The Periphery of the Center

8th Semester Project. 2013

Supervisor: Henrik Plaschke

Mario Chaparro Vera (DIR)

Alex Rodríguez Toscano (DIR, LAS)

Aalborg University

1

Table of Contents

Contents1

.Introduction……………………………………………………….……………………................1

1.1Project formulation………………………………….……………………………........1

2.Methodology…………………………………………………………………........…….............2

2.1Project……………………………………………………………….…..………..........2

2.2Considerations on the theoretical approach……………………………..………..........3

2.3Considerations on the analysis…………………………………………………............4

2.3.1. Study Case: Spain…………………………………………………...…….. .4

2.3.2. Macroeconomic variables…………………………………………………..4

2.4Validities…………………………………………………………………..……...........5

3.Theoretical Section……………………………………………………………………...............5

3.1Historical background, C-P dynamics & the Prebisch-Singer Thesis……....................5

3.1.1Historical background…………………………………….………….............6

3.1.2C-P dynamics……………………..………………….....................................7

3.1.2.1Technical Changes…………………………………………............8

3.1.2.2Specialization & Structural Heterogeneity……………..….............8

3.1.3Prebisch-Singer Thesis……..…………………………..…………................9

3.2The role of the different macroeconomic variables……………………………..........10

3.2.1Economic growth and Structural Changes…………………………............10

3.2.2Balance of Payments & Access to financing……………………….............11

3.2.3Labor Market dualism………………………………………………............12

3.3Related theories and critics……………………………………………………...........13

3.3.1Related theories………………………………….…………………............13

3.3.2Critics……………………………………………………………….............14

4.Analytical Section………………………………………………….……………………..........16

4.1.Economic growth………………………………………….……………………........17

4.2Economic Structure………………………………………….………………….........23

4.2.1Agriculture……………………………………….…………………............24

2

4.2.2Industry & Construction……………………………………………............25

4.2.3Services…………………………………………….……………….............27

4.2.4Technology……………………………………….…………………...........31

4.3Balance of Payments…………………………………………………………….........33

4.4Labor market…………………………………………………………………….........44

4.4.1Characteristics………………………………………………………............45

4.4.2Employment by sector………………………………………………...........47

4.4.3Temporality…………………………………………………………............49

4.4.4Labor productivity………………………………………………….............50

4.4.5Earnings…………………………………………………………….............53

5.Conclusion………………………………………………………………………………..........55

6.List of references…………………………………………………………………………........57

3

1. Introduction

“Nothing is as powerful as an idea whose time has come”

Victor Hugo

The economic development around the globe has always been uneven, making some

nations become wealthier than others. Historically, these economic differences and, therefore,

power disparities, have determined the relationships among the countries, where the most

powerful had a clear advantage compared to the others in the terms on which they were going to

trade. These disparities among regions had a divergent tendency, increasing the economic gap

and modifying the power relations and, therefore, the terms of trade.

Furthermore, the globalization phenomenon that has been expanding throughout the

world has mainly been the enlargement of the free market system ideology, where the countries’

activities were based on the comparative advantage that they possessed on certain products.

More precisely, this specialization consisted on raw materials, minerals and low-industry goods,

that is, labor-intense products for the developing countries, and in the developed countries high-

technological, other industrial products and services, which are capital-intense products.

In recent times, the situation has improved in some of the economies in which the

implementation of these ideas occurred, through the Industrialization for the Substitution of

Imports. But the N-S dualism still exists and, in the recent economic crisis, in general, and the

consequences of it within European Union (EU), in particular, hold features of N-S relation,

which will be our focus in this project, through Spain as a case study.

1.1. Project formulation:

There are enough evidences, based on the differences of economic growth rhythms, the

disparities of economic structures, the deficit or surplus on the balance of payments and the labor

and capital markets, to suppose that it exist a certain North-South division inside the EU.

4

Considering the existent bipolarity within the EU we would like to investigate, relying on the

structuralist concepts of C-P, whether Spain can be categorized as one or the other.

2. Methodology

In this section we will state the foundations of the project. Firstly, it will be shown the

aim of the project and the connexion between the different sections and concepts within them, in

order to have a general view of the extent of the project and the aim of it. Secondly, we develop

an explanation about the unit of analysis, that is, the Spanish economy through certain

macroeconomic variables; and finally, it will be explained the limitations that the project design

has.

2.1. The project.

The aim of this project is the observation of the Spanish economic reality within the

European context through the concepts and understandings generated by the Structuralist Theory

of economics. This examination has been carried out through the analysis of a certain number of

specific macroeconomic variables, which were studied in the LA context by the structuralist

defenders, especially by ECLAC authors. These theoreticians established the basic concepts on

the first half of the XX century and developed them in the following decades. Their purpose was

to portray in an unprecedented way the relations between the LA countries and the industrialized

nations. The output was a development theory based on the concepts of the separation of the

world through a bipolar perspective, the Core and the Periphery. This dualist division is due to

specific features, along with the dynamics which underlies between these two spheres, the

dependency relations. In this article we relate these two main concepts, bipolarity and

dependency, to Spanish reality, which is our case study. This is due to our belief that the certain

features of that pattern highlighted by structuralism keeps on existing worldwide, in general, and

in the EU, in particular

5

2.2. Considerations on the theoretical approach: structuralism

The structuralist theory of economics generated a certain number of concepts that we

think are highly valuable as theoretical tools in order to categorize economic phenomena,

specifically in our case. We have accepted the ideas from the structuralist thoughts after having

put them into question, that is, when we comprehend that they were an appropriate approach to

our study case.

The arguments for choosing this theoretical approach are numerous. Firstly, structuralism

was focused on economic aspects, leaving out other considerations in terms of military, culture

or environment, among others, which can be misleading when searching for causes. Moreover,

there are a number of concepts that were born from the theory and which can play a key role

when explaining dynamics between countries, such as: the core-periphery division and

dependency, and additionally the model of economic growth, the structural and technological

gaps, the dualism in the labour markets and the impact of economic cycles in a country.

On the contrary, it has to be said that the theory has some specificities that can imply

distortions due to a number of facts. Firstly, as every theory, it was developed in a specific time

and space context, and consequently it could be problematic to extract it for another context. In

addition, new processes have appeared during the last 60 years such as the improvement of

technology and the reduction of its costs, the end of the capitalist-communist cleavage and the

predominance of a neoliberal globalization, the increase of the financial capital flows and the

gain of its importance worldwide, and the emergence and strengthen of new actors beyond the

state that shaped the socio-economic reality such as civil society organizations (Non-

Governmental Organizations, consumer groups, lobbies, etc).

The differences among the LA countries that were analysed in the first part of the XX

century, and the empirical case that we have chosen, Spain in the last decades, are significant.

Therefore, some of the ideas originated in that context are not applicable, or at least they would

explain in a lower degree the economic situation of Spain. An example of that is the deterioration

of the terms of trade because Spanish trade with other European states is based on products that

are similar in characteristics, that is, capital intense, human capital and technical progress.

6

2.3. Consideration about the analysis

2.3.1. Study case: Spain.

Nowadays it is well known the controversy about the European cohesion in economic

and political matters. Emerging debates, as the two-speeds in Europe, the N-S cleavage, or the

need of two different Euro currencies, are being discussed in different forums. The EU and the

integration of its institutions has been frequently defended in the less wealthy countries as a path

to converge with the more affluent ones, but this idea can be questioned in the light of the latest

facts with reference to the consequences of the recent crisis within the EU countries.

In order to study the possible N-S dualism and, therefore, the divergent path among the

country members, it has been established the relation between Spain regarding the EU. We

consider the EU as the appropriate context due to the substantial connexion in economic,

political, and historical aspects, and the degree of integration. Moreover, within this framework,

Spain can be labelled as a Center country regarding the world structure but as a peripheral one

considering the Center countries of Europe.

2.3.2. Macroeconomic variables

In the empirical section our objective has been to check systematically a number of

variables for the Spanish economy. Those factors have been (i) the economic growth, (ii) the

productive structure, (iii) the balance of payments and (iv) the labour market. The choice of these

variables has been mainly because they were basic for the development of structuralist ideas;

consequently our objective has been to analyse the evolution and features of these variables in

order to make the linkage between the theory and the empirical case.

Within every variable it has been chosen the most relevant indicators regarding the main

international statistical sources, observing the trends of the last decade (from 1999 till nowadays)

in an attempt of reaching the most veridical portrait of the situation. Furthermore, the

comparisons were made between Spain and the country’s most important trade partners, which

are the main economies of the EU: Germany, France and Italy. It can be assume that these

countries embodied the ‘north’ side of the so called cleavage in Europe.

7

To sum up, the results of the analysis will allow us to obtain valuable information

through the comparison, and to state certain correlations but not direct causality relations due to

the complexity of the variables.

2.4. Validities

Focusing on construct validities, the project concludes by answering the main question,

which was proposed in the problem formulation. For that purpose, we have chosen the theories

that better approached our case of study, and within the analysis we selected the variables that

were most relevant in order to answer the question and make the linkage with the theoretical

section (Bryman, 2012).

Considering the external validity, it is important to be aware of two issues: if the theory

could explain the N-S dualism in other regions of the world, and if the findings, based on the

Spanish case, could explicate the situation in other regions. In the first case, our belief is that the

N-S bipolarization exists throughout the globe and within different regions and countries.

Therefore, the theory used could partially enlighten the situations that other economies are

passing through. Secondly, the results grounded in the Spanish economy, would be in serious

troubles when describing the situation in other regions due to the great differences that the

countries possess in the different variables analysed.

Furthermore, the statistical validity for this project is satisfactory. That is, we consider

that the statistics as well as the sources used are appropriate for the subject, and the results

extracted from them are suitable, leading us to significant conclusions.

