Guest Post: Why Spain Is A Riot

Tyler Durden's picture

Submitted by J. Luis Martin of Truman Factor

Why Spain is a riot

The reason why Spain is a riot both financially and socially goes beyond matters of economic policy. Spain faces a graver problem, its political institutions.

Over the past few weeks, Spain has received worldwide attention due to its deteriorating economy and growing outbursts of massive social protests. Most notably, US presidential candidate Mitt Romney said in his debate with President Barack Obama last week that he did not want his country to “go down the path to Spain.”

As the world fixes its eyes on the eurozone’s fourth largest economy, analysts continue to offer suggestions as to how to best tackle the Iberian country’s economic woes. However, the reason why Spain is a riot both financially and socially goes beyond matters of economic policy. Spain faces a graver problem, its political institutions.

Spain’s political establishment: stale and clientelistic

Perhaps the most lamentable element in Spain’s political class is that it is hard, almost anecdotal, to find elected officials with a track record outside the public sector. For too many years, the country has been governed by bureaucrats who have no experience whatsoever in the real world of business. The majority of Spain’s politicians do not know what it is to conceive an idea, to risk one’s own wealth, to deal with banks, workers and suppliers, and, ultimately, to experience failure and success. Sadly, the Spanish taxpayer-financed political establishment understands failure and success only in terms of which side of the aisle their members are seated in parliament.

Furthermore, Spain’s political system is extremely sectarian and clientelistic. The concept of merit among the political class has been perverted into allegiance to the apparatus – and to the right leader within. Future political promises are embraced by parties when they are young and, years later, the chosen ones find themselves making decisions on public policy without ever setting foot in the real world: a group of individuals whose only interest is that of the party which keeps them fed and spoiled. Unfortunately, and to use Daron Acemoglu’s term, this type of “extractive” political institutions have contaminated other areas of civil society as well and have distorted a free society’s vital values of meritocracy and personal accountability from the educational system all the way to the business fabric.

A country governed by the unfit

If former Prime Minister José Luis Rodríguez Zapatero, an inexperienced attorney who joined the Socialist party at the age of eighteen, repeatedly made a fool of himself and of his country by his clumsy appearances abroad and flawed policies at home, it is simply because he was unfit to hold the office to which he was elected. Indeed, Zapatero’s incompetence would be exposed early on his rise to power.

It was in 2003, during his first electoral campaign to Spain’s highest office, when Zapatero’s incompetence to lead the country would be exposed for the first time. A nearby media microphone caught him privately acknowledging not having a clue as to the economic concepts he had discussed in a speech a few minutes earlier. The microphone caught Zapatero’s then economic advisor in the Socialist party, Jordi Sevilla, pointing the errors the would-be prime minister made during his speech while assuring him that all he needed to know about the economy could be learned over “a couple of afternoons.” The Socialist candidate then responded that, despite his ignorance, he “liked” matters of economic affairs.

After the socialists’ disastrous leadership, the bureaucrat with less-than presidential stature and charisma, Mariano Rajoy, was seen by many as a major ‘upgrade’ to replace Zapatero at the La Moncloa palace. Rajoy entered public service at the age of 23 and served as minister of education and deputy prime minister under the leadership of tax collector-turned-politician José María Aznar.

The Popular party’s leader to succeed Zapatero promised less red tape, lower taxes, an overhaul of the regional government system to limit its size and do away with the – literally – thousands of state companies plaguing the economy, provide tax incentives to entrepreneurs and, all in all, all of the right-sounding policies voters wanted to hear. It took Rajoy exactly ten days since formally being appointed prime minister by the Spanish parliament to begin to betray each and every single one of those promises.

While we have been covering Rajoy’s sinking rate of approval and the questioning of his democratic legitimacy, perhaps it would be best to illustrate how one of his government’s flip-flop policies have resulted in the country taking a deeper dive into economic abyss and fueling social outrage: the fiscal devaluation that never happened.

