Corruption as a cause of unemploymentMoisés Martín Carretero
On May 22nd last, the European Commission published its recommendations for the European economy, highlighting some news such as the sustained growth of the Eurozone, the exit of Portugal from the Excessive Deficit Procedure, and the growth of the world economy. We are reaching cruising speed, without having solved significant problems, but in the end, we are growing.
For its part, Spain is growing at a robust pace, driven by domestic demand, and will leave the zone of excessive public deficit in 2018, although it still points out doubts regarding its structural sustainability in the absence of new adjustments. The Commission also highlights the low productivity of our economy that has not managed to carry out the necessary reforms to boost its growth.
Nevertheless, the most striking element of the recommendations is the mention of corruption as a problem for the Spanish economy: the absence of transparent and efficient public procurement, as well as the ineffectiveness of the mechanisms for controlling and preventing corruption, particularly in the regional and local areas.
This wake-up call comes at a particularly relevant time for the Spanish economy and society.
The cases of political and administrative corruption in all corners of Spain leave the general public a residue of boredom, disappointment and distrust. However, corruption is not just an ethical or political problem: it is also a major economic problem. There is no shortage of studies that attempt to quantify it in monetary terms, pointing to figures as different as a fork between 7,000 and 87,000 million Euros. However, those figures are difficult to pin down. More interesting is the academic approach of some economists such as García-Santana, Moral-Benito, Pijoan-Mas and Ramos, who determined in a report published by the Bank of Spain that the economic growth produced in Spain between 1995 and 2007 was concentrated in the sectors with worse productivity, but better connected to public administrations.
CORRUPTION FALSIFIES COMPETITION
And that is where the real problem appears: corruption distorts competition, allows uncompetitive firms to arise with millionaire contracts without being the best to to the job, so the cost rises not only to the supposed "commission", but also to the inefficiency of public spending. At the same time, this foments budgetary deviation of public money towards activities that are not necessarily the most effective or pertinent. According to the economists cited, a growth pattern more prone to sectors that do not collude with the public sector would have produced a significant growth in the total productivity of our economy - up to 1.1% of additional annual growth.
Less productivity has brought us less growth, fewer opportunities and more unemployment.
Despite the media alarm generated, in Spain we have a sense that corruption is a micro issue, that apart from headlines and four or five big cases, it is something that can be "forgiven" by the politicians of our ilk. This is a serious mistake: corruption is not just an ethical issue that can be forgiven through the ballot box. It represents a serious deterioration of the institutions necessary for the proper functioning of an economy, a significant obstacle for job creation and for the promotion of social equality. It is the corruption and connivance between sectors that, in Spain, have been intermingled too much -financial, real estate and public sectors- to which we have to look to understand a good part of what has happened to us. Forgiving, tolerating or ignoring it should be an unacceptable behaviour for a country that aspires to maintain a prominent position in the world.