Hot Labour Anyone?

This post has one sovereign virtue: apart from in the current sentence it will not refer, either directly or indirectly, to the Catalan Statute. The topic it does deal with however is probably equally vital for the future of Spain. The issue is Spain’s housing boom, and the role of immigration in fuelling it. Two facts above all others stand out: Spain is currently ‘enjoying’ the longest and deepest housing boom (in the current round) among all the world’s developed economies (see this useful article from the Economist, or this one from Business Week), and Spain is also enjoying sustained rates of immigration which – at around 2% of the population per annum, may well be the most intense ever experienced in a developed economy. For purposes of comparison I could point out that Spain’s net migration rate of 17.6 per thousand in 2003 contrasts sharply with that recorded for the old European Union 15 for the same year – 5.4 per thousand – and is even well above the level recorded by Germany in the early 1990s – a maximum of 9.6 per thousand in 1992 – or by France in the early 1970s. So there is a housing boom, and there is immigration, the question is, what is the connection?

Before going any farther on this, I would just like to draw attention to a recent Live Journal post from Randy McDonald. Spain’s demographic problems are more or less common knowledge. During the 1980s and 1990s it was among those European countries where the fertility rate dropped to what has become known as the lowest-low level (hitting an all-time low at around 1.2). The consequence of the fertility decline coupled with the continuing rise in life expectancy (Spain with a life expectancy of 79.52 is eleventh in the global rankings) is a very rapid ageing of the population, and an anticipated loss of population of something like 9 million people by 2050, which means a population drop from the 2000 figure of 40 million to 31 or even 30 million in 1950 (United Nations 2002 provisionss, median estimate). But all that was before immigration really got going.

Spain’s population on 1 January 2005 was 44.1 million (up by more than 4 million from the 2000 figure) according to data from the National Statistics Institute (INE), of this increase some 600 – 700,000 a year are immigrants, and some 80,000 a year or so are a ‘natural increase’ due to the steady ageing of the population. In fact in 2003 net migration was estimated to account for 93% of Spain’s population growth.

Now all of this leads Randy, reasonably enough, to ask, whether immigration will not be the saving grace for Spain:

Within the space of a decade, Spain’s population composition has changed radically thanks to a population increase of almost 10%. No one saw this wave coming, but this came nonetheless and transformed things radically. Given this single compelling example, it seems if nothing else prudent not to trace out population curves out to infinity.

The issue here however is one of sustainability. At this point enter commenter Pepe from Madrid, who in an earlier discussion on the fertility problems of the Czech Republic made the following, extremely insightful point:

In purely economic terms, I would liken low fertility to a low savings rate. In such an environment, an influx of foreign capital is needed to maintain growth.

In monetary terms, this can take the form of FDI or foreign equity investment (“hot money”). Now, when people talk about immigration (human capital inflows) as one way to compensate for low birth rates, a similar distinction has to be made between immigrants who become integrated on the one hand, and what I call “hot labour” inflows on the other.

So there is ‘hot money’ (which everyone is familiar with) , there may also, however, be ‘hot labour’, labour sucked into an economy which is badly overheating, and which is not a stable element in any given country in the longer term. Like hot money, hot labour can be subject to ‘flight’, and this is just what Pepe and I fear may happen when the housing boom finally ends.

Now one thing is for sure, immigrantion is steadily nudging up Spain’s fertility rate. A good starting point for looking at this would be a recent paper by Marta Roig Vila and Teresa Castro Martín: Immigrant mothers, Spanish babies: Longing for a baby-boom in a lowest-low fertility society. As they indicate:

“Coinciding with the increasing presence of immigrants, there has also been an increase in the population’s natural growth. In particular, the crude birth rate increased from 9.1 per thousand in 1996 to 10.5 per thousand in 2004. This coincidence is not fortuitous: in 2004, the crude birth rate of the foreign population was 20.5 per thousand, double that of Spaniards (9.7). Indeed, the foreign population has an age structure conducive to higher natality. The median age of the foreign population, 31.2 years in 2001, is well below that of the Spanish population (37.8), and the proportion of women in childbearing age is significantly higher among foreigners (70.6% of all women) than among nationals (52%). …….. the proportion of births whose mother has foreign nationality has experienced a remarkable increase in recent years. In 2004, 13.7% of all live-births were to foreign mothers –and 16.9% to either foreign mother or father–, a proportion that exceeded the proportion of foreign nationals in the overall population (7%). As noted earlier, the crude birth rate of the foreign population is twice that of Spaniards, but this could be partly due to their younger age profile.”

But there are reasons to think that this boost to Spanish fertility may be temporary. As Roig and Castro Martin point out, there are two main issues. In the first place the operation of what is known as adaptation behaviour, as migrant women steadily ‘adapt’ to the fertility bavaviour of their adoptive country:

Some authors suggest that the first generation of certain immigrant groups tend to maintain the reproductive norms and patterns of the country of origin (Abbasi-Shavazi and McDonald, 2002). A considerable number of studies support the adaptation hypothesis, which predicts that immigrants gradually adjust their reproductive behaviour to that of the host country (Andersson, 2004)“.

The second issue is the decline in fertility which is already well advanced in the ‘sending’ countries (ie female migrants may well soon be coming from countries which already have below replacement fertility themselves: this is already true of the Central and Eastern European ‘transition’ countries):

With regard to the foreseen future, according to United Nations projections, the fertility in the five countries examined – Morocco, Ecuador, Colombia, Peru and the Dominican Republic – will range from 2.22 to 2.36 in 2015-2020 (United Nations, forthcoming). Thus, in the next decade, immigrants not only will depart from a country with an average fertility close to replacement, but if educational selection continues at play, they will have lower fertility than the national average.”

So if the long term impact on Spanish fertility is doubtful, what about the sustainability question, since these new migrants are almost exclusively here for economic reasons, what are the reasons for assuming that they will remain in more adverse circumstances?

Pepe suggests that we divide the migrants into those who will stay the course (those looking for a permanent home) and those who won’t, who will move on to the next country and the next job as soon as things get too rough here. I think he is right, but quantifying the situation is hard. Al I can do is offer an anecdote.

My partner’s parents have an Ecuadorian women looking after her mother who has Alzheimer. This woman went home to Ecuador for xmas, and now she has come back she has decided she needs a document of salary (or nomina in Spanish). She needs this since talking to other female migrants (she has btw residence papers) she has decided that she would like to go to the bank and borrow 10,000 euros. She needs this money, since she wants to rent a flat in her own name so she can offer accommodation to new immigrants coming – on a sub-let basis – and thus make money from the boom herself (here in Barcelona there is now a new weekly paper for Latin American migrants which they hand out in the metro – it’s called appropriately enough Latino – and last week’s front page item was about a small flat in the very centre of Barcelona with 25 Ecuadorian women living in it. So there is certainly scope for business.