Finally, we consider that the linkage among the variables, in causality matters, is

reasonable and adequate. The selected variables possesses correlation between them and

complements each other in order to have a better understanding of the subject and respond in a

more appropriate way to the question posed.

3. Theoretical Section

3.1. Historical Background, C-P dynamics & the Prebisch-Singer Thesis

8

3.1.1. Historical Background

In the first part of this section we are going to describe the socio-economic framework of

the context in which the structuralist thoughts emerged. This is done in order to have a better

understanding of the situation that partially contributed on their creation.

The historical context was of a great importance on the development of structuralism.

This was due to the fact that there were some events that changed the course of the socio-

economic history, as for example the two World Wars and the Crisis of 1929. This last fact was

even more crucial than the wars in the development of structuralist ideas. This is due to the fact

that, before the Great Depression, LA countries grew economically because of the constant

increment of the exports to the industrialized nations, but during the recession period imports

from the Core states decreased vastly, making obvious the fact that industrialization was a key

aspect of development, that is, growing internally without that much dependence on external

economic linkages.

Another factor that can partially explain the development of structuralism was the two

World Wars. In both cases the LA economies grew persistently due to the increase demand of

primary products in which these nations had comparative advantages that was the element that

determine the international division of labor. The reason why this fact was so crucial in the

development of the structuralist theories was that exports from these states augmented rapidly

making the nation’s economy grow. Although this increment was a positive aspect, it was linked

to another issue that played a central role in the deterioration of these economies in the long-run.

This factor was the specialization on the production of primary products, which deteriorated the

terms of trade in the long-run, as it will be explained further in this section.

The free market ideology is based the international division of labor and the

comparative advantages among regions. In this sense, Latin-American countries had comparative

advantage on the production of primary products and natural resources, which were labor-

intense, and the industrialized countries had comparative advantage on industrial commodities,

high-tech products and other commodities that require great amounts of capital (Prebisch, 1948).

9

3.1.2. The C-P dynamics

The structuralist theoreticians made the difference between the industrialized nations, that

they called Center, and the developing ones, the Periphery, in order to analyze the diverse

development of the economies throughout the world and, therefore, improve their understanding

of the economic linkages amongst them.

The Center countries are those where the technical improvements are developed or, at

least, where these progresses penetrate first. Moreover, the expansion throughout the different

sectors of the economic structure is quite rapid, producing a homogenous economic structure.

These changes imply an augmentation of the productivity, which increases wages and, therefore,

the internal aggregate demand. These technical changes also diversify the production structure of

the economy.

On the other hand, the peripheral nations import the technological progress from the

industrialized countries due to their incapacity to create technical development. Furthermore, the

imports of technological improvements are employed on the production of primary sector goods

and those for the export sector. The fabrication of these products is, therefore, cheaper, so the

prices decrease, and the country has to export a bigger amount to the Center nations in order to

receive the same quantity of imports and keep on with the industrialization process, maintaining

the balance of payments equilibrated. This is what Raul Prebisch called ‘development from the

exterior1.

In developed nations the economic growth is guided by technological changes. Since the

tools for the creation of technical progress, such as human capital and capital accumulation, are

highly concentrated in certain regions of the world. On the contrary, in developing nations,

economic growth is driven by the capacity to adapt, with the mentioned delay, the technical

improvements, or the ability to respond to the demand for commodities from the Center. Finally

and consequently to this difference, there is a clear pattern of dualist dynamics.

1 Raul Prebisch, ‘Problemas teoricos y practicos del crecimiento economico’, CEPAL review, Santiago de Chile, 1973.

10

3.1.2.1. Technical Changes

There are differences between the industrialized countries and the developing ones in the

creation process of technical progress, which generate economic asymmetries. This disparity

implies repercussions in certain aspects, such as the productive structure and labor market.

The international division of labor implied that certain regions with a low or inexistent

industry specialized in the production of goods required by the industrialized nations in order to

maintain their economic expansion through the diversification of their productive structure. Due

to this fact, the technical progress originated in the developed countries is only transferred to the

developing ones with the aim of improving the production of the resources that the former

nations need for the advancement of their economies. The reason for this transference was

because the technical progress on the production of primary products in the developing countries

would lower the prices and, therefore, their costs. The cheaper imports lowered the costs of

production of industrialized goods in developed nations and, thus, augmented the margin of

benefits of producing them.

Furthermore, the gradual expansion of technical advancements to developing countries

was controlled by the industrialized nations, which monopolized the technical progress. The

mechanism of the powerful nations for maintaining under control the transfer of technological

innovations were capital accumulation, which basically came from the improvements of

productivity and that were not equally shared with developing economies, and the development

of human capital.

3.1.2.2. Specialization & Structural Heterogeneity

The technological differences among countries bipolarized their productive structure.

Some countries specialized in the production of primary goods while others specialized in the

‘productive diversification’ (Di Filippo, A. & Jadue, S., 1976). In this sense, the developing

countries kept on with the dependency patterns towards the industrialized nations due to the need

on their imports from the latter in order to industrialize and to diversify the consumption when

the income increased. This asymmetry leads to the creation of a ‘structural heterogeneity’, which

11

responds to the biased assignment of technical progress to the export sector of developing

nations.

The introduction of technical innovations in the less developed countries created

dualisms in the productive structure and in the labor market. In the first one by sharing sectors

with high productivity, the ones that are modern due to the introduction of technical progress

from the Core economies (mainly primary sector and other export industries), with other sectors

with much less productive, the industries that used antiquated techniques. In the second case, the

dualism in the labor market refers to the division where the introduction of modern techniques in

the primary and export sector increased the labor productivity and, therefore, reduced the amount

of workers employed on it. The abundance of workforce put pressure on the wages that

decreased in the non-productive sectors, lowering the relative prices of the export commodities.

(Rodriguez, O. 2001).

3.1.3. The Prebisch-Singer thesis

Raul Prebisch and Sir Hans Singer arrived at the same time to the same conclusion: the

tendency of the deterioration of the terms of trade in developing countries. This was explained

through two different hypotheses that complemented each other (Ocampo, JA & Parra, MA,

2003):

The first hypothesis was the negative effect of the income inelasticity of the demand of

raw materials on the terms of trade for developing economies. This premise is exclusively

applicable to the basic products (or at least the ones with a low elasticity on the income-demand).

The hypothesis is based on the fact that economic growth tends to modify the productive

structure of the countries, increasing the industrial sector and services. This issue is affected by

the aggregate demand of primary products and the technological changes in manufactures, which

are associated with the reduction of the raw materials costs. The developing economies are

usually grounded on the production of raw materials and the industrialized ones are based on

manufactures. Therefore, the developing nations will always grow ‘slowly’ compared to the

12

industrialized ones because if they grow rapidly the excess of primary goods will press the

relative prices down.

The second hypothesis was focused on the asymmetries on the labor markets between the

Center and the Peripheral countries. This premise is applicable to every product and service

produced in the industrialized countries. The hypothesis is based on the unequal distribution of

the benefits of technical progress. In this sense the manufacture producers profited from

technical progress through an increment of their incomes, while for the developing countries, the

technical progress lower the prices of basic products. This asymmetry is the result of the

functioning of diverse markets: (i) the product market, where industrialized nations have more

power to fix the manufactures prices, and (ii) the labor market, where industrial workers are

more organized so their wages are higher, and therefore, the product’s prices augmented. In

addition to this point, there is also the view that emphasizes that in the long-run the excess of

labor in the developing economies will generate a decrease in the wages and, consequently, a

deterioration of the terms of trade.

3.2. The role of the different macroeconomic variables

3.2.1. Economic growth & Structural Changes

As Ocampo stated in one of the ECLAC’s review2, “economic growth is invariably

accompanied by changes in production structures, including changes in the composition of gdp

and employment and in international specialization patterns” (Ocampo, J.A. 2011, p.23).

In this sense, there are several reasons that can explain the link between economic growth

and the changes in the production structure. One view defends that the diversification of the

production branches opens new chances for the creation and transmission of technological

progress and, therefore, the improvement of the different productivities. Moreover, another

connection between economic growth and structural changes resides in the fact that the

2 Ocampo, J.A. “Macroeconomy for development: countercyclical policies and production sector transformation”, CEPAL review 104, August, 2011.

13

generation of demand of a new production activity implies the formation of new ones that

satisfies the former’s demand and, thus, the development of different activities (Hirschman,

1958).

The main variable that changes the economic structure of a developing country is

technical progress. That is, the ability of the countries to absorb the improvements from the

industrialized nations and the adaptability on the response to the Center’s demand.

The development process consists indirectly in passing from a productive structure where

the primary sector and the low-industry sector, which are labor-intense sectors, have a great

importance and contributes highly to Gross Domestic Product (GDP), to a structure where the

primary sector and low-industry sector do not contribute in the production as much as the high-

industry and services, which are capital-intense sectors.

3.2.2. Balance of Payments predominance & Access to financing

The focus on the balance of payments was one of the main reasons why some LA

countries suffered financial problem. This is due to the fact that the financial sector experienced

boom and bust cycles, and because the external sector (exports and imports from the current

account more precisely) were significant (Ocampo, 2011). The effects of the economic cycles are

especially severe for the agents who are considered to have a high risk. These agents have

facility for financing during the booms, but they are in serious troubles finding financing during

the economic busts.

At a national level, the Small & Medium Enterprises (SMEs) and low-income households

are the ones that suffer the most the consequences of the cycles, while, at the international level,

the developing countries are the ones that are more affected by them. In this sense, LA nations

are placed in the high-risk category and, thus, they are exposed to the cyclical shocks (Frenkel,

2008 as quoted by Ocampo, J.A., 2011).

