Sunday, September 2, 2012

Brilliant European Economic Policy is Turning Spain’s Economy Into a Barter One

Partying Like It’s 10,000 B. C.

People will do what is necessary to survive difficult economic times.  And difficult economic times are what is happening in Spain

Today, workers 16 to 24 face an astronomical 53.3% unemployment rate. For 25- to 34-year-olds, the rate is 27%. It tapers off for older workers, who can be costly to lay off under Spanish labor law.

Half of the young unemployed have been seeking work for at least a year, according to Spain's national statistics bureau, and the few jobs that are available are often low-paying, temporary positions. The number of people in their 20s and early 30s who live with their parents began to tick up in the past 12 months after declining for years.

That’s right, Spain has the industrialized world’s highest unemployment rate.  And this fact is sending the Spanish people towards a new economic system, bartering.  A time bank is a barter system that is set up to record a person's time providing goods and services for others in the bank.  This allows them to call on those people for goods and service to help themselves.

imageBesides time banks, they include barter markets springing up in barrios, local currencies designed to spur the flagging retail economy, and charity networks that repurpose discarded goods. An environmental group recently launched Huertos Compartidos, or Shared Gardens, that links up owners of vacant land with those willing to plant vegetables in them and share the harvest.

See thousands of years ago the world economy operated on a barter system.  Farmers would trade food for clothing, wine for furniture and all that.  But someone discovered a better way, a monetary economy, and world economic progress started. 

But now the geniuses that set economic policy for countries like Spain have driven that economy back towards a barter system. 

The number of such banks in Spain—some run by neighborhood associations, others by local governments—has nearly doubled to 291 over the past two years, according to a survey by Julio Gisbert, a banker who runs a website called Vivir Sin Empleo, or Living Without Work, that tracks mutual-aid initiatives. Some economists worry that the rise of such informal systems of economic exchange is pushing more of Spain's economy underground—out of the view of regulators and tax collectors, and effectively sending the country back in time developmentally.

Of course with some modern technology like the internet it is not all that bad, in fact it saves many people from hunger and severe depredation, and even provides some needed psychological comfort.

In economics there is always the tradeoff, and the tradeoff here is that these efforts reduce rather than help Spain towards its goal of reducing its budget deficit.

Banks and social currencies, he says, can backfire on the broader economy since the income received from such arrangements often goes undeclared, therefore depriving the government of tax revenue. 

So we have just another in a long line of examples of policy producing the opposite of what it is intended to do.  And will European leaders listen and learn?

Meanwhile, Spain's public-assistance system has been battered by national and state budget cuts aimed at soothing financial markets. As jobless benefits run out for long-term unemployed, the percentage of out-of-work Spaniards receiving assistance has fallen to 65% from 78% in 2010. Last month, the national government announced the most severe budget austerity plan in the country's modern history.

Don’t look like it, after all the people making this policy all have nice government jobs for themselves, so what’s the problem.

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