirements, while the government loses a significant proportion of its tax revenues through the funding which goes to poorer regions, such as Extremadura. This has a knock-on impact on the likes of infrastructure, which are not compensated for by Madrid investment.

But investment can run up against institutional impediments. Legal certainties are regularly referred to because business, e.g. the hotels, builders, are anxious about them. These stem from amendments to regulations at all levels; amendments either made or flagged up as possibilities. A different type of investment - in human capital - is lacking, as can be seen from the low numbers pursuing different forms of higher education. This has an impact on the capacity to innovate, while investment in innovation (where the government is concerned) is vastly lower than its rhetoric suggests. The current administration makes much of its commitment to innovation, yet the budget for this (Biel Barceló's department) is only one-tenth of the whole.

Exports in the form of tourism are the main lifeblood of growth, and given the apparent deficiencies in areas identified by the EU report, one is inclined to conclude that the Balearics achieve good rates of growth despite the obstacles presented.

The EU explains that a growing number of regions use the index in order to compare themselves with others and to identify strengths and weaknesses to shape their development strategies. There is also at the back of it a tool for Brussels to identify where funding is more pressingly required. But ultimately, very little of what the index reveals is either new or surprising. Putting things bluntly, northern Europe is competitive, while southern Europe isn't. How long have we known that?

And in the Balearics, how long have we known about economic reliance on tourism, about an absence of innovation, about patchy educational achievement, about institutional capriciousness? Still, there is always the attractive environment. If only competitiveness was just a factor of landscape, sea and sun.