14

The volatility of the financing is reflected in the supply and maturity profile of the

financing, which has procyclical characteristics. Risk degree is higher in developing countries

due to the lack of credibility on the return of the credit and interests, generating problems on the

balance sheets of the developing country’s companies.

These cycles pressure policy-makers to follow procyclical monetary policies, as they

lower the interest rates during booms in order to facilitate the financing and raise them during the

busts with the aim of reducing it. Moreover, countercyclical monetary policies pressure the

exchange rate, which fluctuates, modifying the national currency value and, therefore, the

balance of payments that deteriorates during booms and improves during busts.

3.2.3. Labor Market dualism

The international division of labor and the differences in technical development and

economic structure led to a labor market dualism in the world, in general, and in LA countries, in

particular.

Within LA economies the introduction of technological progress, which was mainly done

in the primary and the export sectors, segmented the labor market into two: the high-productivity

sectors, in which the wages were elevated, and the low-productivity ones, whose workers

obtained a low wage (Márcio Holland y Gabriel Porcile in Cimoli, M. 2005).

In the first ones, the introduction of technical changes increased the labor productivity,

creating certain alterations, such as an increment of average wages and, at the same time, the

reduction of the demand of workforce in the sector. On the contrary, the sectors where the

technical improvements has not arrived yet or in a weak way, that is, they use an antiquated

technology in the production process, the labor productivity was low. Moreover, the wages stay

steady (or even reduce) due to the collision of forces that takes the wages up or down. The

modernization process creates a dynamic of transfer of workers, the high productivity sectors can

not satisfies the great supply of labour, consequently producing a surplus that decrease salaries

and increase the dependency patterns through an enhancing of the decline of terms of trade.

15

3.3. Related theories and Critics

In the late 1960s different conceptions about the role of LA in the international sphere

appeared. They were heritance from the original and main proposals of Raul Prebisch and the

early ECLAC authors. Those theories were: the Dependency Theory, the World System Theory,

and the Neostructuralism; having all similarities and differences regarding its predecessor.

Consequently we will explain the similarities (A) and thereafter the critics and disagreements of

each one of the theories (B), subsection including classical market approach critics.

3.3.1. Related theories

The Dependency Theory encompasses the Marxist view, whose main proponent is A.

Gunder Frank, and the Sociological one with Faletto and Cardoso as main authors. Both

branches confirm the explanation of LA underdevelopment was due to the external factors,

especially those related to the international economic system. The idea of defending the need of

trade for an equal improvement of the economic conditions for every country does not take

place. Through the mechanism already explained above, just the Core economies make profits

from the world dynamic, whose main features are: the international division of labour, the

country specialization and the monopolization of key technological sectors. Moreover, the

capitalist system tended to the stagnation and, politically, to the impoverishment of the masses

and to antidemocratic government (Guillén,2007).

From this perspective, the main dynamics underlying the international economic system

are: firstly for achieving a minor improvement of the conditions of LA, the countries have to be

subordinated to the Core (Reyes,2009). Furthermore, the Periphery had its greatest economic

development when the relations with the Core were weaker (Ibid.) The subsequent period, when

the Core recovered, had a strong impact in the balance of payments and the stability of the

peripheral countries. Finally, another idea is the correlation between the level of

underdevelopment and the intensity of the historical links to the Core in the form of colonies,

being the former deeper when the latter was stronger (Ibid.).

16

Considering the World System Theory , I. Wallerstein is the most remarkable author. His

ideas take the legacy of the division of the world in different spheres along with the International

Division of Labour and the role of technology. However the main features of this theory are

slightly different to the structuralism, consequently explained in the critics section.

Finally, Neostructuralism, whose main proponents are J. Ramos and Jose Antonio

Ocampo, is understood within the work of the ECLAC during the end of the1980s till nowadays.

Their research was considered as an opposition to the neoliberal policies accounted in the “lost

decade” of the 1980s. The authors utilize the study of the variables through a similar approach to

the structuralist, but without tackling the foundations of Neoliberalism. Further clarification is

done in critics section.

3.3.2. Critics

Considering the dissension of the different approach within the literature, those are the

main arguments: from the Marxist conception of the DP, the Center (or Core) countries exploit

the Periphery even within the industrialization of developing countries scenario. Industrialization

perpetuates the imperialist expansion and strengths the foreign capital and, consequently, the

control of the Core to the rest of the nations system, obtaining a surplus from Latin-American

workers with the connivance of national elites. (Guillén, 2007). The road to development for the

developing nations is through the complete disconnection breaking any relation with the Core.

On the other hand, the Sociological approach proclaimed a more reformist way to

development, the associated dependent development (Kay, 1998). They put into question the role

of national bourgeoisie as an actor encouraging a holistic strategy for development in a country.

They based their hypothesis in the study of the historical path of insertion of LA in the world,

focusing on the role that the internal social groups had taken during that time, and how the social

structure appeared during the process, perpetuated by the underdevelopment path. Also, authors

as Celso Furtado or Osvaldo Sunkel have explained how dependency can be seen in cultural,

financial and commercial activities.

17

Besides, the World System Theory, similarly to the Sociological approach to dependency,

tackles the historical variable, drawing a cycle of hegemony along the history of capitalism.

Within that cycle the focus went from the underdeveloped states to the analysis of each part of

the system: Core, Semi-peripheral and Peripheral countries; breaking with the bipolar vision. The

emergence of this theory is closely related to the globalization process understood as a time-

space compress phenomenon, within the neoliberal market-leading organization of the society as

base.

To continue, the reformulation of the structuralist ideas by the Neostructuralist includes

the following issues: firstly, the excessive importance and confident on the state as resource

allocation agent; secondly, the underestimation of the exterior sector that took places during the

whole process; and finally the need of short-term fiscal and monetary stabilization policies added

to the long-term prospect that characterized the ISI strategy (Berthomieu,2005).

Considering state, this one should be the provider of public goods, macroeconomic

stability and the basic infrastructure in order to allow the correct functioning of the market

(Guillen,2007). Moreover, the economy should tend to open, becoming export oriented

economy. External competitiveness should be enhanced through improvements in productivity; a

high and constant exchange rate for promoting selective exports; and selective restrictions in

imports for the modification of the balance of payment’s equilibrium, but being far from the

protectionist measures implemented in previous decades. Another aspect lied in the study of

inflation: the structural explanation against the inertial one.

Overall, Neostructuralism proposes a middle way between the state main role for the

structuralists and the marginal role that plays for neoliberal authors (Guillen, 2007), who

represent another set of critics towards structuralism.

Structuralism appeared as an alternative explanation to the classic market economy and

the theory of trade inserted in it. The main concerns were related to the great participation of the

state in the economy, opposing to the principle of self-regulation of the market and private

property as microeconomic foundation of the social order (Filippo, 2009). State represents

inefficiency in several areas: in the allocation of resources due to manipulated interest rates and

because of the creation of monopolies and oligopolies. Along with that, the problems in the

18

balances of payments: imports increased after the first stage of industrialization; and if

traditional export decreased, a devaluation policy to incentive those exports would made more

expensive the industrial production (Grunwald, 1970).

Critics also underlies in regard of the national market due to the fact that in some

countries the absolute size of population along with the structural factor, led to a weak

expansion of internal demand (Grunwald, 1970); and a weak profitability of the economies of

scale. In terms of financing, the domestic savings financed a limited part of the needs of capital,

with the consequent increase of foreign debt. Finally another problem is the one related to the

spreading of technology, being it still imported decades after the first policies were implemented

(Ibid.); and the capacity of labour absorption of the new activities, leaving great parts of

population in unemployment and self-employment situation in the informal sector.

4. Analytical Section

This section consists in the examination of the economic reality of the Spanish economy

in the last decade through the analysis of diverse macroeconomic variables. Furthermore, we will

also state which of the features of the variables used in the analysis, correspond to a Peripheral

nation and which are more characteristic of a Center country.

The Spanish economic performance will be analyzed within the EU context because the

country is one of the members. Due to this fact, the economic cycles are parallel in Spain and the

rest of the nations. This is because the European countries are the main recipients for the

country’s exports and they are also the main donors of imports. Furthermore, it is also

remarkable the role of the political integration that these nations has experienced in order to have

a better understanding of the nation’s economic situation.

In addition to this, we believe that it exists a North-South dualism within the European

nations. This is due to the different economic growth rates, the dissimilar economic structures

that these countries possess within the EU27, the diverse balance of payments and the disparities

that exist among the countries’ labor markets.

19

In the next part of the empirical section we will go deeper on analyzing the

macroeconomic variables that will help us defining if Spain is a peripheral nation or a Center

country. The Subsections that follow are divided in (i) the economic growth, where it will be

described the Spanish GDP tendency and the components of this variable comparing them to the

German case; (ii) the economic structure, in which we will comment about its configuration; (iii)

the balance of payments, where we will go deep on studying the diverse tendencies of the

spheres that shape this variable; and (iv) the labor market, in which we will analyze the existent

dualism and the productivities in the different sectors.

4.1. Economic Growth

The economic growth tendencies that the Spanish economy has experienced in the last

decade possess different features among the period before the financial crisis and the one

afterwards. As it is shown in Graph 1, in the first years of the last century the production

multiplied almost by three, passing from 580,345 million dollars in the year 2000 to 1,593,421

million dollars in 2008, which was the pick. After that year and as a consequence of the global

economic crisis, the GDP had a decreasing tendency, reducing until 1,350,907 million dollars in

2012.

Graph 1: Evolution of the Nominal GDP in Spain between 1999 and 2012 (at current prices in millions of

US dollars).

