T1 01 Economic Public Policies (PDF)

1. Economic public policies: public intervention in the economy in general and the tourism sector in particular 1.1. Public intervention in economic activity The evolution of markets is traced back to early human societies, from nomadic groups to the formation of urban centres, the countries, an...

1. Economic public policies: public intervention in the economy in general and the tourism sector in particular 1.1. Public intervention in economic activity The evolution of markets is traced back to early human societies, from nomadic groups to the formation of urban centres, the countries, and ultimately the industrial revolution and globalisation. These transitions have shaped modern market systems. It can be distinguishing between inclusive economic structures, which foster broad participation and growth, and extractive economic structures, which concentrate power and wealth, stifling innovation and progress. Similarly, there are inclusive and extractive political institutions, which either support or undermine market efficiency and economic fairness. Various factors influence the economic landscape, including climatic, cultural, religious, and geographic determinants. These factors often interplay with economic policies and structures, shaping the nature of different markets, particularly in sectors like tourism. Public intervention in economic activity is frequently used to correct distortions and imbalances or achieve desired outcomes. It can be distinguishing between macroeconomics, which focuses on large-scale economic phenomena such as national income, inflation, and unemployment, and microeconomics, which deals with individual markets and economic agents. Several instruments are available for public intervention in the economy. These include monetary policy, which regulates the money supply and interest rates to influence economic activity; fiscal policy, which involves government spending and taxation to impact aggregate demand; and budgetary policy, aimed at managing public finances to maintain economic stability. Also, regulatory measures can be mentioned, which govern market activity through laws, standards, and self-regulation mechanisms. In addition to these instruments, public authorities may engage in planning, supervision, and control of economic activities. Specific measures are designed to promote certain sectors, such as providing subsidies or public services, particularly in sectors like tourism. A recurring challenge for economic policymakers is addressing market distortions: deviations from ideal conditions where supply and demand interact efficiently. These distortions can arise from information asymmetries, monopolies, externalities, or other factors that prevent markets from functioning optimally. The cyclic nature of economic activity is influenced by both domestic and international factors. Drawing on the work of economist Joseph Schumpeter, it outlines three types of economic cycles: long cycles (40-50 years), typically linked to major technological shifts; medium cycles (5-10 years), reflecting fluctuations in investment and consumption; and short cycles, caused by temporary shocks or changes in market conditions. These cycles contribute to periods of expansion and recession, where economic activity and employment levels fluctuate, often requiring government intervention to stabilise the economy. The tourism market is particularly susceptible to market imperfections, as fluctuations in demand can be triggered by external factors like economic downturns, political instability, or environmental disasters. Additionally, tourism markets often experience seasonality, leading to imbalances in supply and demand at different times of the year. To address these challenges, public intervention can help mitigate the adverse effects of such market imperfections through policy measures aimed at promoting stability, fostering innovation, and ensuring equitable development. Several macro-economic indicators are essential for understanding economic health and guiding policy decisions. These include: economic growth, defined as the increase in a country’s output or income over time; productivity, which measures the efficiency of production and is key to long-term economic growth; inflation, the general increase in prices, eroding the value of money; the balance of trade, which records the difference between a country's exports and imports; and the balance of payments, which tracks all transactions between a country and the rest of the world. Regarding the labour market, there are different categories of employment and unemployment: employed individuals, who may be self-employed or salaried workers; unemployed individuals actively seeking work; inactive individuals, those not seeking employment, such as retirees or students; and qualitative unemployment, where workers’ skills do not match the demands of the labour market, often requiring policy intervention to address this mismatch. Another key focus is the legal framework underpinning market economies. Property rights are central to economic activity, as enshrined in Article 33 of the Spanish Constitution, which guarantees the right to private property and inheritance, with limits imposed for the common good. These rights are essential for fostering investment and economic stability, but they must be balanced with social considerations, such as ensuring that property use aligns with the public interest. In parallel, economic freedom is protected by Article 38, which ensures the freedom to engage in business within a market economy. This includes the right to establish and operate businesses for profit, subject to regulations that ensure fair competition and prevent monopolistic practices. Additionally, can be highlighted the importance of public participation in setting economic objectives. Drawing on the ideas of philosophers Jürgen Habermas and Peter Sloterdijk, it discusses how democratic processes should guide economic policies, ensuring they reflect the needs and aspirations of the population. These economic goals may include: short-, medium-, and long-term objectives for growth, employment, and competitiveness; promoting regional development to balance economic disparities between areas; and ensuring sustainability in economic policies, aligning with broader environmental and social goals. Summarising, public intervention plays a crucial role in addressing market imperfections, ensuring stability, and promoting sustainable development. Key policy tools, such as fiscal, monetary, and regulatory measures, must be carefully designed and implemented to balance the needs of economic growth, equity, and environmental sustainability. It is necessary ongoing coordination between public authorities and the private sector, particularly in industries like tourism, to foster innovation and ensure long- term competitiveness. 