The point of all this is that the arrival of so many immigrants so quickly has pushed the rent on flats out of the roof: it is more expensive – in monthly payments – to rent a flat than it is to buy one, and that surely is a sign that something is badly amiss. The other point of this little homily is that ideas traval fast. In the age of mobile phone connectivityyou can quickly have viral entrepreneurship, and of course, rapidly built pyramid chains.

So what might happen when the ‘boom’ ends. Well in the case of our Ecuadorian woman, with a flat which she can’t rent if no immigrants come, and with a rent liability she herself cannot meet, and with an outstanding loan to the bank of 10,000 euros she cannot pay, possibly the most intelligent thing she could do would be to get on a plane and go home. The owner of the flat would have a different problem set: they have an empty flat with no tenant in sight, not for kilometres and kilometres and kilometres. And of cousre the bank wants to know about next months mortgage payments, since the majority of these flats which are up for rent are being bought by someone who doesn’t need it ‘as an investment’.

Now lets think about the building contractors problem set. Well people in this occupation normally live on credit, and normally pay salaries and other costs out of money borrowed from the bank till the building in question is sold. The bank accepts the situation as long as it has good reason to assume that the building eventually will get sold. But this is just it, when the boom breaks for some significant period of time the flats won’t get sold, at least not in anything like the quantities they were (Spain’s last boom ended in Olympic year 1992, and the property market didn’t recover till 1995). Now when the bank sees that their customer isn’t going to be able to sell, what does it do? It cuts the line of credit, that’s what it does.

What this means is that one fine Friday the boss has no money to pay his workers. So he goes to the site and tells them this, sorry lads, off you go, and no money for now, I’m afraid. That’s if he has the ‘face’ to do this. Some of them of course simply launch themselves from the 13th floor of the unfinished building.

Now imagine what is actually going to happen the day the bubble bursts. This process can happen in building sites all across Spain, and in a very rapid period of time. The Spanish workers will be more or less Ok, but the migrants? Again it’s hard to put numbers, but I reckon we could at some point see a million migrant workers, on the streets with no work, and no reasonable prospect of employment, with their home governments possibly pressurising the Spanish one to organise flights and fly them home.

And just when might this nighmare end game to Europe’s best known fairy story come to pass? No one has any idea. Since the thing which is driving the boom is the ridiculously low interest rates which are currently on offer from the ECB (in Spanish, not German terms) and since there is little likelihood of any substantial rise in these any reasonably foreseeable future the show looks like it will continue to run, until, of course, the day it doesn’t that is.


Abbasi-Shavazi, M. and P. McDonald (2002). A comparison of fertility patterns of European immigrants in Australia with those in the countries of origin. Genus 58(1): 53-76.

Andersson, G. (2004). Childbearing after migration: Fertility patterns of foreign-born women in Sweden. International Migration Review 38(3): 747-774.

23 thoughts on “Hot Labour Anyone?

  1. Somebody has to live in those houses. The boom has to end. However low interest rates are, unoccupied houses still cost money. How high are home ownership rates?

    Whence come the immigrants? I am afraid you cannot be sure that home governments will want to take back their people in all cases.

  2. Spain is fortunate in that a substantial percentage of its immigrants are Latin Americans, who can be assimilated, as opposed to Muslims, who cannot. And if economic changes mean that the immigrants can no longer be accommodated within the economy, well, unemployable and impoverished Latins are no big deal. Unemployable and impoverished Muslims ARE a big deal.

  3. The economics of this are interesting, but I am curious about the politics. How is the local population reacting to this massive increase? Are they unware of it (seems unlikely); is everyone pretending that they are guest-workers and going to go home in 5 years? (Which raise the issue of how much of this is legal, how much illegal? The poster above claims they are mostly from Latin America. Is this actually true? My guess would have been that they’re mostly East European, Balkan and Moroccan.

    The point, of course, is how does this play against the standard stereotype that Europe is doomed because they aren’t having kids but are too damn stupid/xenophobic to allow immigration?

  4. “The poster above claims they are mostly from Latin America. Is this actually true? My guess would have been that they’re mostly East European, Balkan and Moroccan.”

    In my original piece, I emphasize that it’s a mix: Ecuadorians are tied with Moroccans at a half-million each, followed by Argentines, Dominicans, Romanians, and others. A majority of the immigrants are probably Hispanophone, but only a slim one.

  5. “Spain is fortunate in that a substantial percentage of its immigrants are Latin Americans, who can be assimilated, as opposed to Muslims, who cannot.”

    Obviously I don’t agree. There seem to be two propositions here and both of these seem to be false.

    1/. Spain is fortunate in that a substantial percentage of its immigrants are Latin Americans.

    2/. “Latin Americans….can be assimilated, as opposed to Muslims, who cannot.”

    The second I don’t propose to discuss. You either believe this one or you don’t. I don’t. Since the people who do normally base themselves on non-rational feelings, I can only accept that they have those feelings, state that I don’t and move on, since I don’t imagine the situation is available to argument. Only time and history will tell.

    I would simply say that in both cases (ie Latin American and North African) part of the issue turns on just exactly what meaning the term ‘assimilation’ has in a globalised and digital age. Am I, who spend half my day on the internet, reading the global press and debating global issues, often with non-Europeans from the USA ‘assimilated’ here in Catalonia? I don’t know, and I don’t know what this word means in a diversity based world. I speak the local language – Catalan – so I imagine in some small sense I am. Incidentally, since Spanish isn’t their first language, North Africans are far more likely to “assimilate” more quickly in this region of Spain if that is what really concerns you.

    The first proposition is however the most questionable, and this not for any ideological bias on my part, but simply because, in fact, the behaviour of one part of the community of recent Latin American arrivals here seems to tell me that what you say is empirically false.

    Firstly a question of definition. You say Muslim. In fact there are two important new Muslim communities here in Spain: one from Pakistan and another, largely Berber (ie they speak Amazigh and not Arabic) one from Morocco. There is also a sub-Saharan population from countries like Senegal, Gambia and Mali who bring with them beautiful music, some of whom are Muslim and some of whom aren’t. Putting all these groups into one single category doesn’t make any sense to me, any more than it does to talk of Protestant Fundamentalist and Catholic migrants from Latin America, or Greek Orthodox ones from Eastern Europe (don’t forget these groups are extensive: the biggest single group of non Spanish nationals killed on 11 March was from Romania).

    Now back to your proposition 1. When talking about migrants in Spain from Latin America it is important to distinguish those who came in the 80s under the weight of dictatorship in countries like Chile and Argentina (who were largely educated, and of Spanish descent, rather like the people from Zimbabwe or S Africa who arrived back in the UK during Apartheid and the reign of Ian Smith) and the latest wave of migrants which is principally from Ecuador, Bolivia and Columbia and is largey from the indigenous community in those countries.

