Investment in intangible assets and its effect on the Spanish economy

Nov 30, 2021

Redacción Mapfre

Redacción Mapfre

We have known for decades about Spain's long-term growth problem and how this problem is rooted in low labor productivity, which is extremely important in a very service-oriented country like ours. We have long used the mantra of necessary reforms and education in STEM disciplines to solve it, or we constantly point to some of the drawbacks of how investments are made in Spain. I think all that is valid, yet it all looks like the same problem to me. Let me explain. 

I think Spain has an investment problem that weighs down productivity. It is not a problem of quantity, but of the wrong mix of capital stock. Spain ranks at the bottom of the OECD in intangible investment (5% of GDP vs. an average of 10% GDP) and has a capital mix that is radically different from its peers. For example, the proportion of tangible assets over intangible assets in Spain is 18% versus 5%, while in the USA it is 13% versus 11% and in Israel it is 10% versus 15%. Furthermore, within Spain’s stock of intangible capital, and with the knowledge that there are three fundamental groups of such capital – namely computerized information, innovative properties and economic competencies – the first two account for less than one third of the total while economic competencies account for two thirds. That means that the weight of digital skills and R&D in Spain pales in comparison to the OECD average. 

This mistaken investment mix has two consequences: first, the immediate one is that it limits the growth arising from innovation and technological change and, second, the bias in investment towards the physical stock of capital ends up reducing our capacity to invest in innovation (even when it is possible), because it requires ever higher amounts to amortize its depreciation. In other words, Spain's capacity to grow endogenously is increasingly being lost and the investments that are actually made are putting a brake on our future capacity to try again, resulting in a country with fifty excellent airports, but with low levels of innovation and digital qualification. I think a large part of our productivity and growth problem, therefore, can be found in this type of decisions. 

To solve these problems, I believe that we must make a firm commitment to intangible assets, while paying close attention to the type of assets and the proportions of this type of capital compared to others. The improvement in productivity and competitiveness will, in this sense, go hand in hand with the reformulation and strengthening of education and the renewal of skills. This can be done from the ground up through education and/or through the import of skilled human capital so as to foster change in these intangible assets. 

The Spanish proposal included in the Next Generation EU points in this direction and would result in 11% productivity growth if education is improved. This would be a giant step forward, which will require a redefining and updating of skills (digital and numerical) in line with the times, as well as the introduction of learning systems that reward innovation and the scalability of such innovation. Further, it would also be essential to redefine the National Digital Skills Plan, the National Vocational Training Plan and the Early Education Plan, that is, increase the percentage of the population with “profession-oriented” education, as Spain included in its Next Generation EU spending proposal.

Last News:

Bond yields: a sign of changing expectations

Bond yields: a sign of changing expectations

Debt markets appear to have started the year with returns not seen since before the pandemic. According to Alberto Matellán, chief economist at MAPFRE Inversión, all this is the result of a change in expectations.

Share This