Dispatches from Spain: How does a Socialist Government cope with 20 Percent Unemployment?

Walking around the streets of Madrid or Barcelona, one can’t help but wonder “How will Spain’s government – a socialist government no less — cope with near-Great Depression levels of unemployment?” Spain has been much in the news lately due to its unwanted membership in the notorious PIIGS (Portugal, Ireland, Italy, Greece and Spain) club of high debt countries. Adding color to the media coverage has been large protestor encampments at the Puerta del Sol plaza in Madrid and other cities’ main squares, where throngs of young people known as the Indignados, worried over their future, have occupied the nation’s consciousness.

Paradoxically, even as the economic strain is apparent in news stories and statistics, I am struck at how remarkably well Spain is coping with this challenging time. You don’t walk around Madrid or Barcelona and think, “This place is falling apart,” quite the contrary. The streets are teeming with people in the cafés, tapas bars and taverns, and in the parks and plazas; the transportation systems, both within cities and the high speed rail crisscrossing the country, are world-class and run on-time. Spaniards still all have health care, unlike 47 million Americans, as well as other social supports, and I see far more homeless people and beggars in downtown San Francisco (where I live) than in any parts of Spain. The public space still is energized by street musicians, sidewalk artists, and dramatic flamenco performances, and by that indomitable Spanish spirit of duende that has to be felt to be understood.

Yet a more penetrating realization comes from assessing the zero-sum dilemmas faced by a well-intentioned socialist government trying to cope with the ravages of a global economic collapse. In important ways, Spain is the quintessential “canary in the mineshaft,” showing the trade-offs of policy interventions when caught between a rock and a hard place. Particularly when it comes to loosening up regulations to create more job openings for the legions of unemployed, and reducing burdens on businesses that might encourage more investment, the socialist government of Prime Minister José Luis Rodríguez Zapatero has felt compelled to pursue policies that have pitted his party against its most stalwart supporters, especially labor unions and public employees. Socialists and social democrats of all nationalities should take note….