    Now actually, when you strip out the religious difference, Moroccans have a lot more in common with Spanish people than the Latin indigenous people do. In the first place a big chunk of the population in the south of spain has some kind of common descent, since the Berber population occupied and ruled Spain for hundreds of years.

    Also the Moroccans often come from a much more stable culture than the LA ‘indigens’ do. The culture of these peoples has been smashed by centuries of racism and oppression, rather in the same way that the Native Americans had their culture smashed, or those who were forcably taken from Africa as slaves had their’s systematically smashed.

    This is evident in the social customs and behaviour of this population. Let me take just three topics.

    1/ Adolescent violence
    2/ Alchohol
    3/ Machismo and Parenting

    On all these three the attitude of the Latin ‘indigens’ is different from both the Spanish and the Moroccan culture and by a long way.

    Firstly, try Googling for Latin Kings. There you will find among other things this:

    America Undercover sheds light on the shadowy world of what was perhaps the country’s largest and most formidable gang. “King Tone”, leader of the Latin King Nation of New York State, publicly espoused Puerto Rican nationalism as he attempted to convert the gang into an organization that helped the lives of the impoverished. However, the reality of the gang, as captured on surveillance tapes, included murder, kidnapping, drug dealing and assault.

    or this:

    We here in the Motherland,extend our love worldwide.As our Nation has grown and prospered in a way that has had us amazed,who would of thought that back in the day (1960’s)this Nation would evolve into a force to be reckoned with,and with that in mind,Our Missions,Our Drive,Our Goals must be kept with a positive agenda.We must keep out the forces that seek to destroy us,our reputations,our very exsistance.We must keep our Destiny alive!Our Almighty Latin King Nation Manifesto and Constitution is our Heart & Soul,IF YOU DON’T ALREADY HAVE IT,GET IT.READ IT,STUDY IT,LIVE BY IT,IT’S KINGISM TO THE FULLEST! This is our LESSONS,our ONLY lessons.If your chapter doesn’t have this LITERATURE,we can make arrangements and have them sent to your respected chapter.True Kingism is what we seek,what we demand!

    It is estimated that something like 75% of ‘latino’ adolescents in Spain are now members of the Latin kings or similar entities (and incidentally Peter, do you really think that this is going to be easier to ‘assimilate’?).

    The result of this is that violence in Spanish secondary schools is now on the rise, and violent killings around schools are increasing alarmingly. This kind of ‘gang’ phenomenon was hardly an issue here before.

    Secondly alchohol. Spanish people consume huge quantities of alchohol, but there are implicit rules: it is normally consumed around a table where there is food, or it is normally done privately at home behind the privacy of closed doors. (The Basques here are very different incidentally). The Moroccans, when they consume alchohol do so in a simlar way, and when they don’t they open very pleasant tea rooms, which are becoming a really nice addition to the Spanish diversiity scene.

    ‘Latinos’ however ‘enjoy’ drinking, and have no inhibitions about public manifestations of drunkenness, something which shocks the Spanish.

    Thirdly, the issue of partnership formation. Here the ‘latinos’ are completely different from the Spanish and the Moroccans. The latinos tend to form early and highly unstable partenerships, the most evident consequence of which is the presence of adolescent pregnancies.

    Both the Moroccans and the Spanish set up home later, and start having children later (although of course, they may well ultimately divorce). Adolescent pregnancy is virtually unknown in these communities.

    Well, Peter, I’m not sure all this will cut any ice with you, but believe me I do *not* think Spain is lucky to have so many Latino rather than Moroccan immigrants.

  6. “How is the local population reacting to this massive increase? Are they unware of it (seems unlikely); is everyone pretending that they are guest-workers and going to go home in 5 years?”

    You raise an interesting question Maynard. There were some early manifestations of racism in Spain at the start of all this, in particular in a relatively culturally closed and backward part of Spain: Almeria. If you want some info on this try Googling for “El Ejido migrants”. Local people even broke into the mosque and urinated on the Koran.

    After this there was a change in government policy and the PP effectively had an open-door policy for undocumented migrants from Latin America via the airport of Barajas.

    If you see my last comment, only now are people realising that this might have been a mistake, and that Moroccans may be a better long-term investment.

    In addition it has caused a lot of bad feeling among migrants with sub-Saharan Africans dying regularly in the ‘pateras’ and Ecuadorians being told ‘this way please’.

    On the “is everyone pretending that they are guest-workers”, on the contrary, everyone is deeply worried by the prospect that Pepe raises, that they might pack their bags and leave at some stage. Most Spaniards have accepted that without substantial immigration they won’t have secure pensions. They prefer the pension. In this sense things are different here than in Germany. Germany has shot itself in the foot with the ‘guest worker’ policy.

    However, the rate is so dramatic, maybe bigger proportionately and quicker than even the US has ever seen, that obviously people are getting uneasy. Since the economy is booming this doesn’t surface too much. I would look out when the boom ends.

    “Which raise the issue of how much of this is legal, how much illegal?”

    Spain has the US model Maynard. It is nearly all illegal, with employer pressure ensuring that the government turns a big blind eye: “eyes wide shut”. Every 4 or 5 years there is an official amnesty, then everyone gets papers. The last of these was in March last year.

    Politically this will be interesting. When all these people take Spanish nationality – in maybe 7 to 10 years – then there will be 4 or 5 million new voters. This will have important political consequences and will mean – given the fact that they have already seriously fallen out with Spain’s other nations – that the PP may end up in opposition for many a long year.

    “The point, of course, is how does this play against the standard stereotype that Europe is doomed because they aren’t having kids but are too damn stupid/xenophobic to allow immigration?”

    This is a fairy story Maynard. Something some nutcases are purveying in the United States to anyone who is silly enough to listen. It bears no relation to European reality outside possibly Germany. It certainly isn’t true in the UK, Spain, France or Italy, although, of course Italy does have serious problems, as I keep indicating.

  7. What proportion of this increased immigration is retired people from Northern European EU countries (the UK, Germany, Netherlands, Scandinavia?) Surely they must account for a relatively significant proportion and therefore not doing much to improve the fertility rate?

    Also – do they not account for much of the demand for housing, fueling the boom as much as the low ECB interest rate?

  8. “What proportion of this increased immigration is retired people from Northern European EU countries (the UK, Germany, Netherlands, Scandinavia?)”

    If you can read numbers in between Spanish this is all outlined here Geoff:

    Basically, the retired EU community migrants are concentrated in Almeria,Alicante, the Costa Brava and, to a lesser extent, the Balearic Islands.

    The biggest prices boom has been in the big cities of Madrid, Barcelona and Valencia, so this correlation doesn’t quite fit. Interest rates are the story, and of course the fact that low growth germany is subsidising UK borrowers who can get real estate at 2% (plus margins) over the 4.5% which is more realistically and appropriately on offer there.

