The Competitiveness Trap In Mallorca

For years, I have been beating the drum for the need for greater economic diversification in Mallorca. I have also been critical of a lack of competitiveness. I take no credit for having drawn attention to either as they are obvious.

Over the weekend, there was a gathering of the great and good (sic) of various business bodies and the regional government. They called on Brussels to recognise problems caused by the insularity of the Balearics. They referred to problems for competitiveness created by elevated transportation costs. They cried out for major investment in research and development. They insisted that there had to be diversification away from a reliance upon tourism.

It makes you want to scream. None of these issues are new, especially calling on Brussels to put its hands in its pockets. Apart from previous aid from Brussels, the other issues have either been handled badly or simply not been handled at all. What really makes you want to scream is the fact that Josep Aguiló, the government's finance and business minister, was there, trotting out mantras that would not now need to be trotted out if any meaningful action had been taken in the past to address the lack of competitiveness, R&D and diversification.

It would be instructive to learn from Aguiló what he actually believes competitiveness to mean. Perhaps he concurs with Air Berlin's Álvaro Middelmann, who implied that Balearic taxpayers were being ripped off by paying for mainland infrastructure and that transport (and transportation) systems in and for the Balearics are inadequate.

The greater costs of both import and export because of higher transportation costs are a further obvious factor. So why are the great and good only talking about it now? And what are they going to do about it? The answer is probably nothing, other than to hope that Brussels might come calling.

Balearic taxpayers were paid an inadvertent insult by President Bauzá when he made such a thing of bigging up the high-speed rail link from Algeciras to the French border. It will help to lower transportation costs to the Balearics, he said. Well, let's hope he's right because a conclusion one can draw from Middelmann is that he appears to think that it won't benefit the Balearics, and if you were to choose between a businessman who regularly speaks common sense and an ambitious politician only too willing to be seen allying himself with fellow PP leaders on the mainland, then I would suggest you choose the former.

While lending his support to the AVE train, what is Bauzá doing for Mallorca's transport system? He took a ride on the inaugural electrified train to Inca and gloried in the celebration of something set in motion by a previous government. Other than this?

He will argue that his hands are tied by the man with the money box, namely Aguiló. And to the question as to what Aguiló believes competitiveness to mean, the answer will be the same as his masters in Madrid. Lower wages. Reduce the pay packets of those already receiving a pittance for performing mainly McJobs in the tourism industry, and tourism will receive a boost and Mallorca's troubles will be over.

Except of course, he is wrong. Price competition isn't the same as competitiveness. Not competitiveness as it applies to a country or to a region or to an island. Competitiveness comprises among other things - and I borrow from Harvard professor Michael Porter here - good education, good roads, sound economic policies, trusted institutions (to include the legal system), privatisation and, perhaps above all, the right mentality for economic progress engrained in the local culture.

How many of these elements exist in Mallorca? The public education system is lousy, some roads are good, but many are not, economic policies have been anything but sound, the legal system is way too politicised, there is privatisation but could be more, the mentality is one of so long as there's enough to pay for a good fiesta, then the rest can go hang.

Lowering wages will achieve nothing in terms of improved competitiveness. The opposite is the case, because they do not contribute to higher living standards. Competitiveness equals productivity and maximising returns on all products and services and on human resources. And where the latter are concerned, the best are getting the hell out of the Balearics.

It's the same old story. Tourism is all there really is. The private sector might be able to do something about diversification and R&D, but if it comes up against a mentality that seems incapable of looking beyond a Brussels sugar daddy and that for years has failed to address these issues, then it won't.


Any comments to andrew@thealcudiaguide.com please.