Surplus and capital profitability in the Spanish economy, and comparison with the Euro area. A political economy approach

ABSTRACT

The article studies the evolution of both surplus and profit rates in the Spanish economy during the phase of the housing bubble, the subsequent crisis and the recent economic recovery (1995─2017), comparing as well core and peripheral economies of the Eurozone. From various methodological approaches and showing several indicators, this paper finds an underlying deep profitability crisis and an alarming drop in what we call the productivity of surplus, without reaching previous levels of profitability at the end of the period. This path has been offset by a reduction in interest rates, which promoted corporate indebtedness. The huge decrease of profitability in Spain is however consistent with its peripheral insertion into the Euro area. In opposition, the more advanced economies of the region were able to keep the level of capital profitability and even increasing the volume of surplus.

KEYWORDS:

• Profit rate
• surplus
• interest rates
• wages
• political economy

JEL CLASSIFICATION:

• B51
• E01
• E32

Disclosure statement

No potential conflict of interest was reported by the author(s).

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

1. We assume the impossibility of an exact measurement of profitability due to difficulties in availability and statistical reliability ─a problem that is not exclusive to this topic, on the other hand. For this reason, a heterogeneous set of indicators is presented, which strengthen the conclusions.

2. This debate is not addressed in this article, for which we refer to Mateo (2019), where can be found a thorough classification of subjectivist accounts of the crisis (the above-mentioned ones) in opposition to materialist conceptions of the crisis, leading to a concept of crisis as a possibility or a necessity of the accumulation of capital.

3. The terms center and periphery are taken from the (Latin American) structuralist approach to make reference to the internal structure of the Eurozone, where the center (periphery) refers to the countries with greater (less) productive development. Although it is true that the European periphery is a developed area, this comparison is common in the literature due to its relative backwardness and type of external insertion. See, among others, Milios and Sotiropoulos (2013), Gambarotto and Solari (2015) or Weissenbacher (2020). Certainly, there may be controversies with this classification. France occupies an intermediate place, but for the purposes of the paper, it rather has a semi-peripheral position, while Ireland, despite having many peculiarities, has been incorporated into the periphery.

4. Although the crisis erupts in the second half of 2008, 2007 may be used as a reference due to the evolution of macroeconomic variables.

5. For a deep and more extensive explanation, see XXX (2019).

6. It is however necessary to highlight some nuances: some of these incomes can actually be considered wages, but it also happens that certain executive salary perceptions would belong to the surplus.

7. In fact, it is also not possible to deduct the share of the capital stock corresponding to these small producers.

8. An opposite view would imply that finance would regulate the dynamics of accumulation, in turn determined by a supply and demand for money independent of structural aspects; and very important, that interest is not a part of the surplus. For a more detailed account, see Mateo (2018, 2020), as well as Evans (2004) or Shaikh (2016).

9. For example, it does not appear in Nölke’s (2016) deep review regarding the debates on the causes of the Eurozone crisis, as occurs in turn in Stockhammer, Constantine and Reissl’s (2020) broader comparative analysis of heterodox and orthodox approaches.

10. Mateo and Montanyà (2018) show some measures of both surplus and profit rates, but in this paper the results have been completed, updated and extended in the case of the comparison with the Eurozone.

11. More surprisingly, though Carchedi (2012) makes reference to a falling profitability in the Euro area in his Marxist─based analysis, no data is provided in his account.

12. In a complementary way, if the productive GOS is taken and the agricultural activities are excluded ─given their particularities─, it turns out that the maximum is reached one year before, in 2006.

13. See Appendix for methodological aspects.

14. Although the core economies do not have the same capacity to create employment during the years of expansion, their higher stability makes that, in global terms, the balance turns out to be quite similar: these countries have increased employment by 14.4% between 2001 and 2017, 13.2% the periphery, and 14.8% Spain.

15. If the period 1996─07 is taken instead, the growth rate of this ratio is still much higher for Spain (134%) than for other peripheral countries, such as Greece, Italy or Portugal (79%, 71% and 68% respectively).

Additional information

Funding

This work was supported by the Ministry of Economy, Industry and Competitiveness of Spain, as part of the research project ‘Modeling and simulation of energy transition scenarios towards a low carbon economy: the Spanish case’ (MODESLOW) (Ref: ECO2017—85110—R).