20

Source: UNCTADSTAT

In Graph 2 we can observe the evolution of the GDP in Germany in the same period. We

include this information in order to be able to compare the economic growth trend with what it is

considered a ‘Center’ country in Europe. As we can note, the size of GDP is greater than in

Spain and the tendency, before and after the financial crisis, is flatter. This results show that

German economy depends less on the international framework.

Graph 2: Evolution of the Nominal GDP in Germany between 1999 and 2012 (at current prices in millions

of US dollars).

Source: UNCTADSTAT

The percentage of growth in Spain in that period is represented on table 1, where we can

appreciate an increasing tendency for the production rate in the first part, which fits with the

description above of the GDP evolution, passing from an average of 7.734% in the period

between 1999 and 2007 to an average of 0.06% for the period between 2008 and 2012. On the

contrary, Germany grew more constantly but with lower rates over the whole period,

experiencing fewer problems after the crisis. The average growth rate for this nation between

1999 and 2007 was 2.46% and the average after the crisis, between 2008 and 2012, was 1.76%.

The divergence of tendencies appears as a result from the wider multilateralism that Germany

has compared to Spain and the stronger export sector of high-valued products.

21

Table 1: GDP percentage growth in Spain between 1999 and 2012.

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

7.5 8.6 8 7.2 7.4 7.4 8.1 8.4 6.9 3.3 -3.7 0.1 1.4 -0.8

Source: Statistics from the Economic Outlook of the Organization for Economic Co-operation for

Development (OECD).

Table 2: GDP percentage growth in Germany between 1999 and 2012.

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20121.9 2.6 2.8 1.5 0.7 1.8 1.5 4.2 5.1 1.6 -4.0 5.0 3.9 2.3

Source: Statistics from the Economic Outlook of the Organization for Economic Co-operation for

Development (OECD).

The economic growth is based on the analysis of the GDP (GDP). This variable comes

from the following equation:

GDP = C + I + G + (X – M); in which C refers to private consumption (which includes

Household and Non-Profit Institution Serving Households (NPISH) consumption); I denotes the

Gross Investment (Gross Capital Formation (GCF) in our analysis); G indicates the Public

Spending from the general government; X refers to exports to other countries; and M denotes the

imports from other nations.

In tables 2 and 3 it is shown the evolution of each of the GDP components. From the data

we can appreciate some similarities between the economies of the two countries, such as for

example that the component that contributes the most to the GDP in both cases, as it normally

does, is the private consumption. Moreover, the GCF and the public spending have, more or less,

the same percentage of contribution in both countries’ GDP.

On the contrary, there are also some disparities among both nations. Firstly, there is a

great difference between the size of the economies and, therefore, among the magnitude of the

22

variables. Secondly, the net exports (that is, exports minus imports) over the whole period are

positive for the German economy, but negative for the Spanish one. Finally, the public spending

has reduced in the Spanish economy since the economic crisis hit the nation (in 2008), but has

continued increasing in the German case for the whole period.

Table 3: Evolution of the components of the GDP in Spain between 1999 and 2013 (at current

prices in millions of Euros).

Year\Components C I (GCF) G X M

1999345,366.0

0

145,695.0

099,616.00

154,677.0

0165,412.00

2000376,052.0

0

165,618.0

0

107,951.0

0

182,992.0

0202,706.00

2001402,392.0

0

179,380.0

0

115,816.0

0

194,142.0

0211,333.00

2002425,425.0

0

194,240.0

0

125,065.0

0

199,280.0

0214,752.00

2003451,445.0

0

214,624.0

0

135,610.0

0

206,084.0

0224,681.00

2004487,367.0

0

238,107.0

0

149,419.0

0

218,201.0

0251,800.00

2005525,267.0

0

268,575.0

0

163,358.0

0

233,387.0

0281,289.00

2006566,151.0

0

304,945.0

0

177,121.0

0

259,130.0

0321,800.00

2007604,654.0

0

326,236.0

0

193,059.0

0

283,331.0

0354,119.00

2008622,368.0

0

316,697.0

0

212,003.0

0

288,217.0

0351,497.00

2009592,404.0

0

251,575.0

0

223,603.0

0

250,667.0

0270,189.00

2010608,105.0

0

239,266.0

0

224,511.0

0

285,110.0

0308,109.00

2011620,012.0

0

229,054.0

0

222,721.0

0

321,819.0

0330,251.00

2012621,170.0

0

206,209.0

0

211,446.0

0

338,014.0

0327,314.00

23

2013612,335.8 (f)

190,537.7 (f)

210,388.8 (f)

352,979.5 (f)

315,165.7 (f)

Source: Table created by Alex Rodriguez & Mario Chaparro, extracting the data from Eurostat.

(f) refers to forecast, that is, the prediction that this Organism made for 2013.

Table 4: Evolution of the components of the GDP in Germany between 1999 and 2013 (at

current prices in millions of dollars).

Year\Component C I (GCF) G X M

1999 1,161,860.00 435,980.00 384,780.00 588,130.00 570,550.00

2000 1,195,040.00 456,590.00 389,570.00 683,550.00 677,250.00

2001 1,233,430.00 427,650.00 399,140.00 731,230.00 689,550.00

2002 1,240,580.00 385,340.00 410,380.00 760,570.00 664,670.00

2003 1,264,510.00 383,390.00 415,450.00 767,080.00 682,930.00

2004 1,283,610.00 387,120.00 414,200.00 846,440.00 735,670.00

2005 1,306,980.00 384,130.00 417,300.00 919,070.00 803,080.00

2006 1,339,540.00 419,620.00 424,690.00 1,053,140.0 923,090.00

2007 1,356,730.00 467,750.00 434,040.00 1,145,410.0 975,430.00

2008 1,389,620.00 476,430.00 451,920.00 1,191,190.0 1,035,360.00

2009 1,391,550.00 390,720.00 475,300.00 1,006,540.0 889,610.00

2010 1,433,160.00 436,540.00 487,600.00 1,173,340.0 1,034,440.00

2011 1,487,660.00 473,510.00 499,770.00 1,300,810.0 1,169,150.00

2012 1,521,590.00 455,250.00 515,430.00 1,362,590.0 1,210,960.00

2013 1,558,312.4 (f) 445,251.4 (f) 537,022.9 (f) 1,391,898.1 (f)1,238,291.6 (f)

Source: Table created by Alex Rodriguez & Mario Chaparro, extracting the data from Eurostat

(f) refers to forecast, that is, the prediction that this Organism made for 2013.

In this sense, even if the Spanish economy possesses one of the highest GDPs in the

world (the 12th more precisely3), the size is less than a half of the German one. Moreover, from

the larger fluctuations observed in the Spanish economic growth we can extract that the country

3 The World Bank databases (http://data.worldbank.org/data-catalog/GDP-ranking-table)

24

is more vulnerable to international cycles, rising with a higher rate when the economic

framework is favorable and reducing more when the global economy contracts. In this respect

we can state that the Spanish economy possesses characteristics from Peripheral nations because,

as Raul Prebisch noted, the effects of international economic cycles are especially severe for the

agents who are considered to have higher risk, which is feature of these kinds of countries.

Furthermore, as we can observe from the data analysis developed above, the

consequences of the economic crisis have been greater in Spain than in Germany. This is due to

the fact that Germany had a more developed economic structure and higher productivity (as it

will be deeply analyzed in the following subsection) and, therefore, the country experienced a

more stable growth during the boom and felt less the consequences of the crisis. Finally, the

private indebtedness was lower than Spain, as we will show further in this section, and the

nation’s investment on Development and Research (D&R) in Germany was larger than in the

Mediterranean country.

4.2. Economic structure

The Spanish economic structure regarding GDP per sector clearly shows the pattern of a

developed economy. The 65, 5 %4 of the GDP (in current prices) is produced by services, 15,6%

by industry, while construction contributes 8,4% to the total production. The primary sector

formed by agriculture, cattle industry and fishing produces the 2,5%.

Regarding productivity of the whole economy within the framework of the main trade

partners, during the last decade Spanish Total Factor Productivity5 (TFP) has grown in a slower

pace than its neighbours’ during the whole period, excluding 2009.

4 INE (National Institute of Statistics), National Account statistics 2012. The 8,1% left represents net taxes 5 “TFP growth is often defined as “technological progress”. It captures the effects of a set of heterogeneous factors, including the capacity of the economy to innovate and the impact of the quality of the institutional and business environment, such as the regulation of labour and product markets, on the productive use of capital, labour and other inputs” ( Mora-Sanguinetti & Fuentes, OECD 2012:12)

25

Graph 3: TFP Growth in percentage, for the sample of countries, from 2000 to 2011

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

-5.00

-4.00

-3.00

-2.00

-1.00

0.00

1.00

2.00

3.00

4.00

Total Factor Productivity Growth (ln difference, percent)

SpainGermanyFranceItaly

Grow

th %

Source: The Conference Board Total Economy Database™

The increment of the TFP in 2009 was due to the lower utilization of factors of

production as a consequence of the economic crisis and the job destruction (Fernandez, 2011). In

order to have a broader scope of the situation, the following subsections will analyze the

economic structure of the Spanish economy in terms of activities and productivity.

