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Speech by the President of the Government of Spain at the seminar "Monitoring the recovery: beyond GDP"

Monday 25 October 2021

Ministers, dear Paolo, it is a pleasure to meet you again here in Madrid.

Well, as you know, the first decades of the 21st century have hit the world economies with two almost consecutive crises, accelerating a reflection on our socio-economic models that I believe is essential. Our responsibility, therefore, is to address the economic, social and environmental lessons that we have been left this time.

And so far, maintaining positive growth rates of our gross domestic product has been at the centre of the evaluation of almost all public policies. But while gross domestic product is undoubtedly a fundamental variable for measuring the economic development of any country, of any economy, it does not have the capacity to reflect essential aspects such as environmental sustainability, non-traded goods and services and other factors that determine a country's well-being.

Let me recall at this point some words of Robert Kennedy which illustrate this perfectly. He said that gross domestic product does not include the health of our children, the quality of their education or the joy of play. It does not include the beauty of our poetry, the strength of our homes, the intelligence of our public debate.

Since 1980, if we look at the data, the world economy has grown by 194%, but if we look only at the most advanced economies, i.e. those of the OECD, the growth has been 85%. But this increase has brought with it other processes, of which I would like to point out two in particular.

The first of these is environmental degradation. In the same period of time, greenhouse gas emissions have doubled, the global temperature has risen by 0.7 degrees Celsius and, according to the United Nations, the loss of biodiversity, which is very important for our country in the last half century, is ten times the rate of the previous ten million years. And these are just two facts of the great environmental crisis, of the climate emergency we are in.

Nobody, on the other hand, or at least a large majority - a minority, no doubt, always irreducible - will deny climate change, but nobody disputes that there is an urgent need to change the trend in environmental indicators if we are to have a future as a species.

And along with the climate emergency, inequality. Our keynote speaker today, Nobel Prize winner Joseph Stiglitz, has written a lot about it, he is one of the world's leading authorities who has warned most about the costs of inequality in our societies. Since the 1980s, growth has been disproportionately concentrated among those with a vision or an advantage.

Some economists then argued that the important thing was to grow at any cost, so that growth could then be better distributed among citizens. And, according to them, the choice was between growth or distribution. But reality has confronted us with radically different results, showing that equitable distribution is still an unfinished business.

As you know, data corroborates this assertion. According to recent estimates, the top 1% of income earners accounted for 17% of the economic growth that occurred in Europe between 1980 and 2017, while the bottom 50% of earners only managed to achieve 15% of that cumulative growth. It is, therefore, an objective fact confirmed by data that economic growth is not distributed equally and that these trends, if they continue, will only aggravate the issue further.

If we move even closer to the Spanish reality, that of our country, and according to a study published a few days ago by a media outlet, the income gap between the richest and poorest neighbourhoods in Spain increased between 2013 and 2018. While in the wealthiest areas income has grown by an average of 27%, in the poorest neighbourhoods it has grown by only 11% in the last five years. In other words, during the economic recovery from 2013 to 2018, the richest, wealthiest neighbourhoods of Spain's major cities became almost three times richer than those with lower incomes.

In households close to the poverty and social exclusion line, another very delicate and worrying phenomenon can also be observed. An economic downturn leads to an increase in the number of households in difficulties, but the subsequent recovery brings down the various poverty indicators at a much slower and arguably non-existent pace. This is corroborated by some data.

For example, between 2013 and 2019, while the Spanish gross domestic product per capita rose from 21,899 euros to 26,426 euros, i.e. it grew by 20.67%, the poverty rate rose from 20.4% to 20.7%.

And recently, moreover, more advanced economies are beginning to show a greater collective awareness of gender inequality. On any indicator we take, i.e. educational attainment, activity, job insecurity, unemployment, minimum pensions, poverty, the results for women are systematically worse. At present, the wage gap is estimated at 14% in the European Union, while in Spain it is 11.9%.

