When former U.S. Secretary of State Condoleezza Rice spoke at the launch of the University of Calgary's School of Public Policy in May, she argued that an important objective of foreign policy should be to free people from tyranny. As she forcefully put it, why would anyone support the idea that people should be subjected to a dictator's whims? If there is one country that well illustrates this principle, it is Spain, which I visited recently. It has a rich history, beginning with Phoenician, Iberian, and Celtic settlements, followed by Roman development that still affects the shapes of many cities. The Visigoth invasion during the fifth century turned Spain into a Catholic country. It was then taken over by the Moors in the eighth century, who lasted in the south until evicted by King Ferdinand and Queen Isabella in 1492. This rather famous date in Spanish history also saw Christopher Columbus's "discovery" of the Americas and the expulsion of the Jews. The Spanish monarchy showed how not to run a country, despite the rich cultural and artistic heritage it fostered. To fund large, beautiful public works in their names, they borrowed vast sums of money from European banks and covered the loans with the gold and silver resources they exploited from their empire. Little was spent on economic development, thereby making Spain a poor cousin in Europe by 1900, and one of the last European countries to join the Industrial Revolution. When Francisco Franco died in November 1975, Spain was fortunate that the dictator's appointed heir, King Juan Carlos I, peacefully transformed the government from a dictatorship to a parliamentary monarchy, much to the consternation of conservative forces in Spain. (The king stood down a short-lived coup d'etat in 1982.) Now, after thirty years, Spanish democracy is as imbedded in society as flamenco dancing and omelettes. Along with democracy came economic growth. From 1980 until 2007, Spain's annual GDP growth rate has averaged 3% per year, better than the E.U. annual average of 2.6%. By 2007, Spain, with its population of forty-five million, had become the ninth- largest economy in the world (not that much smaller than Canada), once adjusted for purchasing power parity. While its growth has not been as exceptional as Ireland's, the benefits of both E.U. integration and liberalization pushed the Spanish annual growth rate to 3.8% in the decade up to 2007, with a per capita income now surpassing Italy's and somewhat below that of France. The country has also been blessed with good leadership over the years, despite challenges from Basque separatists, from being highly regionalized, and from being overindulged with far too small municipalities. Governments have had a string of surpluses of about 2% of GDP since 2003, resulting in a debt-to-GDP ratio of 34% by 2007. Public spending accounts for only about two-fifths of GDP, somewhat similar to Canada and well below many other European countries. Of course, with the advent of the global recession, Spain is taking its licks. GDP is expected to fall 3.5% in 2009 and 0.5% in 2010. It overbuilt the housing sector with easy terms for mortgage financing. Housing prices have fallen 10% since late 2008, and there are now about one million unsold homes. Spain's unemployment rate has surged to more than 19%, with the construction industry taking the biggest hit. Some smaller banks have been under pressure to merge with solvent large banks, as in the case of three Catalan savings institutions that were reviewed in the press in June. The government is following the global approach, buoying up financial markets with interest rate cuts and quantitative easing. Deficits are now more than 9% of GDP, partly as a result of major public infrastructure spending. Perhaps the most eye-catching project is the near completion of the Sagrada Familia., a Barcelona cathedral by the famous architect Antoni Gaudi; its construction, never finished, began in 1882. If Spain can ride through the difficult pressures of this recession, it could return to a period of strong economic growth with the democratic traditions now in place. Condoleezza Rice has it right.

Is Spain a developing or developed country? Explain using 2 examples.

2. What are the two factors that have allowed Spain's economy to grow by 2007?

3. What evidence shows that Spain was experiencing a recession in 2009?

Explain why changing to a democracy was good for Spain's Economy.