4.2.1. Agriculture

The primary sector has followed a declining trend, surviving thanks to the protectionist

policies of the EU which have altered the world prices of commodities. The CAP (Common

Agricultural Policy) has supported Spanish primary sector since the inclusion of the country in

the EU until nowadays, mainly through subsidies, market support, direct aids, and rural

development and decoupled payments6. The future program will distribute between the members

more than 40% of the EU expenditures7. Following the words of the present ministry of

6 Web page of University of Dublin: “Exploring links between EU agricultural policy and world poverty “ (http://www.tcd.ie/iiis/policycoherence/eu-agricultural-policy/protection-measures.php)7 OECD database (http://www.oecd.org/eu/evaluationofagriculturalpolicyreformsintheeuropeanunion.htm)

26

agriculture, the 30% of the income of farmers has depended on the European funds8,

consequently the prediction for this sector is negative due to the reformulation of the

requirements for applying to the funds along with the competence generated by the most recent

EU enlargements. As it will be shown in our analysis of the current account of the balance of

payment, agricultural products have a remarkable importance considering exports.

4.2.2. Industry and Construction

According to the UNECE, Spain is listed in a low position regarding to percentage of

GDP by the industry sector, solely above Luxembourg, Greece, and United Kingdom within the

EU.9 The decreasing of this sector has followed a constant tendency for decades; however and

similarly for agriculture, the products within this sector play an important role on foreign trade.

Diagram 1. Percentage of GDP over total economy per country, 2010

Czech Republic Germany Italy Spain United Kingdom

Luxembourg 0

5

10

15

20

25

30

35

29.3

23.8

19.3

15.9 15.5

7.4

% GDP Secondary sector.2010

Source: UNECE

During the last decades and previous to the world economic crisis, the construction sector

has created a great part of the national’s wealth, following the figures of the industry (12,6%

GDP for 2006 reaching its peak10). The graph 4 shows the evolution of that sector in comparison

8 Webpage Newspaper “El Pais” 6/05/2013 (http://economia.elpais.com/economia/2013/05/06/agencias/1367856454_623384.html)9 UNECE. Statistical database webpage: (http://w3.unece.org/pxweb/quickstatistics/readtable.asp?qs_id=11&lang=1)10 (INE)

27

to the EU. As a product of the real state bubble and the credit bubble, thousands of dwellings

were built during consecutive years. Also a great impulse to the public civil engineering

happened, developing a great number of infrastructures for transport, tourism, culture, etc; not

always fulfilling the requirements on general interest and long-term economic viability11.

Nowadays the sector suffers a great adjustment to its natural supply value provoking losses in

terms of jobs, but increasing the productivity at the same time.

Graph 4: Production in construction over total economy for the sample of countries, 2010

20012002

20032004

20052006

20072008

20092010

20112012

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

180.00

200.00

Production in construction (%2010 = 100)

European Union (27 countries)European Union (15 countries)Spain

Source: Eurostat

Focusing on the productivity, the graph above represents the trends followed in the last

years in comparison to the trends of the main trade partners:

Graph 5: Percentage of growth in productivity by selected sectors and sample of countries, 2000-2009

MANUFACTURING ELECTRICITY GAS AND, WATER

SUPPLY

11 Webpage Newspaper “The Telegraph” 15/02/2012 (http://www.telegraph.co.uk/news/worldnews/europe/spain/9084202/Castellon-airport-Spanish-ghost-airports-unused-runway-to-be-dug-up-to-meet-regulations.html)

28

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-15

-10

-5

0

5

10

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-10

-5

0

5

10

15

20

MINING AND QUARRYING CONSTRUCTION

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-25

-20

-15

-10

-5

0

5

10

15

20

-10

-5

0

5

10

15

20

Source: OECD Statistics (Stat Extracts, via OECD’s iLibrary)

Graph 5 show the evolution of the growth of multi-factor productivity (%) for Spain

(Orange), Germany (Green), France (Blue) and Italy (red) for the four subsectors. The decreasing

trend for the Spanish figures is the common fact in all of them, independently of the crisis. The

exception is the construction sector, whose trend shows its anomalous nature within the Spanish

economy, reaching great levels of productivity related to the large job destruction.

Before the economic crisis, Spain reached a lower level of growth in productivity than

Germany in every sector, except for mining during various years, and for construction in the

early years of the housing bubble. Considering France, both countries have similar trends and

values, excluding manufacturing in which France achieved higher levels. In the case of Italy,

there are disparities depending on the subsector, having Spain superior growth rates for

manufacturing.

29

To sum up this subsection, there is a latent problem for the Spanish economy due to the

importance of manufacturing on foreign trade, subsector in which the country has stayed below

its trade partners during the whole decade.

4.2.3. Services

The tertiary or services sector is characterized by a great degree of diversity in terms of

output of product and nature of its activities. As a result, it is shared the vision of the existence of

duality within the sector between activities with low productivity, which are intensive in labour

and the ones with high productivity, which are capital intensive. The productivity for 2009 of the

whole sector was two thirds the average of productivity of the EU-15 (Maroto,2009).

Figure 1: Spanish.Gross value added at current basic prices (in millions of Euros), by subsectors of services sector, 2010

117007; 26%

45383; 10%

69191; 15%

37980; 8%

43092; 9%

71156; 16%

71096; 16%

Spain.Gross value added at current basic prices (in millions of Euros).2010 G.WHOLESALE AND RETAIL TRADE;

REPAIR OF MOTOR VEHICLES AND MOTORCYCLES

H.TRANSPORTATION AND STORAGE

I.ACCOMMODATION AND FOOD SERVICE ACTIVITIES

J.INFORMATION AND COMMU-NICATION

K.FINANCIAL AND INSURANCE ACTIVITIES

L.REAL ESTATE ACTIVITIES

M-N.PROFESSIONAL, SCIENTIFIC, TECHNICAL, ADMINISTRATIVE AND SUPPORT SERVICE ACTIVITIES

Source: EUKLEMS database.

30

Those subsectors that on average have higher and increasing productivity as the subsector

J,K and H (Maroto,2009) do not represent a large part of the production whereas the activities

characterized in the opposite way as the ones encompass in the group G and I, conform a quarter

of the total production of the services.

Focusing on the trends about TFP (Value added based, with 2005 as base year) for the

main European economies, it can be seen the following facts: for every subsector except G and

K, there has been a decrement in the TFP, especially in H, I and M-N. The reason underlying that

tendency was the large use of factors of production, both labour and capital during the expansion

years (2000-2008) of the Spanish economy (Fernández,2011)

Graph 6: Percentage of growth in productivity by selected sectors and sample of countries, 2000-2009

G.WHOLESALE AND RETAIL

TRADE; REPAIR OF MOTOR

VEHICLES AND MOTORCYCLES

H.TRANSPORTATION AND

STORAGE

2,000 2,001 2,002 2,003 2,004 2,005 2,006 2,007 2,008 2,00980.0

85.0

90.0

95.0

100.0

105.0

110.0

2,000 2,001 2,002 2,003 2,004 2,005 2,006 2,007 2,008 2,00980.0

90.0

100.0

110.0

120.0

130.0

140.0

I.ACCOMMODATION AND FOOD

SERVICE ACTIVITIES

J.INFORMATION AND

COMMUNICATION

31

2,000 2,001 2,002 2,003 2,004 2,005 2,006 2,007 2,008 2,00980.0

85.0

90.0

95.0

100.0

105.0

110.0

115.0

120.0

125.0

2,000 2,001 2,002 2,003 2,004 2,005 2,006 2,007 2,008 2,00980.0

90.0

100.0

110.0

120.0

130.0

140.0

K.FINANCIAL AND INSURANCE

ACTIVITIES

L.REAL ESTATE ACTIVITIES

2,000 2,001 2,002 2,003 2,004 2,005 2,006 2,007 2,008 2,00960.0

70.0

80.0

90.0

100.0

110.0

120.0

130.0

140.0

2,000 2,001 2,002 2,003 2,004 2,005 2,006 2,007 2,008 2,00980.0

85.0

90.0

95.0

100.0

105.0

110.0

115.0

M-N.PROFESSIONAL, SCIENTIFIC, TECHNICAL,

ADMINISTRATIVE AND SUPPORT SERVICE ACTIVITIES

32

2,000 2,001 2,002 2,003 2,004 2,005 2,006 2,007 2,008 2,00980.0

90.0

100.0

110.0

120.0

130.0

140.0

SpainGermanyFranceItaly

Axis Title

Source: EUKLEMS database.

The crisis context would change the decreasing trend in certain subsectors because the

TFP for Spain is counter-cyclical (Timmer etal., 2007, Boldrin et al. 2009)by Mora-Sanguinetti

& Fuentes, 2012:16) due to large number of temporary workers in low-productivity activities,

being those the ones fired in the recessive scenario (Mora-Sanguinetti & Fuentes, 2012).

Furthermore, the productivity problems are related to the specialization in low-

productivity sectors, low uses of information, technology and communication (ITC) and the

inefficient use of human capital (Fernández, 2011) along with other political and administrative

considerations. As a consequence, the gap between Spain respect the main countries within the

EU in terms of GDP and standards of living could be wider if we have in account the divergent

trends of productivity within the sectors and if those trends does not transform.

4.2.4. Technology

The structuralist theory gave great importance to the technology as way of progress for

the society, idea shared by the liberal thought too.

In the Spanish case it can be observed different trends depending on the variable to study.

Regarding the Diagram 2, the country invests remarkably less than their main trade partners, and

33

also it is below the EU average. During the last decade the investment has increased, reaching a

1,39% maximum, starting to decrease in 2010 in the context of the economic crisis.

Diagram 2: Research and development expenditure, by sectors of performance,% of GDP .2011

EU (27 countries) Germany Spain France Portugal0

0.5

1

1.5

2

2.5

3

2.03

2.84

1.33

2.25

1.5

Research and development expenditure, by sectors of per-formance,% of GDP .2011

Source: Eurostat databases

The backward position can be seen in Graph 7 too, in which the trend, increasing

positively and in a greater path than in the main countries, is still above the EU average. The lack

of correlation between the level of education and the opportunities offered by the labour market

can be one of the causes of this situation. Further analysis will be made in the Labour Market

section.