    For eg

    Entre los municipios con más de 1.000 extranjeros empadronados, los que tuvieron mayor porcentaje de población extranjera de 65 y más años fueron también de la provincia de Alicante. De los 14 municipios con más del 25% de los extranjeros empadronados con edad igual o superior a 65 años, 10 pertenecen a esta provincia. Los dos primeros son Els Poblets y Calpe, ambos con más del 37% de extranjeros de 65 ó más años. Si se consideran los 26 municipios con más del 20% de los extranjeros de edades iguales o superiores a 65 años, 15 de ellos pertenecen a la provincia de Alicante.

    and on the distribution:

    “Los extranjeros más numerosos fueron los marroquíes (511.294), seguidos de los ecuatorianos (497.799), los rumanos (317.366) y los colombianos (271.239). También cabe destacar los más de 227.187 inscritos del Reino Unido, los 152.975 argentinos y los 133.588 alemanes.”

    In the link there is a table with a complet breakdown (as I say these are as of 1 January 2005, you should add the best part of another million for those who have come in the last 13 months plus those who are yet to register (not all migrants register on the first day of arrival naturally).

    The UK number is 6.09% and the German one is 3.58%, Italian 2.56%, France 2.09. So you could say a total old EU 15 of a little over 10%, and this is a cummulative total, many of these will be pre-2000. Of the more recent the % of community is maybe half this. So small beer, and not the culprit in the national housing boom I’m afraid, although in local cases it certainly is.

  9. Thanks for clearing that up Edward – and for the thread in general, it’s certainly very interesting and thought-provoking reading.

  10. Almeria was said in today’s Voz de Almería to have the highest building rate per thousand last year (followed by Guadalajara at under half the speed).
    ‘Viviendas’ – particularly apartments, have been going up by some 15% per annum in price in the province, making for a good investment amongst the sharper land-owners and speculators. These homes are, pretty much exclusively, sold to Europeans by large (usually Alicante based) companies making presentations in the UK – or elsewhere – and flying out planeloads of punters.
    Currently, sales are slowing, but construction continues at a heady pace (see Greenpeace on la destrucción de la costa mediterranea, or, ejem. etc).
    Many foreign property-owners are not on the padrón (the town hall registry) which is used exclusively in making up population numbers by the Instituto Nacional de Estadisticas. This causes problems for the small ‘tourist’ municipalities as there population numbers don’t bear up to the reality – thus earning them shortfalls in funding from central government, and in licences – taxis, buses, school-teachers, local police etc etc.
    The Spanish are obliged to be on some town hall’s books or other. The foreigners…?
    There are some 700,000 Brits living in Spain, according to the Fundación de Propietarios Extranjeros ( (compare with 225,000 Brits listed officially) plus an endless number of house-owners who visit part time.
    So – foreigner population numbers are a bit more rough ‘n’ ready than the beautifully crafted figures suppose.

  11. “Many foreign property-owners are not on the padrón”

    I’m sure you are right Lenox. But these are not necessarily residents, so they don’t really belong to the Spanish Population. Those who are residents will probably be on, as they need this to get a health card I think.

    “There are some 700,000 Brits living in Spain, according to the Fundación de Propietarios Extranjeros ( (compare with 225,000 Brits listed officially)”

    This may also be so, but where do they get there numbers from? And what does ‘living’ mean here? My guess is that a big part of the difference comes from people who don’t consider themselves residents.

    In the end we are talking here about two isssues here I think, property and fertility.

    Geoff’s question was in part whether the old EU country migrants formed an important part of the 4 million plus extra residents that Spain has acquired in the last five years, and my answer is that they don’t. They formn less than 10% of the total non-Spanish permanent resident population, so the fact that they are OAPs won’t especially affect fertility projections one way or another.


    “The Spanish are obliged to be on some town hall’s books or other. The foreigners…?”

    The answer is not all of them are, only those who have residence papers are expected to do so. The others, once their tourist visas (if they have even these) expire are not even legally in the country.

    They can however, under one of these beautiful anomolies which exist in what many consider to be one of those best in all possible worlds consitutions, register and be counted even while not officially here.

    In fact, even while not officially here, they are entitled to free health care, and their children are entitled to free education, as a constitutional right, but to get the health card they need to be on the padrón, so, in fact, the overwhelming majority are. In this case the numbers are pretty reliable.

    “Almeria was said in today’s Voz de Almería to have the highest building rate per thousand last year (followed by Guadalajara at under half the speed).”

    Yep, but this isn’t a reflection of the greater importance of the construction industry there, but rather of the low Spanish population density. The population density in Madrid and Barcelona is obviously much higher, so while the rate per thousand is less, the net worth is hugely more.

    “Currently, sales are slowing”,

    Yep, the boom is slowing, but it isn’t over yet.

    Here in Barcelona we just had the lowest rate of increase last year since 1997 at about 12%. It really is hard to say when this will end.

    “have been going up by some 15% per annum in price in the province, making for a good investment amongst the sharper land-owners and speculators”

    Well this depends how you look at things. Since they have now gone up over 150% since 1997, they may be nearly done. A good investment would mean that they were likely to continue going up at a rate which is significantly over the rate of inflation for a good number of years to come. If they aren’t, then they are overpriced already.

    Bank of Spain Jaime Caruana Governor thinks they are overvalued. Earlier this month he said he thought that they were overvalued by anything between 24 and 35 percent. He also said that he thought that the risk to the banks themselves from a sudden fall in house prices was minimal because default rates are now very low and general bank solvency is ‘comfortable’.

    What he means is that, since the majority of the Spanish population aren’t going anywhere, he doesn’t expect too many defaults, people will just have to hack it out, and that the banks have set aside reserves for some margin of anticipated losses.

    The investment decision of the foreign purchaser is however different. They would need to form some sort of judgement about the possible relative values of closely related currencies (like the pound sterling and the dollar) over, say, a fiveto ten year time window, as well of course as the long term trend in the value of the underlying asset (the house) which, as I’ve indicated, may well not be up.

    Beyond the ten year window you need to ask yourself about the viability of the eurosystem, and about whether or not Spain may not be forced to have its own currency again. I’d say this was a tricky topic, especially for the non-specialist. Still there is lots of sun and cheap booze, so I imagine that, for now, they are happy.

  12. Edward,

    Great post (if I do say so myself). The immigration numbers you’ve posted really highlight the magnitude of the phenomenon (17.6 per thousand in 2003, wow).

    Now, I’d like to put the size of the property bubble into perspective.

    Housing starts in Spain amounted to 687,000 in 2004 and 708,000 in 2005 (figures from La Caixa), which is around 16 per thousand. The US for comparison had around 2 million in 2005 (6.7 per thousand).

