Spain: Is corruption scandal the last straw?

The latest corruption scandal in Spain involved allegations against a number of high-ranking current and former government officials, including the Prime Minister.

They find themselves directly implicated in a system of under-the-table payments, illegal financing schemes, secret ledgers and hidden foreign accounts stretching nearly two decades.

The reality is that this scandal is just the latest in a long list of similar cases. For Spaniards, barely a week goes by without waking up to startling headlines announcing new investigations into corruption in what has become a whirlwind of allegations, criminal charges, spirited denials, equivocations and theatrics. In a nation that once served as a model of peaceful transition from dictatorship to democracy, there is growing public discontent and a generalized sense that the political model introduced in 1975 is no longer viable, and that changing it will be extremely difficult.

At the turn of the Millennium money seemed to grow on trees in Spain and a runaway construction boom stoked the economy, but in 2007, the country found itself in the middle of a financial crisis that caught its political leaders entirely unprepared. The construction market began to crash, a banking crisis soon followed, GDP growth vanished, and suddenly thousands of companies of all sizes were filing for bankruptcy. Today, the economy is in deep recession, unemployment is above 26 percent, businesses and administrations at all levels are facing severe debt problems, and there is no end in sight.

As the economy collapsed and investigators began to seek answers, one fact became increasingly clear: Spain had been plagued by economic, political and institutional corruption on a massive scale for well over a decade. According to a recent report in the Spanish daily ABC, the 15 most egregious corruption scandals since 2000 had cost the nation 7 billion euros, but this is just what has been uncovered so far.

How did it come to this? In an article I co-authored last year, along with Professor Fernando Jiménez Sánchez of the University of Murcia, we set out to answer that question by analysing the pervasiveness of corruption in Spain.

We used transcripts from conversations secretly recorded by police over the past few years as part of judicial investigations, and let the “players” describe how they operate in their own words. What they describe is a system involving crooked businessmen, investors, bankers, lawyers, notaries, building contractors and politicians of all ideologies. They operate through networks managed by shadowy middlemen, or “brokers”, who facilitate the corrupt transactions, providing offshore havens, money laundering services, and even false testimony when required.

The empirical evidence points to a tit-for-tat environment involving inefficient land use laws, local politicians who hold the key to lucrative development contracts and subsidies, illegal party financing schemes, and huge amounts of cash, often of opaque origin.

The most recent Eurobarometer indicates that 78 percent of Spaniards believe that politicians use their office as a means to enrich themselves illicitly. In January, a survey published by the El País newspaper reported that 95 percent of respondents believe that political parties tend to cover up corruption and protect their corrupt members instead of denouncing them and expelling them from the party. But the perception of corruption is not limited to politicians. Many experts believe that the problem of corruption in Spain is endemic and pervasive.

“Yes, without a doubt,” says Professor Jiménez Sánchez. “In Spain, corruption is not the problem of a single political party, but a structural problem that has to do with the system of patronage inherent in our political system.”

In a survey for ABC, 98 percent of respondents also believe that the judiciary treats politicians with more leniency than ordinary citizens. This lack of public trust in the judiciary and in the rule of law is a dangerous slippery slope.

“The judiciary can be a part of the solution, but not the only solution,” says Manuel Villoria, professor of Political Science at Rey Juan Carlos University and a member of the Board of Directors of Transparency International. “But what is part of the problem is the politicization of the justice system and the fact that it is more profitable for a judge to support large-scale corruption than to fight it.”

Yet, despite their distrust of politicians and judges, in survey after survey, Spaniards continue to demonstrate a remarkably low level of tolerance for corrupt transactions. They also cite nepotism, bribery, kickbacks, breach of public trust, and favouritism as unacceptable behaviours. In fact, a majority believes that corruption is getting worse, and something must be done about it. This indicates that the problem does not lie in some sort of faulty social moral code, but rather in the citizens’ lack of faith in the system.

Perhaps the most disturbing aspect in all of this is what this means in terms of personal initiative: the perception that in Spain, due in large part to corruption, personal effort is useless, and the possibility of changing the status quo is nil. That it is who you know—not what you know—and how you play the game, that count.

In a 2010 survey for the Spanish Foundation of Savings Banks (FUNCAS), when asked what is most important in order to achieve economic advancement in Spain, over 56% said “having good contacts and cultivating them”; almost 20% chose “being lucky”; and, significantly, only 18% selected “having good ideas and striving to implement them”.

Coupled with high unemployment rates and falling investment levels in research and development, this lack of faith in the system is driving huge numbers of people to emigrate. According to the National Institute of Statistics (INI), nearly a million have done so since January 2011.

When the majority’s view is that “this is how the system works”, people tend to fall into line and invest their time and effort in cultivating the appropriate social contacts in order to access its benefits. In the case of Spain, this attitude seems to create a kind of social contagion that impairs the system’s capacity to prosecute and punish these corrupt activities, and thus makes it impervious to change.

There is a growing fear that public discontent in Spain could soon translate into serious social and political problems for the entire Eurozone, and investors and analysts are beginning to worry about the possibility of violent social upheaval.

Corruption has spread its tentacles with allegations reaching from the Royal House (the King’s son-in-law) to the smallest towns in Spain, and this, added to a lack of leadership, with politicians seemingly more interested in taking advantage of the situation than in coming up with a plan to resolve it, does not bode well for the near future.

“[Spanish] society is stunned and disorganized,” says Manuel Villoria. “Collective action is problematic; no one moves far enough to generate a large popular movement that can generate a real catharsis. And then we have the sell-out media outlets that always dedicate themselves to generating sectarianism and to manipulating extremists.”

So, what can be done? A majority of Spaniards believes that the only way to battle corruption and bring the country back from the brink of disaster is by implementing significant political and judicial reforms, via a grand pact between the two main parties (the centre-left Spanish Socialist Workers’ Party and the centre-right People’s Party), to promote real democracy, transparency and good governance.

Whilst Villoria thinks a pact could work, Fernando Jiménez Sánchez is not so sure: “The lack of citizens’ faith in the system has reached such levels that no matter what the parties do, they’ll have a hard time convincing the public that they are serious.”

Even if such an agreement is reached, the real work will then begin. Cleaning up the system and curbing corruption will require decisive political and institutional leadership to make substantive changes to the Constitution of 1978.

“I believe it is inescapable,” said Jiménez Sánchez. “I only hope that we can live up to the challenge.”