34

Graph 7: Employment in knowledge-intensive service sectors. Share of total employment, € per person, for sample of countries, 2000-2008

2000 2001 2002 2003 2004 2005 2006 2007 20080

5

10

15

20

25

30

35

40

Employment in knowledge-intensive service sectors. Share of total employment

GermanySpainEU (27 countries)PortugalFrance

Sources: Eurostat databases

Furthermore, in table 5 about the output of the economy, it is seen the share related to the

innovation. In this case, Spain is above the average, and over France and Portugal.

Table 5: Turnover from innovation % of total turnover

geo\time 2004 2006 2008

EU (27 countries) 13,7 13,4 13,3

Germany 17,6 19,2 17,4

Spain 13,8 15,9 15,9

Portugal 10 13,3 15,6

France 11,7 : 13,2

Sources: Eurostat databases

However, the economic crisis is affecting strongly to the budget for R&D and it is

predicted that the resources allocate to those activities will continue decreasing, impacting again

35

in the increasing of the gaps respect the main European economies for the more important

indicators.

4.3. Balance of Payments

In this subsection we will analyze the balance of payments between Spain and the rest of

the world. Firstly, we will compare the evolution of this issue with the German case in order to

set a more appropriate context to examine, through this variable, the North-South dualism that

we consider it exists in Europe. Secondly, we will go deeper on studying the components of the

Spanish balance of payments, that is, the current account (goods, services and rents), the capital

account, the financial account (from Spain to the rest of the world, from the rest of the countries

to Spain and the financial derivatives), the reserves of the Bank of Spain and the national debt.

Finally, basing on this feature and relating it to our theoretical section, we will suggest if the

country is a peripheral nation or a center one.

As it is shown in table 6, the balances of payments between Spain and Germany with the

rest of the world differ in size and in sign. In the German case, even if in the first years of the

period the nation experienced a negative balance of payments, due to specific political decisions

taken at that time12, the evolution of the country’s balance is positive. This is due to the strong

export sector that the country possesses in high-valued products and services, which exceeds the

internal demand, but also because of the lower value of the imports, the increment of private

savings, and the high productivity in the nation’s productive sectors. The balance augmented

significantly in the economic expansion period, contracting in the two first years of the crisis due

to the negative shock experienced in the region (in the commercial partners more than the

internal one), and growing again in the following years as a result of the impulse of the export of

goods and services and the solidity of the country’s productive sector.

On the contrary, Spain faced a negative balance of payments throughout the whole period

mainly because the value of imports of goods and services was higher than the exports. The

deficit incremented meaningfully during the economic expansion due to the increment of high-

12 Siebert, H. “The Germany Economy. Beyond the social market”. Princeton University Press, New Jersey, 2005.

36

valued imports. It also was influenced by the lower value-added of the exports, due to the lower

productivity in the export sector, the decrement of national savings and the disparities in the

financial account. After the economic crisis the negative balance reduced as a consequence of the

economic problems that the nation experienced, that is, the impossibility for importing as many

products and services as before, due to the contraction of the aggregate demand for foreign

products and services, and the decrease of incoming financial flows in the country, as we will

show further in this section.

Table 6: Evolution of the Balance of Payments in Germany & Spain from 1999 to 2012

Source: OECD Statistics (Stat Extracts, via OECD’s iLibrary)

As we can corroborate in Graph 8, the total exports decrease in the first year of the crisis,

augmenting in the last period. In the same direction but under the level of 2007 (opposite to the

export tendency), the total imports reduced in the first years after the economic shock in the

region, experiencing an increasing trend in the last years.

Graph 8: Evolution of percentage of imports and exports of services from Spain to the

rest of the world (with base on 2007=100)

37

Year Germany Spain1999 -25 834 -16 9672000 -35 459 -24 9492001 -12 -26 8232002 42 669 -23 7642003 40 525 -27 4762004 102 368 -44 1642005 112 591 -66 8602006 144 739 -88 3132007 180 914 -105 2662008 153 634 -104 6762009 141 538 -50 5392010 155 992 -46 9632011 161 196 -39 7872012 185 425 -11 268

Source: Spanish National Institute of Statistics (INE, taken from the Ministry of

Economy)

In order to keep on contextualizing the Spanish trade performance we include diagrams 3

and 4, in which we examine the total exports and imports that the country has had with the main

European partners in 2001 and in 2010, that is, before and after the recent economic crisis. In this

respect, we can observe that the balance in 2001 showed a deficit in the balance with almost

every country, except for Portugal. Contrary, in 2010, the balance varied depending on the nation

that we focus, having surplus with France, Great Britain and Portugal, and deficit with Germany,

Italy and the Netherlands.

On the comparison among the mentioned years we can extract some features of the

consequences of the crisis in the balance of payments. Firstly, we can observe a change of the

sign in certain nations. This can be partially explained by the contraction of the aggregate

demand for foreign products in Spain. Secondly, the difference in deficits among years has been

reduced. This happened due to the increment of exports in every case due to the lower prices of

the Spanish goods. Finally, the imports have increased in practically every case. This increment

partially occurs as a result of the difference of time in the series.

Diagram 3: Spanish total imports and exports with the main European partners in 2001 (in

millions of Euros)

38

Source: Spanish National Institute of Statistics (INE database)

Diagram 4: Spanish total imports and exports with the main European partners in year 2010 (in

millions of Euros)

39

Source: Spanish National Institute of Statistics (INE database)

On Diagram 5 it is shown the evolution of the Spanish deficit in the current account of

the balance of payments. In the chart it can be seen that a great percentage of the deficit on the

balance of payments is due to the deficit experienced in the current account of goods and

services. This great deficit in the current account is the result of the lower prices of the country’s

exports and the lesser volume of them. Moreover, the goods and services that the country

imports, even if they are from the same sectors as it will be demonstrated, are more expensive

and larger in quantity.

Diagram 5: Spanish current account from 2003 to 2011 (in millions of Euros)

Source: Spanish National Institute of Statistics (INE, taken from the Bank of Spain)

Due to the great percentage that the current account represents out of the total balance of

payments we are going to go deeper on studying it, as it is shown in table 7, in which the main

components of the account are displayed. On it we can observe that there exists a surplus on

tourism and trips activities, which is the variable that contributes the most on this account. On

the other hand, the deficit on rents is basically created by the deficit on the investment rents.

40

Table 7: Evolution of certain components of the current and capital account in Spain from 2003

to 2011 (in millions of Euros)

  2003 2004 2005 2006 2007 2008 2009 2010 2011

  Net Net Net Net Net Net Net Net Net

Current Account -27909.9 -44163.7 -66859.7 -84736.3 -105378.2 -105973.1 -54481.3 -47427.3 -37765.9

Trade balance -39838.8 -53660.2 -68603.2 -80142.2 -91245.8 -86723.5 -42175.5 -47778.8 -39701.4

Services 23300.9 21753 22239.7 22142.6 23076 26143.8 25503.4 27514 33997.2

1.Turism and trips 27037.2 26604.2 26433.1 27444.3 27700.9 28066.6 26038.7 26957.8 30604.1

2.Other services -3736.4 -4851.2 -4193.3 -5301.7 -4624.9 -1922.8 -535.3 556.2 3393.2

Rents -11603.6 -12139.5 -17103.3 -20983.1 -30141.5 -36033.8 -29787 -19849.5 -26134.2

1.Labor 54.1 -148.2 -177.7 -287.7 -277 -54.7 -129.4 -39.4 -115.2

2.Investment -11657.7 -11991.3 -16925.5 -20695.4 -29864.6 -35979 -29657.7 -19810.1 -26018.9

Current transfers 231.7 -117.1 -3392.9 -5753.5 -7066.8 -9359.6 -8022.3 -7313 -5927.6

Capital Account 8165.3 8427.9 8180.4 6174.6 4577.8 5474.4 4275 6289.2 5487.5

Current + Capital

Accounts -19744.5 -35735.8 -58679.3 -78561.7 -100800.4 -100498.6 -50206.4 -41138.2 -32278.4

Source: Statistic databases from the Bank of Spain.

Within the current account the highest contributor to the negative balance is the deficit on

products. This is represented in table 8, in which we can observe the increasing negative ratio

between exports and imports throughout the last decade. The deficit augmented until the

financial crisis due to the larger size (in value) of the imports compared to the exports. This ratio

reduced afterwards due to the contraction of the Spanish economy and the increment on the

country’s export sector, as we can see in Diagram 6.

Table 8: Evolution of Spanish total imports and exports of products and the ratio between them

from 1999 to 2011 (in thousands of Euros)

  Imports Exports X-M1999 139093706 104788627 -343050792000 169468101 124177336 -452907662001 173210117 129771013 -434391042002 175267866 133267678 -420001892003 185113677 138119047 -469946302004 208410704 146924723 -61485981

41

2005 232954466 155004734 -779497322006 262687190 170438627 -922485632007 285038313 185023218 -1000150962008 283387764 189227851 -941599132009 206116175 159889550 -462266242010 240055850 186780071 -532757802011 263140741 215230371 -47910370

Source: Spanish National Institute of Statistics (INE databases)

Diagram 6: Spanish total imports and export of the main products in 2001 and 2010 (in

thousands of Euros)

Source: Spanish Institute of Statistics (INE database)

Services are the other main component of the current account of the balance of

payments. In this case, the followed trend was similar to the product industry leading to

a surplus in the last year, as we can observe in diagram 7, in which the Spanish total

import and export of main services is represented.

