I have read España, destino tercer mundo (Spain, Third World Destination), written by Ramón Muñoz, a journalist from El País . The book is very pessimistic, almost apocalyptic. Muñoz predicts that default and “corralito” will be the final outcome of the crisis in Spain, due to the inability of the economy to assume the enormous public and private debt acquired in the past decade. Well, this is debatable, and I actually think that the probability of the opposite scenario (paying religiously all the debt) is higher, due to the pressure of international debt holders and the need of keeping the systemic stability of the eurozone.
Much more interesting is the central thesis of the book, which the author develops in Chapter 4: the deep cause of the Spanish crisis is that the country produces nothing. The dismantling of the industry in the 1980s, due to the impact of globalization and the entry into the European Union, would have left Spain with no industrial base. Its economy would have become a service economy, characterized by low productivity and the inability to absorb labor force. The author points out that we should not blame the growth of the housing sector in the 2000s: at least Spain was able to produce something during that period.
This argument is very suggestive, so I decided to revise the evolution of Spanish industrial production in the last 40 years, compared with that of the major economies of our European setting. I chose 1970 as the starting date because at that time the Spanish economy had already done much of its "economic miracle", and the data would allow us to observe the impact of the oil crisis and the " industrial restructuring " of the 1980s . The graph shows that the story of the Spanish economy in the last decades is not a story of deindustrialization. On the contrary, Spanish industrial production grew above France, Germany, Italy and the UK . We can observe in the graph the slowdown during the 1980s (although it was similar to other countries), and also the strong growth caused by the expansion of the housing sector from 1996 onward. Note that the United Kingdom suffers a relative industrial stagnation during these decades (see graph).
Industrial production in Germany, France, United Kingdom, Italy and Spain, 1970-2012 (1970=100)
In Spain, the fall in industrial production since 2007 was awesome. Although further inquire would be needed, this quick analysis suggests that Spanish industrial production grew consistently between 1970 and 1996 (car industry, capital goods, chemical and pharmaceutical sectors...) and very strongly between 1996 and 2006 due to the construction boom funded by cheap credit. A remarkably strong decline took place from 2007 to the present, breaking the trend of the past four decades. Summing up, the breakdown of the housing boom (and not a long-run decline in industrial production) seems to be the main cause of the Spanish economic crisis. Why such as enormous housing bubble occurred would give us insights about the primary cause of the Spanish economic decline.