Broken promises breaking up the country

During his political campaign, Rajoy promised not to raise taxes, but to actually lower them (while in the opposition he criticized Zapatero, quite rightly, that raising taxes in the midst of an economic recession was irresponsible). A few months after imposing a severe income tax hike across the board, Rajoy’s government announced an increase in the national Value Added Tax (VAT) that would raise such a levy to as much as 21 percent in most goods and services (there are reduced rates for certain types of products and services, but those have also suffered increases). The government would later follow up such a tax increase with a lowering of social security charges for employers. All in all, given the impossibility of executing a policy of currency devaluation, a fiscal devaluation would make the country more competitive in foreign markets and boost exports.

The increased VAT measure is hitting domestic consumption – already suffering from the previous hikes and wage cuts. However, the lowering of social security charges for employers is nowhere to be found. In line with Rajoy’s government’s language, everything is either temporary (tax increases), or soon to come (tax cuts and major reforms). The reality is, however, that the fiscal devaluation that never happened has exacerbated the economy’s downturn: higher taxes have led to higher inflation and lower domestic consumption, which in turn has led to an increasingly stalled economy and higher unemployment.

If, besides an incoherent economic policy, we take into account Rajoy’s poor handling of the ‘banking sector reform’ (an euphemism for a bailout of insolvent banks), his incomprehensible maneuvering around an imminent European sovereign bailout, and the separatist calls coming out of the Basque and Catalonia regions, in less than ten months the Spanish premier may have inflicted more harm to the country than his Socialist predecessor did during his 7-year mandate. In addition, Rajoy is doing a terrible disservice to the solemn ideals he and his political party claim to represent: limited government, economic freedom and meritocracy.

While nobody knows exactly what Rajoy’s economic strategy is, what is hurting the country the most – even risking breaking it apart – is the widespread sentiment that Rajoy simply has no idea of what he is doing.

The Spanish civil society is wise

Many observe that the excesses of the past, for which Spain and other European countries are now paying dearly, largely stem from an imperfect monetary union: a currency which produced a mirage of equality and harmony among highly divergent market competitors. In the case of Spain, the most damaging effect the euro-bubble has caused, however, is that it has helped to mask many of country’s structural problems and has made it possible for a cancerous political class to spread and infect virtually all areas of society. Spaniards, however, are wise and seem to have arrived at the correct diagnosis as to why their country is failing.

Last years’ protests in Madrid’s emblematic Puerta del Sol square gained global attention as then Prime Minister Zapatero was ready to call snap elections and hand over the power to Rajoy. Then, one of the demonstrators’ popular rally cries was “they don’t represent us.” Last week, on September 25, Spanish demonstrators did not protest in a square or sought to “occupy” a bank or the stock market. Instead, they took their protests to the entrance of the national parliament.

When the government tried to criminally prosecute the organizers of such demonstrations before parliament, the judge assigned to the case dismissed it. The judge in question, Santiago Pedraz, wrote in his ruling that the protesters were exercising their right to freedom of speech, and that it was no crime for citizens to call for the members of parliament’s resignation, or even the abolition of the current regime, even when such calls questioned Spain’s current constitutional system. To the surprise of many, Judge Pedraz took his legal argument one step further and framed his decision in the context of the current “decay of the so-called political class.”

Spaniards are now rejecting the cynical notion that the current confiscatory policies that aim to bailout an insolvent system managed by morally-insolvent politicians is anything but “austerity,” and that a petulant government which systematically does the opposite to what it says does not have a place in a free and democratic society.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
kaiserhoff's picture

Substitute "American Political Establishment" in the second section, and this dude nails it.