Diagram 7: Spanish total exports and imports of main services in the last term of 2012 (in

millions of Euros)

42

Source: Spanish National Institute of Statistics (INE database)

Opposite to the current account there is a surplus on the capital account, as it is shown in

Diagram 8. This surplus means that the Spanish economy has been receiving more capital flows

than the ones that the country has been dispatching abroad. In this sense and contrary to the

current account, it means that Spain has obtained more borrowings or sold more of the national

assets. These sales include the foreign direct investments, which can be Greenfield projects or

fusions and acquisitions, portfolio investments, which refers to the purchase of bonds and shares,

other investments, as for example loans of flows to banks, and bank reserves, which denotes the

purchase or sales of foreign currencies from the central bank of Spain . The different contribution

of these variables is shown in table 9.

Diagram 8: Spanish capital account from 2003 to 2011 (in millions of Euros)

43

Source: Spanish National Institute of Statistics (INE, taken from the Bank of Spain)

The financial account of the balance of payments is represented in Table 9, in which the

evolution of the components of this account is shown. At a quick glance, we can determine that

the investments from Spain to other countries have been lower than the ones received in the

nation from the rest of the world during the whole period.

Resulting from the deficit on the addition of current and capital accounts, that is, more

Euros are going abroad than the foreign currencies are flowed in the country, the Bank of Spain

credits the financial account through its reserves in order to equilibrate the final balance of

payments13. The evolution on the reserves had follow a decreasing tendency, passing from

positive to negative in the previous years to the crisis and increasing negatively in the years that

followed. The positive sign means that there is a reduction of the reserves, and vice versa.

Table 9: Evolution of the International investments, financial derivatives and reserves in

Spain between 2003 and 2011 (in millions of Euros)

  200

3

2004

20

05 2006 2007 2008 2009 2010

Investments from Spain

to other countries 116851.5

123199.

1 164292.4 169638.2 145407.2 41848.7 9640.8 -38868.6

13 Dodge, E. “AP Macroeconomics and Microeconomics”. Mc Graw-Hill, 2005.

44

Investments from other

countries in Spain 125536.1 152829 223304.8 251475.9 250795.9 151788.6 71376.8 -1973.6

Financial Derivatives .. .. .. .. .. -862.9 329.7 17.1

Reserves in the Bank of

Spain 13625.9 5147 1439.5 -480.4 -164.2 -644.6 -1563.5 -813.6

Source: Spanish National Institute of Statistics (INE, taken from the Bank of Spain)

The Spanish companies and the national government searched for credits abroad

in order to finance their operations. As we can see in Table 10 the national debt was

decreasing (in percentage of the GDP) during the period before the crisis. But in 2008

started increasing largely achieving to surpass 80% in 2012 because part of the private

debt became public. This increment was also due to the increase of the size of the

nominal interests and the European monetary and fiscal policies integration, which

make the country incapable to follow the correct policies and depreciate the national

currency.

Table 10: Evolution of the Spanish total debt and the percentage of it in the GDP

between 1999 and 2012

Years Total debt Debt % of GDPDIC 1999 361775168 62.4%DIC 2000 374033184 59.4%DIC 2001 378246752 55.6%DIC 2002 383434976 52.6%DIC 2003 382031840 48.8%DIC 2004 389141760 46.3%DIC 2005 392497120 43.2%DIC 2006 391054816 39.7%DIC 2007 382306944 36.3%DIC 2008 436984000 40.2%DIC 2009 565082304 53.9%DIC 2010 644692067 61.5%DIC 2011 736468088 69.3%DIC 2012 883872944 84.2%

45

Source: Bank of Spain (Eurosystem)

Finally, we can conclude by saying that the Spanish balance of payments possesses

some of the features that the structuralist thoughts linked to the Peripheral countries. In

this respect, the negative balance of payments during the whole period analyzed would

be the most clear example. This is due to the fact that structuralist emphasized the

dependency pattern that the Peripheral countries had with the Center ones, highlighting

the deficit in the developing countries’ balances account. This could be explained by the

higher value of the imports compared to the goods and services that Spain exports.

Furthermore, from a structuralist view, the current account was significant in

peripheral countries, as it is the case of Spain in recent times. In this sense, peripheral

nations were highly dependent of trade. The following data, table 11, shows that trade in

Spain is also a great contributor to economic growth.

Table 11: Evolution of the ratio of trade in market prices to GDP between 2000 and 2011

  GDP X M ((X+M)/GDP)*1002000 629,907 182,992.00 202,706.00 61.23%2001 680,397 194,142.00 211,333.00 59.59%2002 729,258 199,280.00 214,752.00 56.77%2003 783,082 206,084.00 224,681.00 55.01%2004 841,294 218,201.00 251,800.00 55.87%2005 909,298 233,387.00 281,289.00 56.60%2006 985,547 259,130.00 321,800.00 58.94%2007 1,053,161 283,331.00 354,119.00 60.53%2008 1,087,788 288,217.00 351,497.00 58.81%2009 1,048,060 250,667.00 270,189.00 49.70%2010 1,048,883 285,110.00 308,109.00 56.56%2011 1,063,355 321,819.00 330,251.00 61.32%

Source: created by Alex Rodriguez & Mario Chaparro, extracting data from the Bank of

46

Spain and the Spanish National Institute of Statistics (INE database)

4.4. Labour Market

The structuralist authors gave a great importance to the dynamics of the labour

market, as an evidence of the position that a country has within the centre-periphery

division. One of the effects of dependency was the great amount of workforce unemployed

in the labour market, that is, a surplus of labour and the dynamics that it generated.

Moreover, the dualism that underlies within the labour market was the reflection of the

differences of the economic structure: workers in high productivity sector received high

salaries in opposition to workers in the low productivity sector who obtained low wages. In

order to determine if those features are implicit in the Spanish labour market, certain

number of indicators will be used.

The Spanish labour market has a number of specificities within the European

countries. To understand them, we will see the main characteristics of the labour market,

the distribution of employment through the different sectors, along with the productivity,

the short-termism and the retribution of the factor of production labour.

4.4.1. Characteristics

To begin with, it is shown that the economic cycle strongly affect the

unemployment rate of Spain in comparison to its European neighbours. This fact implies

that a great percentage of the Spanish employment depend in subsector which suffered of

great volatility in terms of demand such construction and accommodation and food

activities. These causes also reside in the great percentage of temporary workers. These

phenomena are going to be tackling in following parts in this subsection.

Graph 9: Unemployment rate (% of the total active population), sample of countries, 2003-2012

47

2003 2004 2005 2006 2007 2008 2009 2010 2011 20120.0

5.0

10.0

15.0

20.0

25.0

30.0

Unemployment rate

Spain

Germany

France

Italy

European Union (27 coun-tries)

% of

activ

es

Source: Eurostat databases

The same causes behind the total unemployment rate are the ones behind the youth

unemployment rate. This follows a similar pattern as the total one, but in a greater extent,

with unemployment surpassing the 50% of the total active youth population. This fact has a

remarkable impact in sociological terms.

Graph 10: Unemployment rate under 25 y, annual average (% of total young active population) for the sample of countries, 2003-2012

48

2003 2004 2005 2006 2007 2008 2009 2010 2011 20120.0

10.0

20.0

30.0

40.0

50.0

60.0

Unemployment rate under 25 - annual average, %

European Union (27 countries)SpainGermanyFranceItaly

% to

tal y

oung

activ

e pop

ulatio

n

Source: Eurostat databases

4.4.2. Employment by sectorIn this section it is studied the employment by sector, with the purpose of showing the

percentage of workers regarding the importance of each sector.

As we can observe the percentage of employment of each sector over the total active

population amongst our countries share similar patterns. The greatest differences can be

found in agriculture for Germany, with the lowest percentage while Spain has the largest,

close to the EU27 average. Secondly, in the manufacturing subsector, both Germany and Italy

reach almost a fifth of their workers employed within the subsector, while France and Spain

perform under the EU27 average. Finally, for the wholesale and retail and accommodation

and food services Spain achieved a greater percentage, remaining over the EU27 average, and

practically doubling the rest of the country in the latter subsector analysed in this part.

Table 12: Percentage of employment (% of total active population) by main e onomic sector

49

for the sample of countries, 1st Q of 2012

2012 Q1 Agriculture,

forestry and

fishing

Electricity,

gas, steam

and air

conditioning

supply

Mining and quarrying

Construction Manufacturing Wholesale

and retail

trade;

repair of

motor

vehicles

EU 274,83% 0,79% 0,39% 7,11% 15,72% 14,01%

Germany

1,64% 0,95% 0,24% 6,62% 19,94% 13,45%Spain

4,45% 0,48% 0,22% 6,81% 12,64% 16,35%France

2,85% 0,76% 0,10% 7,19% 13,02% 12,64%Italy

3,57% 0,71% 0,14% 7,79% 18,73% 14,73%

2012

Q1

Transportati

on and

storage

Accommodati

on and food

service

activities

Information

and

communicati

on

Financia

l and

insuranc

e

activitie

s

Real

estate

activitie

s

Professiona

l, scientific

and

technical

activities

EU 275,06% 4,32% 2,96% 3,03% 0,81% 5,08%

German

y4,78% 3,82% 3,21% 3,32% 0,64% 4,96%

50

Spain4,85% 7,19% 2,95% 2,52% 0,56% 4,73%

France5,12% 3,65% 2,99% 3,27% 1,28% 5,44%

Italy4,60% 5,07% 2,42% 2,85% 0,60% 5,97%

Source: Eurostat databases

As a consequence of the figure showed above, Spain does not differ from its European

neighbours in the most of the sectors, therefore the importance of those sectors considering that

productivity would impact in a similar way in every country. However, on the one hand, the

significant differences in the manufacturing sector situated the better performing countries in an

advantaged position within the overall of the economy, due to the key importance of it; while

on the other hand, the supremacy of Spain in the services sector shows that an important part of

the Spanish workforce is employed in this subsector, whose outputs is relatively weaker than in

other subsectors.

