State investment in Catalonia

By Marta Espasa

18-1-13


Last week the new Barcelona-Girona-Figueres section of the high-speed (AVE) rail line was inaugurated. This is excellent news, and we have been expecting it for some time now, but we must keep in mind that Catalonia’s investment deficit –one it has been suffering for years on behalf of the centralized government in Madrid— still needs to be corrected. In this respect, President Mas took advantage of the official event to demand that the central government comply with the third additional provision of the Catalan Statute of Autonomy. This provision establishes that State investment in infrastructure in Catalonia shall be equal to the relative participation of Catalonia's gross domestic product in the gross domestic product of the State for a period of seven years. In other words, the State’s budgets should be foreseeing that 18.5% of regional investment goes to Catalonia. Nonetheless, the 2012 budgets allocated only 11.1% of State investment to Catalonia, and a mere 11.9% in the budgets of 2013. This level of investment is clearly much lower than the amount established in the Statute and it is perpetuating Catalonia’s infrastructure deficit.

 

The situation being what it is, we might ask ourselves what economic or political criteria are determining this territorial distribution of the State’s public investment.


Since public investment in general (and investment in transportation in particular) lowers transportation costs and increases accessibility, it is the public instrument that has the most direct effect on the aggregate growth rate and the geographic distribution of economic activity. This kind of investment, therefore, is a basic instrument of economic growth policies and regional development.


Nonetheless, the territorial distribution of investment follows different models depending on which of these two objectives is a priority. Thus, if economic efficiency and growth is a priority, it would make sense to invest in regions with a low public capital to private capital ratio, or in other words, in the autonomous communities with a relatively more robust business sector. On the other hand, if public investment is understood to be an instrument for correcting regional income disparities, then the criteria of redistribution or equality would be the priority, favoring the poorer regions. A conflict arises when the regions with a low public capital / private capital ratio do not agree with those that are less economically developed. In Spain’s case, it has been clearly demonstrated that investment has mostly been channeled towards the autonomous communities with the lowest level of economic development.


In addition to these criteria, there is another political criterion of a more profoundly ideological nature that also helps to explain the territorial distribution of investment in transportation infrastructure: the territorial model that Spain’s central governments have long defended and supported. Transportation infrastructure is a key element for the structuring of a territory, as it is what makes trade and interpersonal relations possible, and as a result the way this structure is designed reflects the perceived relationships between the various territories of a country. Therefore, in Spain’s case the transportation model that has been in place from 18th century until today has been a radial one with Madrid at its center. This has meant that Madrid has taken on the role of the fundamental node in the Spanish transportation system, which has further strengthened its central position.


All of these issues are why for some time now there has been an intense debate going on about investment. Regarding the size of this investment, in the years in which efforts of budget consolidation have been a priority, this item has always suffered the biggest cuts. This has been a cause for concern due to the effects that such a low level of investment could have on economic productivity and, in consequence, on competitiveness and economic growth. 


At the same time, today there is great malaise in Catalonia due to the unfair treatment it has received regarding the State investment in transportation infrastructure, which is something that could undermine its economic growth.


Now more than ever, therefore, we need to change course and prioritize the criteria of efficiency and economic growth when it comes to the regional distribution of State investment. Unfortunately, however, the central government doesn’t seem to share this view.

 

 

 

Image source: La Moncloa

2013-01-14