In addition to these results, there is the observation that motherhood tends to reduce women's income, but not men's: 11% less in our country's case.

Faced with the same social circumstances and the same institutional framework, there is a different economic reality simply because of sex. Consequently, advancing gender equality is not only a question of social justice, to which the Government of Spain is logically committed - because most of Spanish society is - but it is also a question of economic efficiency. It is estimated that the full incorporation of women into the labour market in our country would increase potential growth by 15%.

What do I mean by this? Well, what I mean is that we need to modernise institutions to ensure the maximum creation of opportunities and the fairest distribution of the fruits of that economic growth. And these transformations must be carried out with the greatest possible consensus, because over the last decade in Spain we have suffered many counter-reforms.

I want to think about the labour and pension counter-reforms of 2012 and 2013 that broke, that broke the social dialogue. And the Government is committed, the whole Government is committed to tackling the modernisation of labour law in order to:

1. Eliminate job insecurity

2. Boost the competitiveness of our economy.

3. Restore balance in bargaining between employers and workers.

Such legislation, with a vocation to last, will be done in Spain as it is done in Europe: with social dialogue and with a vocation for consensus.

And in this regard, one of the most recent contributions to the debate on this new governance of economic policies is the role of minimum wages. Regardless of the effect on the employment trend of some groups in the labour market, which we must always bear in mind, they are a major tool in reducing inequality.

Moreover, as the recent Nobel laureate in economics, David Card, has pointed out, minimum wage rises are far from implying job losses. It is to say, the future of our democracies lies in ensuring more equitable and also more sustainable growth. Unequal societies are also an ideal breeding ground for reactionary and therefore anti-democratic drifts.

Empirical evidence, moreover, has shown us that it is not necessary to grow first in order to redistribute later, but that the most egalitarian societies are also the most prosperous. Far from there being antagonism, therefore, between growth and equality, there is a positive correlation between the two goals. And so the choice is not between a society that grows or a society with greater equality, but rather that we should and can aspire to a richer and therefore more equal society.

This same evidence also shows that reductions in CO2 emissions or improvements in other environmental indicators, such as the preservation of our biodiversity, are compatible with economic growth, because it is possible to aspire to greater prosperity and at the same time make progress in sustainability through an energy transition that must be fair in social terms, in intergenerational terms and, of course, also from a territorial perspective.

In short, ladies and gentlemen, it is a matter of developing the new paradigm in the conception of economic policy that was already taking shape before the implosion of COVID-19, which is reflected, for example, in the adoption of Agenda 2030 and the alignment of the Government of Spain with the Sustainable Development Goals.

And in this regard, I would like to mention some of the measures that the Government of Spain has been taking in recent times, and it has done so in the midst of the pandemic, being aware that the pandemic has accelerated many of these changes and that, therefore, the pandemic could not be the justification for putting them to one side, for cornering them, for abandoning these transformations, but rather for placing them at the forefront of all political action.

For example, to combat environmental degradation - which is ultimately the great global crisis - we have passed the Climate Change and Energy Transition Law and the Renewable Hydrogen Roadmap. Some may ask, and not without reason, how it is possible that in Spain we have not had a law on climate change until now. But this is the reality.

One of the first initiatives of the Government of Spain was to introduce the Minimum Basic Income, which is already covering 800,000 people, of whom 320,000 are minors. Because in the end, the most painful poverty, or at least the one that hurts us the most, is undoubtedly child poverty. Situations of poverty have a permanent negative impact on all members of affected households, especially children. And this has also been a structural reform, as it has been, dear minister, conceived and also endorsed in this case by the EU institutions, and in this case I would like to congratulate you on the work you have done during these months to be able to expand this new pillar of the Welfare State.

We have also acted on the most important inequality-reducing element of our Welfare State, which is the keystone, namely pension reform. This reform will guarantee their sustainability, while at the same time recovering one of the pending issues that was broken in the counter-reform of 2013, which is the revaluation in line with CPI.