1.2. Historical background of administrative intervention in the tourism sector Public intervention in economic activity, particularly in the tourism sector, has evolved significantly over time, with the state playing a pivotal role in shaping the development and regulation of the industry. Historically, state intervention in the tourism sector can be traced back to the early 20th century, when public authorities began recognising the economic potential of tourism and its role in promoting national heritage and attracting foreign visitors. The first major milestone in public intervention in Spain came with the establishment of the National Commission for the Promotion of Artistic and Recreational Excursions for Foreign Visitors (Comisión Nacional encargada de fomentar en nuestro país las excursiones artísticas y de recreo del público extranjero) in 1905. This initiative aimed to enhance Spain’s image abroad, participating in international tourism congresses and promoting the country as a desirable destination. Over time, the scope of intervention expanded, with the introduction of regulatory measures to improve the hospitality industry. For example, in 1909, regulations were issued to standardise hotel and lodging services, ensuring a level of quality that would attract international tourists. In 1911, an act called “Real Decreto” in Spain, established the Royal Commission for Tourism and Artistic Culture (Comisaría Regia de Turismo y Cultura Artística), which replaced the earlier National Commission. This body had a broader mandate, including the promotion of tourism and the preservation of Spain’s artistic and cultural heritage. This period saw a concerted effort by the government to conserve monuments, organise art exhibitions, and promote cultural tourism, all of which laid the groundwork for tourism as a significant economic sector. The next significant development occurred in 1928 with the creation of the National Tourism Board (Patronato Nacional del Turismo) under the Real Decreto of 25 April. This marked a shift towards a more structured and institutionalised approach to tourism management. The Patronato Nacional del Turismo was endowed with greater financial and human resources, and it introduced several key initiatives to boost tourism infrastructure. Among these were the establishment of a Hotel Credit Service to encourage hotel construction and the introduction of the ‘Recommended Establishment’ title as an incentive for improving service quality. Additionally, the creation of the Paradores chain (Red de Paradores), a system of state-run hotels offering affordable accommodation with quality services, was a landmark initiative aimed at making Spain more accessible to tourists. The first Parador, located in the Sierra de Gredos (Madrid), opened in 1928, marking the beginning of a network that would later expand across the country. Public intervention in the tourism sector also extended to infrastructure development. In 1926, the National Circuit of Special Roads programme (Circuito Nacional de Firmes Especiales) was introduced to modernise Spain’s road network, thereby improving access to tourist destinations. Agreements between public authorities and transportation companies further facilitated the movement of tourists within the country, highlighting the state’s role in coordinating tourism logistics.  The period under Franco’s dictatorship (1939–1975) was marked by three distinct phases of intervention. The 1940s were characterised by heavy interventionism and autarky, with inflationary pressures affecting the economy. However, the 1950s witnessed improvements in production, consumption, and foreign trade, leading to a reduction in state intervention. The 1960s were marked by a period of technocratic development, with the tourism sector becoming a key driver of economic growth. By the 1990s, public intervention in tourism focused on competitiveness and sustainability. Plans such as the Framework Plan for the Competitiveness of Spanish Tourism (Plan Marco de Competitividad del Turismo Español, Plan Futures) and its successor, Futures II, underscored the importance of coordinating public and private efforts to enhance the quality and innovation capacity of the tourism sector. These plans also sought to internationalise the sector and promote collaboration with developing countries, setting the stage for Spain’s continued prominence in global tourism. Thus, the historical trajectory of public intervention in the tourism sector reflects a progressive evolution from basic regulatory oversight to a more comprehensive and strategic approach aimed at fostering sustainable growth, innovation, and international competitiveness in the industry. 1.3. Competences in tourism matters in Spain: the state, autonomous communities, and local administration The division of competences in tourism matters within Spain is a complex interplay between the State, the Spanish regions aka Autonomous Communities (Comunidades Autónomas, CC.AA.), and local administrations (councils). Each of these governmental levels is granted varying degrees of authority and responsibility, leading to a multi-tiered governance structure aimed at regulating, promoting, and planning tourism activities across the nation. The Spanish Constitution provides the fundamental framework for the distribution of competences. Article 148.1.18 of the Spanish Constitution empowers the CC.AA. to assume responsibilities in the promotion and regulation of tourism within their respective territories. This has led to a decentralised model where the CC.AA. play a crucial role in shaping tourism policy, adapting it to their specific regional needs and cultural contexts. This recognises tourism as a sector of significant strategic importance, particularly in regions where it serves as