BENJAMIN Franklin said, "If you'd be wealthy, think of saving, more than of getting: The Indies have not made Spain rich, because her outgoes equal her incomes."\nIn 1580, Spain was the wealthiest country in the world; its treasury filled with gold and jewels from the conquest of the New World, and its Empire spanned four continents. Just two centuries later, the Spanish Government's poor fiscal policies (many of its 17th and 18th century Kings were insane, lazy or both) had reduced the glittering Spanish Empire to a mere ghostly shell, bereft of its former glory and disregarded as anything but a laughingstock by rivals.
Spain's finances were so poor that one of America's most gifted founders used Spain as an example of how not to manage money. Benjamin Franklin, well-known for his maxim, "A penny saved is a penny earned," concluded that Spain was beyond help.
Maybe more troubling, however, is that Spain has done little to change its spending habits in the 300-year interim from 1700 to today. In fact, Spain's proliferate spending, this time to support an extremely generous social welfare system and rigid labor market rather than global conquest or an ill-timed invasion of England, has landed the country in the middle of a maelstrom that currently engulfs the Eurozone.
Indeed, the financial crisis from 2007-2009 plunged Europe into a deep recession, but Spain's was the deepest of all. While the German and French economies begin a recovery, Spain's troubles weigh on the entire Eurozone, whose members include most nations in continental Europe. Its fiscal plight has become the darker and more ominous background story to the economic crisis that has left Greece begging for a bailout.
The prospect of Spain facing an economic fate similar to Greece's is what truly terrifies the financial markets. Greece, with a similarly generous social welfare system and equally rigid labor market, is struggling to raise enough money in the bond markets to finance its growing debt and day-to-day operations. Major Eurozone economies recently agreed to provide up to $40 billion in loans as an economic aid package for Greece.
Yet, should investors decide that buying Spanish bonds poses too much risk given the nation's lax fiscal policies, members of the European Union may be forced to set up a Greek-style bailout for Spain. The cost of this bailout would cripple confidence in the Euro, rattle financial markets from the United States to China and lead investors to wonder whether the Great Recession was just the beginning, rather than the end, of the West's economic problems.
Benjamin Franklin knew that the answer to any economic calamity lay in the ability to save and spend wisely. And the roots of this crisis lay not in his time but in the 20th century, when, after two World Wars and the Great Depression, Western countries decided that massive government spending was the only solution to minimize the uncertainty of the business cycle. Now, as the world enters a new century and faces the legacy of the old, Franklin's words may again ring true.
Andrew Golden is fourth-year Commerce student and former Cavalier Daily Life columnist.
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