4.4.3. Temporality

Another specificity of the Spanish labour market in comparison to EU countries is the

high level of temporary workers. As it can be observed in the chart, the peak was reached in

2006, with almost a 35% of the total workforce; decreasing after that due to the effect of job

destruction caused by the economic crisis, being the temporary workers the first in being fired

(Bonhomme & Hospido, 2012). In spite of this new situation, the ratio of temporary workers is

still clearly above the one of the main European economies.

Graph 11: Percentage of temporary employees (% of total number of employees) for the sample of countries, 2003-2012

51

2003 2004 2005 2006 2007 2008 2009 2010 2011 20120.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Temporary employees as percentage of the total number of em-ployees (%)

SpainGermanyFranceItalyEuropean Union (27 countries)

(% of

tota

l num

ber o

f em

ploye

es

Source: Eurostat databases

4.4.4. Labour Productivity

The importance of studying the labour productivity is due to two main reasons: on one

hand the levels of productivity between countries can determinate the dynamics among them.

On the other hand, the level of productivity within the subsectors of an economy can show us

the argued dualism that conform the essence of a peripheral country. This phenomenon will be

explained in the following parts:

Firstly, considering labour productivity (defined as GDP per hour worked by the

OECD14), Graph 12 shows that it has grown for every country in a moderate path, except for

Italy. However, the growth has been more intense in Germany and France than in Spain,

country that has the lowest labour productivity of the sample.

Graph 12: Labour productivity in € per person for the sample of countries, 2000-2011

14 OECD Databases (http://stats.oecd.org/OECDStat_Metadata/ShowMetadata.ashx?Dataset=PDYGTH&ShowOnWeb=true&Lang=en )

52

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Labour productivity

0

5

10

15

20

25

30

35

40

45

50

Labour productivity

SpainGermanyFranceItaly

€ pe

r per

son

Source. OECD Statistics (Stat Extracts, via OECD’s iLibrary)

This tendency is also patent in graph 13, in which the first years of the decade both

France and Germany reached higher levels than Spain. However, the economic crisis had

different impact in the countries. Similarly to other indicators that have been already analyzed

in the case of Spain the crises increments the value of them, that is, labour productivity

improves during the recession, and consequently it behaves as a counter cyclical variable.

Graph 13: Percentage of Annual growth of labour productivity

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Labour productivity annual growth rate

-3

-2

-1

0

1

2

3

4

Labour productivity annual growth rate

SpainGermanyFranceItaly

% of

grow

th

53

Source. OECD Statistics (Stat Extracts, via OECD’s iLibrary)

Finally, Diagram 9 shows the Apparent Labour Productivity15 for the main subsector of

the economy. The sector with highest productivities for the majority of the countries are

electricity, gas, steam and air conditioning supply, mining and quarrying, information and

communication and real estate activities. On the contrary, accommodation and food service

activities are the sector with lower productivities.

Diagram 9: Apparent labour productivity in Euros by NACE Rev. 2. 1 000 EUR. 2013, by main economic sector for the simple of countries

Mining and quarr

ying

Manufacturin

g

Electr

icity, g

as, ste

am an

d air co

nditioning supply

Water su

pply; sew

erage,

waste m

anagement an

d remediati

on activiti

esConstruction

Wholesale

and re

tail tra

de; repair

of motor v

ehicles a

nd motorcycle

s

Transporta

tion and sto

rage

Accommodation an

d food se

rvice

activiti

es

Information an

d communica

tion

Real es

tate a

ctivities

Professio

nal, scie

ntific and tec

hnical ac

tivities

Administrative

and support s

ervice

activiti

es

0

100

200

300

400

Apparent labour productivity by NACE Rev. 2.1 000 EUR. 2013

SpainGermanyFranceItaly

Euro

s

Source: Eurostat databases

In comparison with table 12, about employment by sector, it can be stated the

following assumptions. From the four sectors with highest productivity, Germany has the

highest percentage of employment in all of them except for the real state activities, in which

France has the highest employment rate. Secondly, Spain has the highest employment rate in

the sector with the lowest productivity. In addition, Spain is in the last position when we

15 Apparent labour productivity is defined as value added at factor costs divided by the number of persons employed. This ratio is generally presented in thousands of euros per person employed (Eurostat)

54

regard the employment in two of the four sectors: electricity, gas, steam and air conditioning

supply and real state activities. Finally, Spain has its highest employment rate in one of the

sectors with lower productivity as it is the wholesale and retail trade and repair of motor

vehicles.

As a result of those findings, for Spain, the weakest subsector regarding productivity

has certain relevance in terms of employment and in the economy in general when comparing

to their European counterparts. However, it cannot be confirmed the ideas of the structuralist

thoughts, which legitimate the fact of a two rhythm economies in Europe, with activities with

remarkably high productivity and other with lower. Although, it has to be considered that

because of data correspond to 2013, the zenith of the economic crisis; this one has a strong

impact modifying the trends as it happens similarly for the other variables.

4.4.5. Earnings

The difference in the monetary retribution of workers is another cause that enhances

the dualism of a labour market. As it can be seen in the Diagram 9, in which it is shown the

difference between the 9th decile of workers by earnings and the 1st, they differ approximately

a 3% for every country, except for Italy, close to 2%.

The implication underlying these facts is that, even when considering a certain degree

of differences between the workers of different deciles in each country, all of them shares a

similar pattern, and thus it cannot be considered as a cause of dynamics of dependency

between Spain and the sample of countries.

Diagram 9: Gross earnings: decile ratios. Decile 9/Decile 1 for the sample of countries, 2002-2010

55

2002 2003 2004 2005 2006 2007 2008 2009 20100

0.5

1

1.5

2

2.5

3

3.5

4

Gross earnings: decile ratios.Decile 9/Decile 1

SpainGermanyFranceItaly

Source: OECD Statistics (Stat Extracts, via OECD’s iLibrary)

Furthermore, comparing these results to the data from the Spanish Central Bank regarding

the ratio decile 9 and decile 1 for the country, the figure shows that the difference between

deciles reached by far the 4% percent (unlikely the OECD date, in which the highest peak

reached is 3,5.

Graph 14: Salary distribution, ratio between deciles 9-1 in Spain by sex, 1988-2010

Source: Bonhomme & Hospido, 2012, p 4.

56

This trend is countercyclical due to the effect of the construction during the expansion

context: incentivizing people with low qualification and education to get into the labour

market for a relatively high wage, destroying this kind of employment during the depression

(Bonhomme & Hospido, 2012).

5. ConclusionHuman beings have bestowed a vast range of labels to the world and its regions

throughout history, creating an infinite number of divisions since early times. Each name and

category, as Center and Periphery concepts, in which a territory was defined, had a great

relation to its features, that is, to the reality that they had in front of their eyes.

What the structuralist did in the early first decades of the XX century was nothing but

continue with the practice of defining those parts that are constantly reshaped and

reformulated, but for the first time in a way that nobody had done before: going deeper on

understanding the features of the existent divisions and the relations among nations that

perpetuated the socio-economic development divergences. The core idea is the C-P division.

Putting in question the liberal theory of trade through the observance of decades, they

concluded that the gap between the peripheral countries and the Center would never be

reduced if the terms of commercial relationship patterns continued in the same way,

remaining dependency patterns.

Inspired by structuralist thoughts, our attempt has been to use their concepts and

applied them to the current context, certainly continuing with the aim of labelling the world.

It can be argued that structuralist left behind different aspects that have to be considered when

defining the reality, therefore having limitations, which we mentioned in the methodology.

However, considering their economic approach, the results were and are adequate for the

chosen case study.

In Spain, derived from our analysis, there can be found a certain number of features

that shows correlation between a possible nature of Spain as peripheral country within the

EU: firstly, the Spanish economy, although being developed according to its economic

structure, it is strongly vulnerable to the international cycles (partially as effect of the

construction sector) as the peripheral nation definition. These variables are altered even more

57

remarkable in value when they are compared to its European neighbours considered by us as

the ‘North’, in which some variables behave in a countercyclical way as for instance the

labour productivity or the wage dispersion.

Secondly, the role of trade within the whole economy is relatively significant, fact that

is relevant considering the chronic deficit in the balance of payments of the country and the

weakness of a key sector as it is the manufacturing one. It suggests that certain dependency

pattern is followed regarding the main trade partners.

Thirdly, the average productivity in Spain is lower than the one in its trade partners,

and this account also diverges in terms of productivity growth throughout the sectors. These

phenomena imply that in the long-term Spain would worsen its situation regarding its

neighbours, making impossible to decrease the gap between them, but probably not in the

way the structuralist stated, through the decline of the terms of trade. However, the data

regarding productivity does not show that the Spanish economy can be labelled as peripheral,

due to it can not be found great differences in productivity between sectors as the structuralist

stated. Furthermore, this can also be applied to the technical progress, in which Spain is not

especially backward, even though the country scores lower in certain indicator such as

expenditure in R&D as percentage of GDP.

Fourthly, a different idea can be stated for the labour market. In Spain there are

certain features as temporality, concentration of workers in low productivity sector, and

wage disparities, which shows a strong degree of dualism within the labour market greater

extent than in the European neighbours. This dualism has an enormous impact in numerous

aspects of the societies; deepening the differences among them and generating a surplus of

labour that lower salaries.

To sum up, the study of our analysis through the structuralist ideas allowed us to be

aware of the structural differences between the Spanish and the major European economies

and how they would not be eliminated unless changes in certain key variables such as

productivity would occur in order to diminish the gap and achieving similar levels of

economic welfare.

58