AldousHuxley's picture








rbg81's picture

I used to work for the Federal Government.  For the last 7 years, however, I've been out in the real world.  Here are some observations:

  • Remove the threat of being fired, and you fuck with someone's motivations in a major way.  Basically, even if they work for you, they don't work for you.
  • Along those lines, Government managers are often given responsibility, but not the resources or authority to get the job done.
  • Its too damn difficult to make something happen in Government.  The number of people you have to brief, before you reach the actual decision maker, is stunning.  Honestly, looking back, its a miracle anything ever got done.
  • Too many fucking support contractors.  In many cases, all the Government guy does is manage the support contractors.  IMHO, the support contractors often intentionally CAUSE many problems that they will be paid to help fix.
  • Last, but not least:  Government meetings.  I have been in meeting that, literally, consisted anywhere from dozens to hundreds of people who did not have to be there.  We call them strap hangers.  Many of these people would often fly in (at taxpayer expense, of course) to attend these meetings.  If you add up all the $$ that these people (GS-12s and above) are eating up in salary, benefits and per-diem, its staggering.  My estimate is that maybe 50% of Government meetings are unnecessary.

While things aren't Nirvana in the Private sector, there is some notion that THINGS COST $$--especially people's time.  Unfortunately, that is often totally missing from the Federal bureaucracy.


Buckaroo Banzai's picture

"My estimate is that maybe 99% of Government meetings are unnecessary."

Fixed it for ya.

AldousHuxley's picture

typical blame the government mentality.


You think 1,000,000 employee corporation is any more efficient?


show me a large private corporation that is as large as governments and you will find the same level of waste, mismanagement and bureaucracy. It is just the nature of the beast.


anymore than 1000 or so employees you end up with

  • upper management just being politicians playing politics
  • lower level employees unaccounted for and just generally working till retirement or layoff
  • mid level employees kissing ass to get ahead because budgets are fudged and it is all dotted line reporting relationships.
  • fiefdoms where groups compete against each other rather than as one company team.
Hobbleknee's picture

Corporations don't use coercion to steal money from me.

Vlad Tepid's picture

Someone once told me that I WOULDN'T "feel better if I smoked Lucky Strikes."  I told them to go to Hell.

But I don't know why.  But I did tell them that "I'm lovin' it because it's the tase of a new geeration."  I don't know why I said that either...were these the droids I was looking for?

{Hums the Monday night football tune}

rbg81's picture

The other thing about support contractors is that many are often angling to join the Government so they don't have to work as hard.  Many a competent, motivated support contractor has turned to useless blobs of shit once they're hired into GS.

AldousHuxley's picture

work is for the lower castes my friend

controlling others is for upper castes


but politicians want you to believe that work is where you want to be.... you know what happened to the hardest most productive African slave in history? he died as a slave.

Vlad Tepid's picture

I started to agree with you but since I'm GS, my union said I don't have to nod my head if I agree so I won't.

maggiemayok's picture

It is only anecdotal evidence, but I was hired to be a member of a "program management" team for a military equipment maintenance facility several years ago.  I was supposed to be a financial analyst, but in reality, I babysat a database that tracked labor and supply costs.  I attended so many meetings simply to put a face of the company I worked for in the presence of the government managers.  I was one of dozens of people in the room for the same reason... we had no contributing role or information to add; we just needed to be seen by the important people.

A total waste of money and time in my opinion.  But that was what I did for about 60k a year for a few years.  Eventually, the company lost the contract, so I moved on to other meaningless government work. 

rbg81's picture

I was one of dozens of people in the room for the same reason... we had no contributing role or information to add; we just needed to be seen by the important people.

Yup, that's all too common.

maggiemayok's picture

I used to sit there and take copious notes, writing down details of the ongoing meeting comments as if I had a clue what any of it meant.  Then, back at the office, I would place the notes in a file folder and place the notes neatly in the hanging file.  Every quarter, I would shred the notes, then start over.  I knew it was useless busy work, but figured if anyone ever asked me to justify my position, I could show them the meeting notes. 

