Many a financial, or would-be, financial commentator can currently be seen discoursing weightily about the woes of the Eurozone, Spain and regions such as Valencia. Shaking their heads in feigned pity and stern condemnation of such unimaginable folly they will tell you all that is wrong, listing examples of grand public works, venues of major sports and cultural events, and unused new-built airports as typifying the spending excesses produced by an era of easy credit – and the fall-out it has produced since.
We are all agreed that there has been much wastage and excess, typified indeed by the ill-conceived Castellon Airport, but to paint this a Spanish problem is to deceive the public at large. The easy credit that made many lose their sense of reality has its roots in the great financial centres of New York and London, and spiralled outwards to envelop countries like Spain, so many of the problems described so gleefully by said commentators and analysts (hailing usually from outside the Eurozone) apply every bit as much to themselves.
Moreover, all of this emerged from a period of economic growth and a great investor confidence which gave rise to lucrative profits whilst all of this continued grow. The problem lies not so much in the fact that great amounts of money were invested in large-scale public and commercial projects, it is more that these compulsive investments was allowed to continue until the point of saturation. Again, Spain is simply one of many countries following what was long described as a brand of robust Anglo-Saxon capitalism.
This system worked very well – while the rest was going well and growth was constant – but fell apart the minute the carousel stopped. Spain neither invented this latter-day form of capitalism nor forced it upon others. Rather, it was sold on it and became so entranced by turbo-cash injected growth that it didn’t see the abyss coming in time.
Chicken or egg?
We’ll never solve the problem of the chicken and the egg, but it does serve to illustrate the cause-and-effect relationship between growth, financial resources generated, investment and spending which itself once again fuels the growth. Now that times are tough and we’re ALL in debt, from Spain and the Eurozone to Britain, Japan and the US, it is easy to look back and say that projects like Valencia’s City of Arts and Sciences or the building of a brand new marina to host the 2007 America’s Cup were follies that wasted public funds.
In my view it is not the act of investment but the why, when, where and how that is important. Unlike the airport of Castellon, which had little raison d’être and was in any case started too late in the day, Valencia embarked upon the costly City of Arts and Sciences complex to capitalise on a period of rapid growth and use it to help put the city on the map. It did just that, creating an iconic image of Valencia that is recognisable the world over, much as similar projects have done in Bilbao, Newcastle, Cardiff, London and Glasgow.
Like Expos and related events, the 2007 America’s Cup was a prestige project, but it did provide Valencia with fantastic new facilities, much as Spain’s improvements in road, rail and other infrastructures initiated during the good years provide important building blocks for future growth reducing communication and transport costs which improves competitiveness.
Had there been nothing to show for all that investment we could have spoken of singular corruption and shame, but countries like Spain have emerged from a period of growth and borrowing with excellent new motorways, hospitals, parks, colleges, marinas, ports, airports, high speed rail links, cultural facilities and pristine historic town centres that act as a magnet to visitors, investors and businesspeople alike – enabling the city of Valencia to be chosen as the European base for organisations ranging from Cessna Aviation to the Berklee College of Music– which incidentally, is housed in the City of Arts and Sciences.