a major economic driver. In the case of Andalusia, for instance, its “regional Constitution” (Estatuto de Autonomía) explicitly acknowledges tourism as an essential sector, tasking the regional government with the exclusive competence for its organisation, planning, and promotion. However, the Constitution does not make explicit mention of tourism within the remit of state competences under Article 149. Instead, the Spanish government retains indirect control over certain aspects of tourism through its authority over international commerce, customs regulations, and foreign promotion. This has occasionally led to jurisdictional conflicts between the Spanish government and the CC.AA., particularly in matters concerning international tourism fairs and promotional efforts abroad. Despite this, the Spanish government continues to play a significant role, especially through its influence on broader economic and infrastructural policies that directly impact tourism, such as transportation networks, environmental regulations, and trade agreements.  Local administrations, including municipal governments (councils, municipalities), also have a key role in the management of tourism, particularly in the promotion of local attractions and the organisation of tourism-related activities. Under the law of local government (Ley de Bases de Régimen Local), municipalities are granted the autonomy to promote tourism within their jurisdictions, allowing them to manage local tourism resources and events that contribute to the cultural and economic vibrancy of their areas. The Andalusian local autonomy law (Ley 5/2010, de 11 de junio, de autonomía local de Andalucía) further reinforces this by stipulating that municipalities have the competence to promote local tourism resources and participate in the formulation of regional tourism strategies. This underscores the importance of local governance in shaping the tourism landscape, especially in areas with distinct cultural and historical significance. While this decentralised structure allows for tailored tourism policies that reflect regional and local diversity, it also presents challenges in coordination and coherence across different governmental levels. Tourism, as a sector with both local and international dimensions, often requires integrated strategies that transcend administrative boundaries. Therefore, effective collaboration between the Spanish government, CC.AA., and local administrations is essential to ensure that tourism development aligns with national economic goals, regional priorities, and local community interests. Thus, the distribution of competences in tourism matters in Spain exemplifies a layered governance approach. The Spanish government provides overarching support and regulation, while the CC.AA. and local administrations are empowered to shape tourism policies that reflect their unique geographic and cultural landscapes. This multi-level governance model, though complex, allows for a dynamic and responsive tourism sector, capable of addressing both regional diversity and national strategic objectives. 1.4. Fundamental economic freedoms in the European Union: competition law The European Union (EU) is founded on a series of fundamental economic freedoms that form the bedrock of its single market. These freedoms are designed to ensure the free movement of goods, services, capital, and people across member states, thereby promoting competition and economic integration. These freedoms are intrinsically linked to EU competition law, which seeks to maintain a level playing field by preventing anti- competitive practices and ensuring that markets remain open and fair. One of the core economic freedoms within the EU is the free movement of goods, which prohibits customs duties and quantitative restrictions between member states. This principle is vital for fostering an integrated internal market, where goods can flow freely without national barriers. Article 34 of the Treaty on the Functioning of the European Union (TFEU) explicitly prohibits measures equivalent to restrictions on imports between member states, ensuring that no member state can unilaterally hinder the movement of goods. This freedom is safeguarded by EU competition law, which ensures that national authorities do not impose unjustified barriers that would distort trade and reduce market access for businesses. Similarly, the free movement of capital, enshrined in Article 63 TFEU, aims to eliminate restrictions on capital transfers between member states. This freedom supports cross-border investment and the establishment of financial markets that span the entire Union. Competition law plays a key role in ensuring that businesses operating in these markets do not engage in anti-competitive practices such as price-fixing or market- sharing agreements that could restrict capital flows and harm consumers. The freedom to provide services and the freedom of establishment, set out in Articles 56 and 49 TFEU respectively, further reinforce the EU’s commitment to economic integration. These provisions allow businesses and professionals to offer services or set up operations in any member state without facing discriminatory or protectionist measures. By reducing administrative and legal barriers, these freedoms create opportunities for businesses to expand and operate on a pan-European scale. However, these freedoms are not absolute, and EU competition law ensures that dominant firms do not abuse their market position to exclude competitors or exploit consumers. The European Commission actively monitors and enforces rules against monopolistic practices, such as predatory pricing and exclusive agreements, to ensure that markets remain open and competitive. The free movement of workers, outlined in Article 45 TFEU, complements these economic freedoms by allowing individuals to seek employment in any member state without being subject to discrimination based on nationality. This freedom promotes labour mobility and enhances the efficiency of the internal market by enabling workers to move to regions where they are most needed. However, competition law ensures that businesses do not engage in anti-competitive agreements, such as wage-fixing or no- poaching agreements, which could distort labour markets and reduce employment opportunities. EU competition law serves as a vital