No one ever asked.  The person taking over the database knew even less about the data than I did.  But, they did cut the pay 10% with the new contract.

westboundnup's picture

I lived in Spain in the 1990's.  The power that the labor unions wield is remarkable.  Several times there were general strikes where labor unions would effectively shut down cities or regions.  Private businesses that have no connection whatsoever to the unions were forced to close, or risk the wrath of labor representatives, who would vandalize the business (ex. throwing rocks through windows, etc.).  Keep in mind these are businesses such as family bars or restaurants.  In my opinion, if the unions throw their backing behind a separatist movement, there will be major civil unrest.  It was not surpise me if you see regions gaining greater autonomy, if not independence, such as the Basques, or Catalonia. 

A Man without Qualities's picture

Agreed about the power of the unions, but don't get fooled by the strikes.  The unions, especially the leaders are PART of the establishment.  They would lose power if there were secession.  They may play the game for a while, but ultimately would come down in support of the state, once they had achieved significant concessions.

Part of the tension in Catalonia is they were awarded greater autonomy by the previous Madrid government, but the agreement was declared illegal by the PP controlled courts.  There will be no secession unless things get very bloody, because the cost to the regions would be too great.

However, Rajoy seems intent on stoking the anger as a tool to soften the demands from outside.

The European leaders can sense this and they want him gone.

It is El Clasico tomorrow at the Bernabeu - the Barca fans are planning to send a very clear message...

AldousHuxley's picture

GO look at what wage earners earn in countries with weak unions....


Yes unions suck, but alternative is 100% power to corrupt greedy oligarchs!



Hobbleknee's picture

I live in Sweden, which has strong unions, and it's almost impossible to get fired.  Wages suck balls here.  There goes your theory.

Urban Redneck's picture

Spain's second sons left when Spain was still an empire and never looked back.

Cannibalization and Kleptocracy have been the norm ever since, just as when the first sons were "visiting" their colonies.

Why anyone would expect different of their descendants is beyond me.

Zero Govt's picture

Unions, like Govt, cannot enlarge the pie for all, they simply try to carve out a bit more of the cake

again like Govt minimum wage laws they simply hasten labour over-pricing itself and speed decline lost to more competitive regions 

table thumping windbags with no value added

oldman's picture

It seems to me that your point of view is a bit narrow and fails to take into account that Spain remains tightly held in the grasp of the sons/daughters and grandsons/grandduaghters of Franco. It has remained the fascist state that the US is being modeled after and has become.

I don't want to say anymore---I only want to point out that the 'understanding' with which the article is written, is far less than 'complete understanding'.

Thank you for trying, though    om

BobPaulson's picture

Yeah, they need more politicians with inside tracks to business like Hank Paulson and Timmy. That should clean it up. Kenneth Lay, where are you now? We need leaders like you.

How about some people from sectors like health care, education, construction, engineering, the military? I vote no for more guys with red suspenders thank you.

samsara's picture

Healthcare - Bill Frisk
Family owned HCA

And Ron Paul Family Practice - Actually worked in the trade not owned it

GMadScientist's picture

The state as shell co; I like it!

samsara's picture

i read the first few paragraphs and had to keep reminding myself that he was talking about Spain and not the US.

Zero Govt's picture

ditto any country for that matter

truly surprising however a Spanish judge both criticising and sticking the knife into the crumbling political class

there's a flicker of hope some in Ye Olde Establishment see the writing on the wall and 'get it'  

Lloyd_Xmas's picture

With 25% unemployment can you just impose a siesta requirement.  Force the 75% to nap for 25% of their workday.  This along with creating consumer demand for sangria and chorizo.  Paul K and I thought of this after binging on sangria and chorizo.  I do have to say sangria and chorizo are delicious but the fruit gets stuck in my beard.

s0lspot's picture

Living in Spain for the last 2 years down in Andalucia, biggest & poorest region, I can confirm that Spaniards are indeed wise "socially". The decentralized structure of power that was the result of Franco's demise does mean that power & people are brought closer which is a good thing. Autonomy of provinces (each has its own parliament) allows for social & cultural progressiveness (???) much more than in France, England or Italy.