    Now compare that with your population growth figures:

    “Spain’s population on 1 January 2005 was 44.1 million (up by more than 4 million from the 2000 figure) according to data from the National Statistics Institute (INE), of this increase some 600 – 700,000 a year are immigrants.”

    This means that housing starts are just about keeping pace with population growt–but at a ratio of 1 additional house for every additional person!

    Oliver asks: “How high are home ownership rates?”

    According to Banco de España there are 23,700,600 dwellings in Spain and 15.39 million households. That’s 1.54 dwellings per household, with an ownership rate of 85 per cent.

    The average price of a dwelling in the Madrid province (not just the city) is €3489/sq.meter (funny how the Ministry of Housing doesn’t provide median prices of actual homes). Using a conservative estimate of the size of an “average” home of say 70 sq. m (a measly 750 sq. feet!)gives a price of 250,000 euros. The average household income in Madrid is 25,493 euros. So the average dwelling costs 10 times average household income.

    “And just when might this nightmare end game to Europe’s best known fairy story come to pass?…since there is little likelihood of any substantial rise in these any reasonably foreseeable future the show looks like it will continue to run, until, of course, the day it doesn’t that is.”

    This is clearly unsustainable. As for interest rates, I think that a rise in Euribor rates (at least 95% of all mortgages are variable-rate based on the Euribor) to 3.5 percent, given the enormous leverage in housing loans (100% loan-to value; 30, 40, 50-year terms), will be enough.

    When construction stops—and it will very soon–I think your estimate of 1 million jobless migrant workers is about right.

    Since a disproportiate number of immigrants are working in construction, they may just be the first to see the writing on the wall.

    Also a not insignificant number of them have been able to get on the first rung of the property ladder thanks to very lax lending. The smartest thing for these people to do would be to sell early, take their capital gains and savings and invest in their home countries (talk about “home bias”!). The unlucky ones will be underwater on their mortgages, and they will be sorely tempted to just cut and run.

  13. Edward:
    Far be it for me to deny that a large Latin American underclass can be a major problem on many levels. We can see this all too clearly in many parts of the United States, and the problem’s only getting worse with illegal immigration running unchecked. And the Latin Kings definitely are a scary bunch, though they’re not nearly as ferocious as the Salvadoran gang MS-13.
    Even so, consider what you get with a dispossessed and unassimilated Muslim population: rising levels of fundamentalism, forced veiling of women, honor killings, demands for the recognition of Sharia, urban “no go” zones, rioting, and last but not least, terrorism (as the Spanish should know). Even if the vast majority of Muslim immigrants aren’t fundamentalist, the worldwide experience seems to show that just a small percentage of fundamentalists are all you need to wind up with massive troubles.

  14. Pepe

    Thanks for this information. Obviously we make a great team :).

    “As for interest rates, I think that a rise in Euribor rates (at least 95% of all mortgages are variable-rate based on the Euribor) to 3.5 percent,….will be enough.”

    You may be right. On this one I really wouldn’t like to stick my neck out too far. As it happens it will become clear.

    Keynes ridiculed the ‘fine weather economists’ who were only able to tell you there had been bad weather when the storm was over. Clearly we can see and identify that the storm is coming, we just can’t say on what day Katrina will arrive, what the wind velocity will be, and which will be the trajectory of the eye of the storm.

    That being said, what is incredible is that in some quatrers the Spanish economy is being treated as the ‘poster boy’ of the eurozone economies, and yet all the Spanish authorities – like Caruana – can do is sit back and watch, they have been left with absolutely no policy instruments. And no one in high places seems to think that this is an important issue.

    Two points seem to be being made by the commentators here in Barcelona. Firstly that since people have such incredibly low rates on their mortgages, even a small rise in the Euribor (your point) may be enough to make the monthly payments rise sufficiently to end it. Secondly, there is a very speciall attachment – via the euribor – of Spanish mortgages rates to short term rates, at 1% or so above them. This is really incredible, and may even be unique in Europe (anyone know anywhere else where this is the case?).

    Certainly in the Uk and the US this isn’t like this. Even at the lowest of low rates in the US Fannie May and Freddie Mc seem to have been lending at about 2% over long term rates.

    So I ask myself (now that Mr Bush is finally saying that he thinks the US should get off oil), have the interests of the construction industry been at work here? We all know that the construction industry is one of the principal drivers of the Spanish economy, so have the representatives of this industry been unduly influential in allowing the low interest dependency to develop in this way?

    “The smartest thing for these people to do would be to sell early, take their capital gains and savings and invest in their home countries (talk about “home bias”!).”

    Obviously. This is why I mentioned to lenox that after a 150% rise in 8 years I didn’t see how anyone could consider that Spanish property was a good investment. Clearly it is now more interesting to sell your second home in Spain (if you have one that is), and invest in a developing country that is on the ramp for a good series of underying asset and relative currency value increases. I would certainly go for Turkey, and Morocco is looking better and better. Of course, if you are Peter, then you might prefer Argentina or Chile, since they speak Spanish and are also looking better every day. The question is whether you are thinking long or short term. Short term the Turkish property market can have a crash just like anyone else, or like the UK in the early 90s or Spain in 1992, but long term these values will recover, so you can just sit it out. This is not necessarily true of where Spain is now.

    If you look at the chart in this Economist link:

    you will see that German property prices have – on aggregate – been stationary since 1997, and Japanese ones have dropped 30%. This may be much nearer the current Spanish reality, once they drop they may not recover current values for a generation.

    I think the ‘intelligent buyers’ have already seen this, and have been quietly moving. I know a Basque guy here in Barcelona who understand something of economics, he writes from time to time in national newspapers on economic themes. He had 2 or 3 flats as investments here in Barcelona. He sold them a year ago, and bought in Peru!

    Incidentally, do you know Fabian Estape (by name I mean)? He is highly respected here in Barcelona, particularly since everyone who is anyone seemed to have studied economics with him. He is old and more-or-less toothless now, but he has been saying loud and clear what I keep saying about the eurosystem for as long as I can remember.

    Incidentally, talking of Morocco, did you know that the generalitat has just set up an industrial zone near Tetouan? I know I promised not to mention the Catalan Statute so I won’t, but this is an intriguing move, and highlights just how much “hollowing out” is quietly taking place in the background while the more publicised bonfire blazes away (I will post an article about this below).

    Anyway, stick around Pepe, since at some stage all of this is going to get ‘interesting’, in the Chinese sense, of course.

  15. Peter

    “Far be it for me to deny that a large Latin American underclass can be a major problem on many levels.”

    Just to be clear. I am not in any way against Latin American or any other immigrants coming to Spain. Spain, like the United States, and all the other modern growing economies (we’ll get round to what to do when there are non left to come another day) needs immigrants. One of my criticisisms of successive German (and Japanese) administrations is that they have failed to explicity address this, and indeed, in the German case, a huge opportunity was missed when they effectively turned their backs on potential migrants from the new East European member states.