mechanism for ensuring that these economic freedoms are not undermined by anti-competitive practices. The European Commission, as the primary enforcer of competition rules, has the authority to investigate and penalise firms that engage in cartels, abuse their dominant position, or engage in mergers that would significantly reduce competition. Through its enforcement actions, the Commission ensures that markets remain competitive, and that the economic freedoms enshrined in the TFEU can be fully realised across the Union. The fundamental economic freedoms within the EU are essential for fostering an integrated and competitive internal market. These freedoms are closely intertwined with EU competition law, which plays a critical role in maintaining a fair and open marketplace by preventing anti-competitive behaviour. Together, these frameworks ensure that businesses and individuals can benefit from the full potential of the single market, promoting economic growth and innovation throughout the EU. 1.5. The economic constitution: Private property and freedom of enterprise. economic liberalisation. Limitations on budgetary power In Spain, the historical origins of public intervention in economic activity involved state control over key sectors. The government managed royal factories (Reales Fábricas), monopolised essential products like tobacco, and oversaw military industries for national defence. Public goods and resources were exploited by the state, and both local and state services were controlled to ensure economic stability. The liberalisation process in Spain, driven by privatisation and globalisation, marked a shift away from public management of these sectors. The EU influenced this transformation by promoting economic freedoms and free competition, encouraging Spain’s transition towards a market-oriented economy. The economic constitution of Spain is built upon two fundamental principles enshrined in the Spanish Constitution: the right to private property and the freedom of enterprise. These rights are closely related to the broader context of economic liberalisation and the limitations imposed on budgetary power, all of which play pivotal roles in the governance of economic activity within the framework of a market economy. Article 33 of the Spanish Constitution guarantees the right to private property and inheritance, recognising their social function. However, this right is not absolute. The constitution allows for limitations to be imposed in the public interest or for social utility, provided there is appropriate compensation. This balancing act between private ownership and public interest reflects the dual objectives of safeguarding individual rights while also ensuring that property serves broader social and economic purposes. This framework facilitates economic development while allowing for interventions by public authorities in cases where the public good outweighs private interests. In conjunction with the right to property, Article 38 of the Constitution recognises the freedom of enterprise within the context of a market economy. This right ensures that individuals and businesses can engage in economic activities freely, subject to the constraints of planning and productivity requirements as dictated by the general economy. The state’s role here is to protect and promote the exercise of this freedom, creating an environment where businesses can operate competitively. This is crucial for fostering economic growth, innovation, and employment creation. The freedom of enterprise also aligns with Spain’s broader integration into the EU’s single market, where economic freedoms such as the free movement of goods, services, and capital are protected. Economic liberalisation, a key aspect of Spain’s modern economic strategy, is closely tied to the principles of private property and freedom of enterprise. The liberalisation process, particularly in the latter half of the 20th century, aimed to reduce the role of the state in direct economic management and shift towards a more market- driven economy. This involved privatising state-owned enterprises, deregulating key industries, and reducing barriers to competition. The goal of liberalisation was to enhance efficiency, foster competition, and integrate Spain more fully into the global economy. This transition was not without challenges, particularly in terms of managing the social impacts of liberalisation, but it played a crucial role in modernising the Spanish economy. However, economic liberalisation and market freedoms are tempered by the constitutional limits on budgetary power. Article 135 of the Spanish Constitution, amended in 2011, enshrines the principle of budgetary stability. This amendment requires that public administrations maintain balanced budgets, with the aim of preventing excessive deficits that could threaten economic stability. The amendment was introduced in response to the European sovereign debt crisis, which exposed the vulnerabilities of member states with high levels of public debt. The principle of budgetary stability is further reinforced by the requirement that any borrowing by public authorities must be approved by law, and that the servicing of public debt takes priority over other expenditures.  These budgetary constraints serve as a check on government spending, ensuring that fiscal discipline is maintained, and that economic management remains sustainable in the long term. This limitation is in line with the broader fiscal governance frameworks of the European Union, where member states are required to adhere to specific budgetary rules to ensure the stability of the Eurozone. In essence, the limitations on budgetary power aim to safeguard the long-term health of the economy, balancing the needs for public investment with the imperative of fiscal responsibility. Summarising, the economic constitution of Spain, through its protection of private property, freedom of enterprise, economic liberalisation, and fiscal discipline, provides the foundational framework for a balanced and sustainable market economy. It recognises the importance of individual economic freedoms while also ensuring that these freedoms are exercised within the constraints of social utility and fiscal responsibility, aligning Spain’s economic governance with both domestic priorities and broader European integration.