As you know, also as an instrument of redistribution, we have raised the minimum wage. The figures are absolutely extraordinary: since 2018, 31%. Throughout this legislature, we will carry out the mandate of the European Social Charter to achieve 60% of the average wage. This measure, in our view, will increase the purchasing power and welfare of many people in our country.

And another fundamental step has been the approval of royal decrees that regulate, for example, equality plans, their registration, equal pay for men and women... In short, a boost accompanied by reconciliation policies such as the extension of paternity leave, its equalisation with maternity leave, which in 2021 will already be 16 weeks.

And along with this, there are other debates in which the Government of Spain, in full conversation with the different actors and civil society, has been implementing measures that I believe are very innovative, but also have a strong impact. For example, I do not want to forget at this point, dear Vice-President, the Digital Rights Charter, which is one of the main commitments of the Government of Spain and which aims to protect citizens from the new and serious vulnerabilities that accompany the digital era. For example, in the field of the internet or, no doubt, also in artificial intelligence.

And we have also presented the Digital Spain Agenda 2025 or the Digital Spain Strategy 2025 to drive digital transformation in our country. In short, digitalisation must be seen by citizens, not as an element of social exclusion, but as an element of labour integration and also social integration.

I would also like to mention the so-called Ryder Law, which also guarantees decent working conditions for workers on digital platforms, reinforcing the institutional framework that defines workers' rights in an advanced democracy. It is a law of today and, of course, also of tomorrow, which points the way to ensure that technological advances are not made at the cost of abuses of dominant positions, unacceptable increases in inequality or permanently precarious subgroups of workers.

Because, at the end of the day, the Government of Spain wants to make a fair recovery a reality for everyone. I believe that this, beyond what may seem like a slogan, is a strong condition that Spanish society as a whole has and shares after this pandemic. If we have all suffered from the pandemic, we all need to take advantage of and benefit from the economic recovery. The ultimate goal is to give our society a sustainable, hopeful, democratic, prosperous future. And I would also add, certain.

The interesting round table that we have attended, that you have attended today, reveals a shift, in my opinion, an important one, and that is the one that leads us to design economic policies that are not based solely and exclusively on the growth of Gross Domestic Product, which is, as it is, a very important indicator for measuring the economic development of a country.

Tools such as the Social Scorecard of the European Pillar of Social Rights in the European Union, or the OECD's Better Life Index, show us the way towards a much more holistic and therefore richer shaping, where public intervention of the economy includes other indicators and perspectives as well.

This is undoubtedly a much more complex frame of reference, but one that has a greater capacity to be useful in designing comprehensive long-term economic stimulus programmes. In fact, we, the General State Budget that we presented and approved last year, already incorporated various reports linked to the impact and achievement of the Sustainable Development Goals of the 2030 Agenda in the budget, the reports on gender perspective and also on the impact on the reduction of social inequality in our country.

In short, these are all elements that show us that the challenge ahead of us is none other than to generate more prosperous societies that strengthen the development and capabilities of each and every citizen.

I define myself as a 21st century social democrat who aspires to remain faithful to the essence of what the political project I lead represents, which is that our country should move forwards in terms of social justice. And this justice implies, in my opinion, at least two goals, and that is the end of it.

Firstly, that no one lacks what they need to live with dignity, with dignity, and that we remove all obstacles, be they social, economic, gender inequality, so that every man and every woman in our society can enjoy genuine and effective equality of opportunity.

I believe, Vice-President, dear Commissioner, that this type of debate is essential. They are, I would say, necessary and essential if we want to get it right, correct many of the mistakes made in the past and look to the future with far greater guarantees.

I believe that after the pandemic, European societies, Spanish society deserves it and I am proud of that. And, in that sense, Vice-President, I would like to acknowledge it again in your presence. I am proud to belong to and lead a government that opens up these rich, in-depth debates, so necessary for the progress, prosperity and well-being of our compatriots.

Thank you very much.

(Transcript edited by the State Secretariat for Communication)

Non official translation