    But I don’t think we need to romanticise immigration either. Large scale immigration presents a major policy challenge for any society, and there are always plusses and minuses. We just need to treat all this without racism, and without recourse to stereotypes.

    I mean I could tell you the story about the groups of Romanian Gypsies who go round Barcelona swiping peoples handbags, more or less with impunity. But then I could mention that not all Romanians are Gypsies, and that not all Gypsies are thieves. And I could further mention that those Romanians who died in Atotcha station of March 11 2004 were on there way to work. So this is a complex situation.

    My response was simply to your initial statement:

    “Spain is fortunate in that a substantial percentage of its immigrants are Latin Americans, who can be assimilated, as opposed to Muslims”

    Now the disadvantages of having muslim migrants are, you suggest.

    1/ rising levels of fundamentalism
    2/ forced veiling of women
    3/ honor killings
    4/ demands for the recognition of Sharia,
    5/ urban “no go” zones,
    6/ rioting
    7/ terrorism

    Now going through the list (1) is hard to determine. Obviously, since before the arrival of muslim migrants there were no islamic fundamentalists, there must now be more. The interesting question is whether it is rising as a % of the muslim immigrant population, or whether this population – like its Christian counterpart from Latin America – gradually becomes more secular and less religious with the passage of time. The evidence from France seems to suggest it does.

    2/ Well I imagine that there are odd cases, but I see no evidence in Europe generally that this happens. Women coming from Morocco gradually drop the head-scarfe. I haven’t seen any veils here in Barcelona. Incidentally, the headscarfe was also a custom among older women in southern Spain until quite recently. Obviously it was a cultural and not a religious symbol.

    3/. Well as I say, there are about 70 women a year who die from these in Spain. One technique is to pour petrol over the woman concerned and set light to her. But I’m afraid this doesn’t confirm your thesis, since the principal pertpetrators are Spanish nationals, closely followed by Latino migrants. There may have been a case of a muslim doing this, but I haven’t noticed it.

    4/. Again, have you any specific information on any single case in the EU of where someone has demanded that this be implemented in a member state? The most likely place for this to arise would be Londistan, but London’s radical mullahs seem to have adopted a live and let live attitude to the UK legal system, in particular since they benefit from it so much. Let me re-assure you, this isn’t a problem.

    5/ Well again, where exactly are these? Sarkozy seems to have been quite clear that he wasn’t going to permit this, and he didn’t. The last case I can remember was in Northern Ireland, and the perpetrators this time were of a different faith, and oh yes, the Rastaman ‘front line’ in Brixton, again, a pot-smoking offshoot of Christianity.

    6/ Rioting? Oh, I suppose you’re referring to what happened recently in France. But again, aren’t you conveniently forgetting that the most serious and sustained ‘intifada’ on European soil took place in the North of Ireland, and that the most serious riots outside of Northern Ireland may well have been those in Toxteth Liverpool involving the children of Afro-Carribean migrants (and yes, there were also riots from the children of Pakistani – muslim – migrants in the North of England an few years back).

    But doesn’t this suggest that the issue is more migrant-related in a general sense. Can you seriously keep a straight face and tell me there are no problems like this in the US?

    6/. Well this is the big one. Obviously this is an issue. And an important area of concern. A large – and particularly an undocumented – migrant community can provide a habitat for would-be terrorists, and integration issues, like we’ve just seen in France, can provide new recruits (this may be part of the significance of the fact that the core of the July 7th network in the UK came from Leeds).

    But does not having muslim migrants offer any better strategy. The US has few enough. Does this make you any safer? I hope you are safe, and that we don’t see more terrorism in the US, but if this is so, would it be because of the migrant issue, or because of heightened and more efficient security?

    I think in Spain we have no choice, and it isn’t an issue for me. Morocco is our neighbour, and we need to have closer and not more distant relations with the Moroccan people. In the US you have increased your distance from the Muslim world, unfortunately, in the longer term, I am not clear that this will prove to have been the best way to guarantee your safety.

  16. In the last two comments I have spoken about closer links between Spain and Morocco. Here’s an interesting article which exemplifies this. Incidentally, for those following the Statute discussion, the Trade Minister mentioned – Josep Huguet – is a member of ERC :).

    The president of the Barcelona Chamber of Commerce, Industry, and Navigation, Miquel Valls, has announced that more than 50 Spanish companies have expressed their desire to invest in Tangier’s future Maghreb-Catalan industrial zone, reported MAP news agency.

    The cooperation project between the Moroccan northern region and the autonomous region of Catalonia constituted the centre of the letter of intent signed Tuesday on the fringes of the Business Forum that was held on Jan. 17-18 in Casablanca and Tangier.

    Valls said that in order to prepare the industrial zone to host the increasing number of Spanish businesses willing to invest in the area, it initially will be constructed on an area of 150 ha, but will be doubled in the second phase of the cooperation project.

    Speaking during the second day of the forum, Valls insisted that Spanish businesses are increasingly attracted to invest in Morocco. He noted that between 1995 and 2004, trade exchange between Morocco and Spain recorded an increase of 250%.

    He also stated that among the Spanish trade partners of Morocco, Catalonia comes in the first position with 20%.

    Concerning investment, statistics show that between 1996 and 2003, Spanish companies have invested some 2.4 billion € in Morocco.

    This tendency is going crescendo, added Valls, as during the last two years, 1,400 Spanish companies have settled in Morocco, 34% of which are Catalan.

    Expressing his support to trade cooperation with Morocco, Valls also announced that the Chamber has elaborated a “Strategic Plan for Moroccan Business Internationalisation”.

    He noted that the document, entitled “Morocco 2006/2010”, is “the first business action plan of its kind carried out for Morocco by a European institution.”

    For his part, Catalan Minister of Trade, Tourism and Consumer Affairs Josep Huguet praised the advantages and development prospects Moroccan northern region offers to Catalan businessmen.

    He insisted on Morocco’s logistic advantages, especially proximity to the European market, and qualified local labour hands, especially in the fields of textile and clothes industry.

    On the same occasion, the general director of the Agency for the Economic and Social Development of the Northern Region (APDN), Driss Benhima, presented the investment opportunities offered by the Tangier-Tetouan region. He also stressed the Kingdom’s will to set up “a zone of rapid development” in the region by launching major projects there.

  17. If you allow illegal immigration, you will create an underclass of lesser rights. You are almost asking for gangs to form.

  18. Edward,

    Would you read and comment on this essay?

    It was written in 2002 and the context is
    France and hopefully has not much relevance to

    Still, is this a gross exaggeration or is it basically
    accurate as far as it goes?

