Today, my native country Spain, officially reaches for the first time in its history the 4 Million figure of unemployed.  This is a devastating number of people, no matter if this is just a psychological number or if is correctly measured.

I remember in the early 90’s when it reached the 3 million mark. It was a shock for the nation, it was a pretty scary moment. I was in high-school so it did not affect me directly but I knew that the family business was going through a hard time.

Now we reach 4 million. There has been a lot of immigration increasing the total population, so maybe it’s around the same percentage we had, although it’s hard to measure as methodologies have changed.

Spain until recently has been admired in Europe. It was seen as one of the fastest growing and most dynamic economies. Now it’s becoming the ugly duck of western Europe. For some analysts might even be the canary in the coalmine of deflation (perhaps a little exaggerated article for my taste). Reading the commentaries in the Spanish newspapers, now it’s all critics for the Government, which I positioned in the political right (with a little flavor of the left). Everyone is mad at Zapatero now. Some are saying go left, other go right.

For my part, instead of criticizing I would give to suggest two concrete policy suggestions for Spain. I might be wrong, many times I am, but this is what I feel today:
1. Try to adapt some type of flexicurity model. The concept was originated here in Denmark, and after living here almost 2 years I have been convinced of the wonders of it. Of course you can’t “cut & paste” it, you have to adapt it to the Spanish socioeconomic background, but I think it should be worth to explore the possibility of trying it. In fact I wish some researchers or policy makers could come here to my University where they have the Centre for Labour Market Research at Aalborg University (CARMA). I’m convinced that Spain needs some flexibility for the labour market. As I said, I come from a family who has been involved in the creation of several businesses. I’m not saying we’re the perfect firms, but we have created overtime good services for the people and employment. We have also suffered tremendously when the businesses were not doing good. Some times it came for the difficult to hire someone or fire someone. In Spain, compared to other countries it’s quite hard to layout someone, even with more than accepted reasons in other countries. Another leg of the flexicurity tripod, it’s the embarrassing the Spanish official “Oficina de Empleo”, which it’s just a bureaucrat machine, that in many cases has very nice civil servants, but it provides the worst service for everyone. They should be able to find employment in an effective way. I wonder what kind of incentives should be given to the ones running the show. Also it’s important that the unemployed (especially the recently) received economic support until they find another job. I also find useful that the employed buy some type of subsidised insurance in case they loose their job (in Denmark this was used to do through the unions).

2. Incentive the renting in the housing market. In Spain we have the highest rate of home owners in the world. In order to do it, for some this could be very unpopular measures such as taxing empty housing in bigger cities (specially among banks, ha!), besides other measures. The other possibility of course (very reasonable too) it’s to let the banks and housing developers to bankrupt so the market stabilizes. That means not a single cent for any type of corporate bailouts. Anyways, helping to boost the housing market with rent could cover several possibilities: a) People would be more flexible to move to find a job, b) Speculation would decrease which highly has affected the economy-employment c) many people could save their homes upon renting a place they can’t afford (for that it would be more than helpful to have some agreements with the bank (giving the mortgage) and government as some type of collateral), d) many young people could start their own families and this would revert in the economy. I talked a little bit more about this in a past post also talking about housing in Spain and America.

It’s always nice to stop by Creative Class by the Richard Florida squad. Following links I hit the “How the Crash Will Reshape America” published in the Atlantic in the March 2009 issue.

As I have said sometimes, I like Florida. It seems to be kind of funny that all academics related to the discipline of economic geography say “Florida’s ideas are good, BUT…” It seems that they have to say that in order to show their academic credentials.
So, I of course have to say the same. However, for this last document I admit I have very little objection or none.
He clearly explains the change of economic paradigms and how the American cities have to evolve. He quotes Schumpeter, Jacobs, Romer, Glaeser, Lucas, Krugman among some of the key fellows. His final proposals to change the housing market towards a more renting instead of owning are bold. Which is exactly what the U.S., and great part of the world needs now. Not so much Denmark, but this will be especially fit for my home country Spain.

The solution begins with the removal of homeownership from its long-privileged place at the center of the U.S. economy. Substantial incentives for homeownership (from tax breaks to artificially low mortgage-interest rates) distort demand, encouraging people to buy bigger houses than they otherwise would. That means less spending on medical technology, or software, or alternative energy—the sectors and products that could drive U.S. growth and exports in the coming years. Artificial demand for bigger houses also skews residential patterns, leading to excessive low-density suburban growth. The measures that prop up this demand should be eliminated.

If anything, our government policies should encourage renting, not buying. Homeownership occupies a central place in the American Dream primarily because decades of policy have put it there. A recent study by Grace Wong, an economist at the Wharton School of Business, shows that, controlling for income and demographics, homeowners are no happier than renters, nor do they report lower levels of stress or higher levels of self-esteem.

Once again I have to say, thank you Richard!