Spain’s unemployment level reached 27.2% in the first quarter, according to the National Statistics Institute (INE). The worst level of American national unemployment was 24.75% of the civilian labor force in 1933. It is fair to say that comparisons of jobs statistics from two countries measured 80 years apart is misleading. However, a side-by-side analysis at least indicates how awful the situation is in Spain and how difficult it will be to recover.
At least the United States benefited from investment in federal government programs meant to help the jobs situation in the 1930s. America was able to afford stimulus programs, some of which were included in Roosevelt’s New Deal. Some sections of the U.S. economy might have recovered without the programs. Nevertheless, by the mid-1930s, American gross domestic product moved higher at a remarkable rate.
Spain does not have access to capital that might be used for stimulus. The restrictions of the bailouts it received from the International Monetary Fund (IMF), European Union and European Central Bank have made sure of that. Recently, a movement has begun to allow the most financially troubled European nations some leeway in deficit reduction so that these countries might make an investment toward growth. However, the movement toward this new approach is halting, and may not last. Portugal has just set plans for lower corporate tax rates and plans to draw foreign businesses, but its creditors have not approved these and the plans may die before they are put into place.
The IMF recently argued for limited stimulus in Europe’s most economically depressed nations. It was not clear what the source of that money might be. At least the agency supports what it clearly sees is absolutely necessary to repair the fortunes of a nations that must certainly include Spain.
Economist have rightly asked how anyone can assume that the depressions in Spain and Greece can cycle eventually into recoveries. The answer is that there is no reason to support the hope for turnarounds, at least for several years. And perhaps those turnarounds will be fueled, finally, by a realization that without investment there will be no recovery at all.