I also confirm that their political caste (at least the 2 big parties) is so mediocre that I do not see Mariano "El Payaso" Rajoy finishing his mandate. Half of national deputees have been or are currently being prosecuted for corruption issues. This is not Italy, France or England where corruption is not prosecuted ; here 2 or 3 times a week you see images of mayors, entrepreneurs, MPs, policias, lawyers etc getting arrested on national news.

I believe just like in the 30's that Spain will resucitate La Republica and lead the West towards a saner socio-politico-economical social pact enacted from the pleb up. The Spanish Republic of the 30's was and still is the closest Humans got to a real uncompromised and horizontal country-wide organisational system. Obviously neither the west (UK, Ger, FR, IT, USA) nor the Soviets were too eager to let this experiment in autodetermination & organisation go too far, so they helped the fascists. Let it be noted for posterity that the french gov created concentration camps all along the border to catch fleeing republicanos and cage them just like the Nazis did. Because they were fighting not for a specific party or ideology but for Human Emancipation, they had to disappear. They fought for anarchy, which is the highest expression of order ; self-applied order.

The only country which helped the armed resistance against Franco by sending trucks & weapons was Mexico.


Anyway disgressing here, all i'm saying to you bitchez is that Retard Rajoy will either quit, be forced to quit or will be terminated. The Spaniards may have as much corruption, wine, beaches and fresh figs as the Greeks, they are extremely politicaly conscious because of Franquism & later on, corruption. They sure aren't no Greeks (no disrespect) and are 3x as numerous. I am excited to be part of this end-time here in Spain because the rest of the West feels much more socially and mentally dead when compared to everyday street people here. They're less tortured & complicated than the others and because of Franco (only 30 years ago) are very sensitive to injustice and fascist state behaviours.


Viva la Republica ²

kaiserhoff's picture

thanks for the insight.  I'm a big fan of the art and the chicas.

And thanks for the history lesson.  Anarchists fighting for their beliefs.  What a concept.

Treason Season's picture

Good summation though I am a little more suspect of their political rectitude than you. I was working in Madrid  '03 when the Winsdor bldg fire transpired, an arson job more obvious than the inside job of 9/11 and yet the politcal uproar from the Madrilenos was overpowering by its silence. The post Franco era fattened la gente, let's see if they can get back in shape.

Barefooted_Tramp's picture

On a chilly February day in 1988, Carlos Solchaga, finance minister in Felipe González’s Socialist government, gave a speech in Madrid’s Palacio de Congresos to at least a thousand business leaders: “In no other country in Europe, and perhaps in the world,” he told them, “can you make so much money in so short a time as in Spain. I’m not the only one saying this: it’s what consultants and market analysts are saying too.”

The PSOE couldn’t have been clearer: Spain was a country where only idiots didn’t get rich, or failed to believe that they were. The functioning of the economy, the principle of solidarity, the social-democratic conception of well-being, a left-wing analysis of the origins of wealth: all of these things had been swept aside on the glorious road that would lead society to recognise itself only in wealth — especially short-term wealth.

How does a country succumb to the siren’s song of easy money? The arguments put forward by economists to explain the global crisis omit an essential fact: not only has the capitalist system failed as a whole, but in Spain’s case, this failure has been amplified by the failed transition from Catholic-nationalist dictatorship to democratic state whose sole obsession is with forgetting the past.

StychoKiller's picture

[quote] ...democratic state whose sole obsession is with forgetting the past. [/quote]

Hmm, bring on Franco V2.0!

Barefooted_Tramp's picture

Franco V2.0 - or another rogue regime - is probably closer in Spain than in other cultures mainly because of the Spain's cultural curse known as the picaresque. When this picaresque vein becomes a principle to live by — or worse, to govern by — the consequences are lasting and distgusting. Their problems today are a reminder of the failures of the past.