    The author’s account seems to be based on experiences
    in two of the 800 “zones sensibles” in France: Les
    Tarterets and Les Musiciens. Are Les Tarterets and
    Les Musiciens a special case or is there a similar
    atmosphere in a good part of the others?

    Is it it true that, quote:

    “The local police chiefs were paid by results — by
    the crime rates in their areas of jurisdiction. The
    last thing they wanted was for policemen to go around
    finding and recording crime.”

    It seems to me that such a rule would, all by
    itself, create any number of effective no-go zones
    and would, not so incidently, make french crime statistics
    a gross fiction and make it hard to track the situation.

    Does the description, see below, seem accurate?
    Or is it profoundly misleading?

    “But human society, like nature, abhors a vacuum, and
    so authority of a kind, with its own set of values,
    occupies the space where law and order should be — the
    authority and brutal values of psychopathic criminals
    and drug dealers. The absence of a real economy and of
    law means, in practice, an economy and an informal legal
    system based on theft and drug-trafficking. In Les Tarterets,
    for example, I observed two dealers openly distributing
    drugs and collecting money while driving around in their
    highly conspicuous BMW convertible, clearly the monarchs
    of all they surveyed. Both of northwest African descent,
    one wore a scarlet baseball cap backward, while the other
    had dyed blond hair, contrasting dramatically with his
    complexion. Their faces were as immobile as those of
    potentates receiving tribute from conquered tribes. They
    drove everywhere at maximum speed in low gear and high
    noise: they could hardly have drawn more attention to
    themselves if they tried. They didn’t fear the law:
    rather, the law feared them.”

    “I watched their proceedings in the company of old immigrants
    from Algeria and Morocco, who had come to France in the
    early 1960s. They too lived in Les Tarterets and had
    witnessed its descent into a state of low-level insurgency.
    They were so horrified by daily life that they were trying
    to leave, to escape their own children and grandchildren:
    but once having fallen into the clutches of the system of
    public housing, they were trapped. They wanted to transfer
    to a cité, if such existed, where the new generation did
    not rule: but they were without leverage — or piston — in
    the giant system of patronage that is the French state.
    And so they had to stay put, puzzled, alarmed, incredulous,
    and bitter at what their own offspring had become, so very
    different from what they had hoped and expected.”

  19. “Would you read and comment on this essay?”

    Ok, I have browsed through it. It is very long :).

    “There are burned-out and eviscerated carcasses of cars everywhere. Fire is now fashionable in the cités:”

    As an anti-romantic image this is neither new, nor original. It’s a pity that people no longer read Sartre’s Nausea, written when? In the 1960s? Set in Bidon-ville.

    The general picture described has an element of truth to it, but it is more than a little one-sided. I am sure the reality described here exists in places, and indeed only a couple of weeks ago there was a horrific incident on a train to or from a Marseille where the passengers were effectively held hostage for a period before the police dared to enter the train.

    There are various issues involved here, but most of them relate to youth cultures and violence. I am not saying that this isn’t a problem, simply that it isn’t new and it is hard, from an empirical point of view to tie this down in any ethnic or religious sense. In fact the article was written about France, but it could well be describing things which go on in every modern society, I don’t think there is too much French exceptionalism here.

    My father was raised in a pretty rough part of Liverpool at the start of the twentieth century and I will always remember how he explained to me that they used to lock the door and bar the windows when the orange lodges marched, and he was a protestant!

    The thing is obviously all this has deteriorated much further in recent years, and I don’t regard myself as having any special capacity for explaining why this should be.

    Obviously you in the US often get a one-sided view of Europe, and we in Europe get a one sided view of the US. eg we get advised not to go off the beaten-path in Miami, or in New Orleans (when it existed). We were shown photos of Afro_Americans shooting it out with Korean shopkeepers. I have no idea at all what the religions involved were. Maybe they were followers of Elihah Mohammed, I couldn’t tell you. All I can tell you is that I didn’t imagine that all US muslims behaved like this.

    On the London underground there used to be a zone called bandit territory, where it was notoriously unsafe to travel on the Northern Line after 9:00 at night. I don’t think any of the assailants were thought to be muslims.

    Also, I wouldn’t advise you to go to a football match in the UK by train, since you might – or might not – meet some very ugly people indeed.

    Talking of which, Spain generally doesn’t have these kind of problems at all. The issue is coming with the arrival of the Latin Kings. My impression is that the Moroccans are a bit like the Pakistanis in the UK in the 70s and 80s, pretty passive and they don’t get involved in too much of this kind of thing. But look what happened to the Pakistanis in the UK in the 90s. After being systematically attacked by racist white yobs for 20 years, they finally formed gangs and started to respond. Basically the Afro-Caribbean migrants were normally bigger and tougher, so they were never intimidated like the Pakistanis were. I just hope the Latin Kings don’t start causing problems with the Moroccans. At the moment they don’t, most of the violence seems to be internal to the rival gangs.

    Funnily enough, and getting back just one more time to the Catalan Statute, there was a well-publicised incident where a few US tourists were badly attacked at a football match here. We have two teams, Barça and Espanyol. Historically Espanyol was pretty much a team of the ‘regime’ in the Franco years, being a pole of Spain in the Catalan outpost. Nowadays this is pretty much finished as an issue, but there are still some right wing groups who are called ultras who support them in this ‘old’ way. This ultra phenomenon is pretty extensive across Spanish football, and leads to racist booing and hissing at rival black players.

    Anyway our innocent US tourists unknowingly went with Barça flags into the ultra Espanyol part of the stadium during the derby game Barça-Espanyol, and they got a pretty good beating for their pains.

    This is a very sad story, but it is the kind of thing that happens.

    Coming back to the text:

    “They too lived in Les Tarterets and had
    witnessed its descent into a state of low-level insurgency.”

    This is the kind of thing you need to watch for. I don’t think there is any kind of ‘insurgency’ in France, unless, of course, you call what was happening in the back streets of New Orleans insurgency: then we have insurgency everywhere. It’s the big modern problem after terrorism.

    or this:

    “This alienation, this gulf of mistrust—greater than any I have encountered anywhere else in the world, including in the black townships of South Africa during the apartheid years”

    Simply put: I don’t think people who are trying to push a political agenda are the best sources of information.

  20. Edward,

    Thank you for your comments and quick response.

    Yes, Theodore Dalrymple’s assertion that the atmosphere is worse
    than in the black townships in apartheid South Africa does sound
    hyperbolic, and I’m not sure I believe it, but then I’ve never been
    either of these places.

    On the other hand most of my neighbors are from El Salvador; if
    I walk through the neighborhood the majority of the faces I’ll
    see will be immigrant. I’ve heard of M15. There are lots of
    children around. There are probably are some real, brewing problems
    in the neighborhood, and in fact I know about some. But here’s
    the thing: It would be difficult for someone to walk in and see
    anything wrong or any evidence of gangs or drug-dealing.

