The Spaniards have been on an economic hot streak as of late. So, what have they been doing right, and will this streak continue?
Spain has seen strong economic growth, a balanced budget, and business-friendly policies all contributing to the recent economic success. Actively seeking and welcoming immigrants has helped offset demographic decline, and the people entering the county have had an easier time integrating since they mostly hail from former Spanish colonies.
However, there’s a bulge in Spain’s demographics. This means that the economic boom they are seeing now will only last for another decade unless they can drive a million youths into the country each year. If Spain wants to secure its long-term future, it might have to start thinking about integrating with alternative systems, like NAFTA.
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Hey everyone. Peter Zeihan here coming from a chilly morning in Colorado. Today we’re talking about Spain a little bit. Spain is a country that has been in the news in a good way. That’s a nice change. For having relatively robust economic growth. Fairly good balance, getting this budget under control and a series of good, national policies that they’ve been put in place over the last 15 years that are actually serving it.
Well, economists kind of named it the country of the year, last year for the country that seemed to be doing the best. I don’t want to.
I don’t want to rain on the parade. But we need to put things in context. The two things that, the economist pointed out that the Spanish had done. Right. I broadly agree with number one. They’ve done a series of macroeconomic forms that have made it much easier to do business in Spain than it is in France or Italy or the United Kingdom or Germany.
And in doing so, it’s really unleashed the population to do more. And then second, they have a relatively open door immigration system. And so they’ve been able to, flush out their demographic structure in a very useful way. The country, based on whose statistics you’re using is somewhere around 15%, foreign born, with most of those people having moved in in the last 15 years.
That is pretty significant for a European nation state. These are real things. These do have legs, but I need to put that in context so you understand that this is not a long term fix. Number one, the Spanish demography is based like everyone else is on when they started to industrialize, when you move off the farm and into town, kids go from being free labor to an expense and you have fewer of them.
Well, the Spanish really got serious about industrializing in the 70s. And so they’ve got this population bulge among people who are in their 40s, and then it drops off precipitously below that. Part of the reason that the Spanish opened their doors to immigration was try to round out that lower section as much as they could. It was the right call.
Also, there’s the issue about whether or not this is replicable, and it probably isn’t because Spain used to have a hemisphere spanning empire. And so there are Spanish speakers of Spanish descent living throughout the Western Hemisphere. And it’s fairly easy for the Spanish mainland. The Spanish government, Spain proper, to import people from these former colonies with a minimum of cultural fuss.
This isn’t like France, where they’re bringing in Arabs. It isn’t like the United States, where we’re bringing in Hispanics. They are Hispanics who are bringing in other Hispanics. And the cultural lift for that is a lot less. Just keep in mind that if the Spanish want to continue to repair or just maintain their demographic structure, they’re going to have to bring in just shy of a million people a year who are under the age of 30 from now on.
And you do that for 2030 years and you change the culture quite a bit. In Spain, you don’t change it as much as everyone else. So that’s kind of piece one. Piece two is the nature of that demographic bulge itself. As a country ages as its demographics get older. It’s not all bad. It used to be when you have a lot of people that were 0 to 25, all those young people, there was a lot of consumption from the raising of the children.
And that generated a lot of inflation. That’s not Spain’s problem. Spain’s bulge is now in the late 30s to early 50s. So these are people who are, for the most part, childless. And all the money that they would have spent on their children are instead being spent on consumption. And so you’re going through basically a 25 year consumption boom in Spain that’s going to last at least another decade.
And that is very real. And it feels great because you get industrial growth, you get production growth, and you get consumption growth, but it’s a one shot deal. If anything happens to that lower age bracket that is now fueled almost entirely by immigration. We’ve seen things like this before. It’s happened in China, it’s happened in Korea, it’s happened in Germany.
And if you can’t round out that bottom tier, it’s a one shot deal. Now it’s a one shot deal. The last 25 to 30 years in the Spanish are in the middle of it. They should enjoy it. But the trick for them will be preparing for what’s next. Now, like the United States, that is 18 much more slowly than the European countries.
We are going to be able to look at everybody else who is so much more advanced on this and learn from their mistakes and their successes moving forward, and the Spanish are in a decent place to do that. But at the end of the day, they’re part of a currency union and a political union that is demographically spent, and they will need to find another path forward, not just in terms of their economic model, but their economic grouping.
Luckily, there is a potential answer on Dec. The Mexicans, from time to time of flirted with the idea of Spain joining NAFTA, and I got to say it would be a pretty clean fit. The demographics line up, the industrial bases are complementary and having a foothold in mainland Europe would not be a bad idea for the NAFTA countries.