Among those failures is the distorted vocabulary  used to keep reality at arm’s length. It’s no accident that the state terrorism practised against ETA  in the 1980s was called “anti-terrorist policy”, or that “crisis” was replaced by “reduced growth”, or that the bailout of a private bank with public funds was presented as “a loan on the most favourable terms”. From the very first day of the transition to democracy, euphemism has been part of the very fabric of political discourse.

Three years before the fall of the Berlin Wall, Spain joined the European Union, and the term “globalisation” silenced all reflection on the true nature of the opportunity or the best way of integrating Spain into the new globalised economy. The overwhelming majority of economists and the political class in general, complacently believing they belonged by osmosis to the wealthy minority, never reflected on the consequences of a decision that is, nonetheless, at the root of the present crisis.

oldman's picture


Thanks, my friend,

You have a really good handle on the history and while you are 'there' in Spain, Why don't you re-write this article from your broader context?

The Republic was destroyed by the cowards of infamy---much like what is going on in the US today-------

Well, please write something more true than this on Spain---I would like to see this topic opened up with intelligence and knowledge       thanks    om

tip e. canoe's picture

second that request.

more from om too por favor

boooyaaaah's picture

Ah the politiacal class

When they learned that the Finacial class could give them money to buy votes. They married them. They bailed them out. They accepted their donations

They were finally freed from the neccessity of burdening the voters with taxes

Now they could borrow and in the US they could print and borrow

And the voters loved it. And the beneficiaries of the marriage loved it: the unions, the government workers. The early retirement The cost of living increases

And now what do they do


boooyaaaah's picture

Well they could create a new economy (what took them so long)

An economy based on ridding the world of global warming (despite the Nat Gas discoveries)

And skyrocketing electrial rates

They would moth ball coal fired power plants, And create an economy based on building new windmills and sun power

And public transportation from wher people do not want to live to wher people do not want to go.


Of course the citizens would have to be confined to central cities and public transportation, but that would be taken care of by the UN Agenda 21.

Who ever said that beureacrats could not be creative and titans of industry

And if you dont want their industry their ideas then they would re educate you -- and anyone else in their way


Winston Churchill's picture

Then there is  France whose beurocrats are even further removed from reality than Spains's.

The Spanish still relish their democratic rights only recently having got them.

Spain will probably Balkanize.Long term so will the USA.

Azannoth's picture

The Balkanization of the West will progress only further and faster because the politicians know that their own salvation is to import as many 3rd world'ers as possible

as they will stand as a buffer between them and the native white populations.

Right now I am tryint to find an apartment in a large South German city it's frigging impossible! Now I just read that the gov. is shoving 10's of thousands of immigrants to this city giving them apartments for free!

and normal people have no chance of getting an apartment for anything close to a reasonable price, even when money not being an issue it's still hard as fukc to get a place here, such is the determination of the elites

that they create an artificial living space shortage in a 5mil people big city! despite construction going on at the tilt.

Harbanger's picture

The Worlds mightiest Army could not defeat them....

The Latino Comedy Project's "300"

lolmao500's picture

In other news, according to Rasmussen, Romney is ahead by 2% in the polls post debate.

All is chosen's picture

One article for Mr. Graham Phoenix-Cap to read, & admire

spentCartridge's picture

'Over the past few weeks, Spain has received worldwide attention due to its deteriorating economy and growing outbursts of massive social protests'.


Not from the BBC though, so it mustn't be real, right?

THE DORK OF CORK's picture

Spain is not a country of Basques & is a country of Basque  ,Galician ,Catalan regions.........

Also between these cultural tectonic plates there is much ancient interchange....


Spain is a complicated place or at least it was before 1986 and the Euros almost complete credit destruction of its people , landscape and traditions.
This village was not 100 % Basque ….it held cultural / architectural baggage from other areas also.ía

A very strange but pleasant place…………on one of those cultural / geographical tectonic plates.
(different spelling of town – Otsagabia etc)