Sunday, May 24, 2015
America, Please Don’t Become Spain
Regular readers of my column know that after tax season is over my wife and I take off for a while and typically travel the world. We do not do tours or cruises as we want to be in amongst the locals to touch and feel what is going on wherever we are visiting. This year our trip was to Spain and Croatia with short stops in Milan and London. We also spent some time in Bosnia and Herzegovina and Montenegro.
We started in Spain, a wonderful country we had not visited since 1987. There are many areas to visit and enjoy in the country, but this time we went to Madrid, San Sebastian and Barcelona. By traveling via car, we were able to get immersed in the country. Walking the streets, shopping and taking in their restaurants, you get a chance to interact with the people and hear their thoughts and their concerns. Spain is a first-world country with the fifth-largest economy in the Euro Zone and the 15th largest in the world.
It also has an unemployment rate of 23.2%. To provide perspective, the highest year of unemployment during our Great Depression was 1933 at 24.75%. There was only one other year during the Depression where we had an unemployment rate over 20%. Spain has had rates like this for a while, yet walking around the cities you could not discern a problem. In fact, the only time we had an indication of a problem was when we went to dinner the first night. We created a nice relationship with the owner and his wife who was also the chef. When dinner was over we were baffled as to what rate to tip and we ended up asking the wife/chef. She stated “Before the crisis people would give 10%.” Looking around wherever we went the next nine days you could not tell this country was in “crisis.”
Two thoughts come to mind regarding this. Thankfully, this country of about 47 million people is not in mass riots. I am also thankful I was born in a country that was founded by the British. When you think of countries with a heritage from Spain, they are largely a mess. When you think of countries where the rule of law exists that were established by England – the United States, Canada, New Zealand, Australia, Hong Kong, and Singapore – they are fundamentally more economically successful and financially stable than countries that were part of the Spanish empire. Think Argentina.
We were also in Italy which has a 12.7% unemployment rate, but then we went to the United Kingdom which has a current rate of 5.7%, but still high compared to what we used to think of as a “stable” rate.
The interesting thing I found while researching these rates was that the labor participation rate in the United Kingdom is 73.3%. That struck me since the participation rate in America is at a modern historical low of 62.7%. Republicans have bemoaned the participation rate during the falling unemployment rates of the Obama Administration, stating they are misleading since more and more people have just fallen out of the work force. George Will often cites that if the labor participation rate today was the same as when Obama became president, the unemployment rate in America would be over 10%. You now have some perspective for the number that is bantered around. Just think how many more Americans would be employed if our labor participation rate matched the United Kingdom’s.
Another thing we found baffling in Spain, Milano and London (not so much in Croatia) is it was hard to find locally-born individuals. Most of the help we encountered at our hotels, stores and restaurants were from other countries. I know the countries we visited have declining birth rates, but, when you have unemployment rates like Spain or Italy, why would you import workers unless the locals felt the work was beneath them? A restaurant we bopped into in Milan had only two Italians working there – the owner and one other. The man making the pizzas was from Egypt and the rest of the staff was from El Salvador, The Dominican Republic and Mauritius. This was a great asset to attract tourists since they had staff speaking so many languages. Our Concierge in London (a local) told us that the English did not like working in the service industry. He was the head Concierge and he was the only native-born person on that staff.
There is only one reason these countries would allow people to come and work in these jobs while not requiring their citizens fill the spots. That is the massive growth of the welfare state. When the government hands out money people don’t have to take jobs -- they can live off other people’s money. You may have noticed that our unemployment started to plummet a couple years back when we stopped the extension of unemployment benefits.
We once again experienced why we love to travel outside our country -- whether we are going west, south or east. And we once again experienced why we love America and want to keep it the way it was before we had a massive government.