The crisis of the Spanish Economy: Financialization and over-indebtedness, or falling profitability?
The objective of this paper is to carry out a critical analysis of the explanations of the Spanish economic crisis that place the essential cause of the crisis in the sphere of finance and, in particular, indebtedness. For this purpose, it is necessary, first of all to discuss theoretical aspects of the theory of crises and the role of finance in relation to the Great Recession. A comparative analysis of different currents of economic thought will be exposed. Specifically, neoclassical and post-Keynesian (within both Kaleckian and Minskyan tradition) will be critically confronted with the Marxian explanations of the crisis. Secondly, an empirical basis is provided for the case of the Spanish economy. This study requires calculating various measures of profitability in Spain, as well as making reference to the context of the Euro area. Only in this way can we appropriately grasp the reasons why finance played a fundamental role in the cycle of expansion prior to the outbreak of the crisis, which reflected in a process of real estate asset-inflation, and in turn led to an outstanding rise in indebtedness. Unlike post-Keynesian and neoclassical approaches to the Great Recession, this paper argues that over-indebtedness has rather been a consequence of productive problems linked to falling profitability and not a cause for the crisis, based on a political economy perspective.
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Keywords: crisis, Spanish Economy, financialization, falling profitability
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