Academic journal article Journal of International and Global Studies

The Power of Uncertainty: The Neoliberal Quest for Profit in Spain

Academic journal article Journal of International and Global Studies

The Power of Uncertainty: The Neoliberal Quest for Profit in Spain

Article excerpt

As early as 2008, some voices started to point to the fact that Spain was at the threshold of a severe economic crisis: not having its own currency to devaluate on the international market (i.e. externally) and, as such, no ability to refloat exports, the country was facing the alternative option of resorting to internal devaluation in order to regain international competitiveness (Krugman, 2010; Nino-Becerra, 2013). According to classic economic theory, in a moment of crisis indicated by decreasing productivity, a country has two options to refloat its economy. Traditionally, the most common way has been the external depreciation of its currency in order to make its products cheaper in the international market and increase demand and, consequently, productivity and economic flows. The other option is internal depreciation. However, when currency depreciation is not an option due to international loan pressure (1) or because the country has no actual control of its currency (as is the case for the EU countries, which depend on the decisions of the European Central Bank, or Germany), the only possibility left is to reduce the costs and increase the appeal of national products through the reduction of labor costs. An internal devaluation results, then, in a sustained period of high levels of unemployment until salaries and costs are low enough to reinvigorate foreign trade. If a country sustains enough unemployment for a long enough period of time, people become willing to work for less or will move, seeking work elsewhere. (2) How, then, does one reduce salaries in a country where labor regulations are designed to protect workers from abuse? Simultaneously, then, labor regulations must often be changed in order to make lay-offs easier and life as an unemployed person more difficult.

The social costs of internal depreciation are colossal, and they are placed squarely on the shoulders of private households, as high unemployment fuels private debt: pressure is put on the budgets of lower and middle class households, as they are the ones depending on easily taxable salaried work. Unemployment in Spain has gone from 2 million, 8% of the population, in 2008 to close to 6 million, 26% of the population, in 2013 (INE, 2013). This increase in unemployment has coincided with draconian labor reform, which has reduced unemployment benefits and lay-off costs. In May 2013, 1,900,000 families had all working age family members unemployed and 3 million people had been unemployed for more than three years (Ebola, 2013). Unemployment figures do not include dependents (children) or retirees, whose monthly incomes have been frozen for several years. In October 2013, 12 million people, out of a total population of 46.7 million, were officially living under the poverty line, and three million families had a monthly income of fewer than 300 euros. This number has doubled since 2008 (laVanguardia, 17/10/2013).

The current situation in Spain is a perfect example of how the contemporary global economic system works. Profit, the ratio between actual production cost and market price, depends heavily on labor costs. Labor cost is severely affected by uncertainty. If households have an uncertain survival horizon due to high levels of unemployment and low social compensatory measures, its members are willing to work for lower wages. Uncertainty, in a situation of vulnerability, is more often than not perceived and experienced as risk. Although the term uncertainty, strictly speaking, means outcome unpredictability, this perceived unpredictability of survival is the result of an increased probability (and expectation) of bad outcomes. At a family level then, apparent survival unpredictability is the opposite of perceived security, and it is this perception (of either tranquility or threat) that informs agency.

Thus, "uncertainty" and its dreaded sidekick, "risk," become fundamental market mechanisms. Bauman in Liquid Modernity (2007) and Beck on Risk Society (1999) already warned us that capitalism at the end of the twentieth century was becoming a fleeting hypermodernity, characterized by an economic model with extreme levels of mobility. …

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