TRAPPED

Inequality. We're used to thinking about it in terms of different societies, a gap between an upper and lower class. And in a global context, in terms of countries, we don't realize how large that gap really is between roughly the bottom fifth of the world and the rest. Paul Collier, a professor of economics at Oxford University, makes the argument that growth is severely stunted for the so called bottom billion of the world's population, as the rest face development, increasing and increasing the inequality gap.
(If you want to read more here's the link: http://www.amazon.com/The-Bottom-Billion-Poorest Countries/dp/0195373383/ref=sr_1_1?ie=UTF8&qid=1354637064&sr=8-1&keywords=bottom+billion)

He articulates 4 development "traps" that keep the bottom billion in the third world, some of which certainly apply to even countries he considers as part of the developed world. Today we're going to look at a country that's facing their own share of problems, Spain.

There are a couple traps that really don't apply to Spain:
First is the landlocked with bad neighbors trap. The problem with being landlocked is that it makes strong economic growth nearly impossible, because the only trading partners are your neighbors if there's no coast. That being said, poor partners means more trade and economic stimulation.

Spain is neither landlocked nor surrounded by poor neighbors-- if you don't believe me, here's a map:



Second is the natural resources trap. Collier states that an abundance of natural resources can actually have negative consequences if there's poor management. Because it makes conflict and exploitation more likely, and raises the possibility of Dutch Disease-- resource exports cause the value of the currency to go up, making other export industries noncompetitive, some of which could be more sustainable avenues for economic growth. Spain does have some natural resources (i.e. coal, iron ore, lead and zinc) however, these have all been effectively managed without any conflict or the diminishing of other industries.

Third is bad governance in a small country, which may apply to Spain in terms of the economic crisis that they're currently in- but there are more reasons to believe it doesn't: First is that Spain isn't nearly as small as the countries that Collier analyzes, second is that Spain's economic crisis is primarily blamed on the housing crisis which lay to waste the tremendous investment Spain's bank threw at the housing industry, ruining their Banks. Before the economic crisis Spain was actually running smaller deficits than Germany, and its debt was only 27% of the GDP-- making them a model for fiscal responsibility.

Finally is the conflict trap-- the one that almost makes sense in the context of Spain. The conflict trap mostly revolves around civil war, with two primary effects, the first of which is economic- wars and coups cost a lot of money and stall economic growth, second is the risk of relapse which is really high following a conflict. Right now, Spain is embroiled in the possibility of civil conflict- although there's a small risk of violent escalation, Catalonia has threatened secession on multiple occasions due to economic grievances

All in all, Spain doesn't quite fit the mold for any of these development traps-- although it is headed toward crisis in its own way, hopefully it doesn't stay there.