    For things to be as in your face and dramatically wrong as
    Dalrymple is describing, then things have to have been decaying
    and ignored for a long time.

    You did notice the date on that essay — 2002. Yet it reads like
    it was written after the recent riots. When I first read that
    essay, in 2002, I was shocked. I looked around and it seemed that
    no one else was addressing this topic. Which seemed strange in context.
    I wasn’t sure it was real.

    But I think he’s been rather dramatically vindicated.

    Edward, you state that you only browsed through the essay, and
    yes I agree it’s long. Also I think you came with certain
    pre-expectations. One being that this was about the muslims.
    Actually Dalrymple barely mentions that angle. A good part
    of the essay is an hypothesizing about why things are like this.
    I particularly liked this paragraphs and feel it accurately
    describes an aspect of the human condition:

    “But this is not a cause of gratitude — on the contrary: they
    feel it as an insult or a wound, even as they take it for granted
    as their due. But like all human beings, they want the respect
    and approval of others, even — or rather especially — of the
    people who carelessly toss them the crumbs of Western prosperity.
    Emasculating dependence is never a happy state, and no dependence
    is more absolute, more total, than that of most of the inhabitants
    of the cités. They therefore come to believe in the malevolence
    of those who maintain them in their limbo: and they want to keep
    alive the belief in this perfect malevolence, for it gives
    meaning — the only possible meaning — to their stunted lives.
    It is better to be opposed by an enemy than to be adrift in
    meaninglessness, for the simulacrum of an enemy lends purpose
    to actions whose nihilism would otherwise be self-evident.”

    And this:

    “Everyone acknowledges that unemployment, particularly of the
    permanent kind, is deeply destructive, and that the devil really
    does find work for idle hands; but the higher up the social
    scale you ascend, the more firmly fixed is the idea that the
    labor-market rigidities that encourage unemployment are essential
    both to distinguish France from the supposed savagery of the
    Anglo-Saxon neo-liberal model (one soon learns from reading
    the French newspapers what anglo-saxon connotes in this context),
    and to protect the downtrodden from exploitation. But the
    labor-market rigidities protect those who least need protection,
    while condemning the most vulnerable to utter hopelessness:
    and if sexual hypocrisy is the vice of the Anglo-Saxons,
    economic hypocrisy is the vice of the French.”

  21. “Also I think you came with certain pre-expectations. One being that this was about the muslims. Actually Dalrymple barely mentions that angle”

    I think you are the one Mark who is being rather naieve here. I have extracted two quotes. If you don’t think he is reffering to the children of muslim migrants (whether from the Maghreb or the Sahel) to France, then I don’t really know who he is referring to. I think he is exaggerating the problem, and after today’s sketces in Le Soir it seems we are about to find out.

    And why this: “the terrible canker in its midst”. What the hell is this. I live about 100 Km away from Frnace, I visit it regularly. I haven’t noticed any ‘canker’. And I can think of a number of football stadiums across Europe where the official national anthem of the State (Try Scotland or Flanders) cannot possibly be played without a lot of problems, yet no-one seems to speak of canker. Incidentally, if he doesn’t like France’s HLM he’d better not visit Scotland’s slums, and, as I say, he’d definitely better stay away from the less salubrious parts of the US. Didn’t we just see a shoot-out during an evacuation rescue operation?

    Now this isn’t to score points in some clever game, but to say that this sort of simplistic article definitely IMHO does more harm than good.

    As for the general issue of social alientation, I’m afraid I don’t feel I have much more to offer as an explanation than anyone else. I mean I think its a pretty big topic, maybe too big for me right now, but obviously details like the housing units and inclusivity and exclusivity in the labour market matter.

    Where does the increase in crime come from? The geographical answer: from the public housing projects that encircle and increasingly besiege every French city or town of any size, Paris especially. In these housing projects lives an immigrant population numbering several million, from North and West Africa mostly, along with their French-born descendants and a smattering of the least successful members of the French working class.

    I watched their proceedings in the company of old immigrants from Algeria and Morocco, who had come to France in the early 1960s. They too lived in Les Tarterets and had witnessed its descent into a state of low-level insurgency. They were so horrified by daily life that they were trying to leave, to escape their own children and grandchildren: but once having fallen into the clutches of the system of public housing, they were trapped. They wanted to transfer to a cité, if such existed, where the new generation did not rule: but they were without leverage—or piston—in the giant system of patronage that is the French state. And so they had to stay put, puzzled, alarmed, incredulous, and bitter at what their own offspring had become, so very different from what they had hoped and expected. They were better Frenchmen than either their children or grandchildren: they would never have whistled and booed at the Marseillaise, as their descendants did before the soccer match between France and Algeria in 2001, alerting the rest of France to the terrible canker in its midst.

  22. Interesting post on the relative family structures and social capital of the latin immigrant v. the north african. In the states the perception is that the latins have a strong family structure. In the states most of the latins immigrate from mexico as a opposed to central and south america… maybe that plays some role. I have seen data that the muslim immigrants in the states tend to be of a higher socio-economic background and are more integrated than their european(muslim immigrant) couterparts. Thought?

  23. Edward,

    I hear three theories being offered for ‘why’ 20,000 cars, or
    whatever the actual number is, were burned in the recent riots in
    France. I speak of a number because presumbably the cars are
    counted and its indisputable that this actually occurred and from
    that however indirectly we can get some grasp of the dimensions
    of the real problem, which isn’t the cars burned, but the
    hearts and minds of the people that did it.

    One theory, popular with the american left and popular with
    the american media, is that this wouldn’t have happened if
    France had affirmative action, aka racial quotas, and in practice
    meaning that some 20 percent of french private sector jobs would
    be reserved for ? (actually that’s a problem right there — how
    do we even legally define this group?) and some 30 percent of
    government sector jobs. Now I believe there are a lot of
    unacknowledged problems with this approach and further think
    that it’s morally wrong to turn a person away from a job
    because of the color of their skin. But if it really would
    prevent situations such as seem to have developed in France,
    well then of course that would the strongest argument for
    affirmative action.

    On the other hand proponents of affirmative action only take
    account of the positive impact on those discriminated for
    and give no attention to those discriminated against.

    Another theory, readily found on the internet, is that the
    riots in France have their origin in the islamic character
    of many of the participitants and that muslim culture is
    the heart of the problem. Without going into the reasons why,
    I’ll just say that I doubt this is the ‘why’ of these riots.

    The third theory, the theory that I favor, is that this
    is another practical example of the arc of destruction
    left by the welfare state. Human needs are more complicated
    than simply food to eat, a place to stay and entertainment.
    You can give people all this and all may seem to be well,
    but it’s a holding action at best.

    People need a story to their life, a drama, where they are
    heroes and strive and overcome obstacles. Without this,
    to put it simply, they get sick.

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