Progress with roots

In the last thirty years, the Basque Country has transformed itself from an economic backwater under Spanish dictatorship to a pioneer in sustainable human development. How did they do it?

Juan José Ibarretxe
22 November 2013

The Mondragon Cooperative Center. Credit: All rights reserved.

Despite extremely negative circumstances, the Basque People have been able to implement a significant process of positive socio-economic transformation. How was this achieved? By empowering their own self-governing institutions, developing a social economy based around cooperation and public-private partnerships, rejecting the rule of macro-economic orthodoxy, and prioritizing social innovation - all rooted in the strong and fertile soil of local culture.

At the end of the 1970s, the Basque Country was a small and marginalized region on both sides of the Pyrenees which had preserved one of Europe’s oldest languages. It was emerging slowly from forty years of dictatorship, during which any expression of Basque culture had been repressed. At this time, the region was undergoing a serious economic crisis, with unemployment hovering around thirty per cent and an international image tarnished by perceptions of terrorism and violence.

By 2007, and after a successful peace process had kick-started a period of political and economic change, the Basque Country ranked third on the UN Human Development Index, with a GDP per capita of US$40,000. Local institutions like the Bilbao Guggenheim Museum and pioneering ventures like the Mondragon Co-operatives have given the region a strong international presence, and a healthy balance between tradition and modernity.

Since the end of the Spanish dictatorship, self-government has been a key driver of the socio-economic transformation of Basque society. A democratically-elected Basque Parliament and government administration took control over health, education, security and economic planning, and local governing bodies were re-established with the capacity to collect and allocate many taxes. The strategies and projects promoted by these self-governing institutions have helped to design and implement a model of sustainable human development rooted in broad-based economic growth and social advancement.

This framework of participatory and collaborative self-government has brought decision-making and accountability closer to the population. Shared leadership across the public, private and social sectors has built support for key reforms, though it may be dependent on the ways in which Basque society is organized at every level. A rich fabric of associational life reflects the cooperative emphasis of Basque culture, and at the political level, a critical citizenry long-schooled in independent thinking rejects any sense of passive intervention in public affairs.

The most disruptive decision that was made through these processes was to commit the country to a productive, social economy instead of to a speculative economy at a time in history when “investing in services” was considered the only politically-correct way forward. This decision was inspired by the economic traditions of the region, which specialized in steel and machine tool manufacturing. The Basque Country needed a new economic model defined by the same emphasis on production - as opposed to financial speculation and services - but updated to meet the needs of the twenty-first century.

“Stick to what you are good at” and “focus on the real economy” became the guiding principles for economic development in the face of global recession and future uncertainties. This was not an easy path, since it meant opposing well-established macro-economic orthodoxies. It also relied on a new way of understanding progress. But countries that lack a productive culture of this kind will not be able to respond to these new challenges.

This transition was highly contentious, since the private sector had previously been overly-dependent on public intervention. The rebalancing of these relationships was essential to foster a new and more competitive economy. It was the determination and tenacity of local institutions and leaders from both the business community and the social sector that made it possible to take an alternative route.

Along this route, public-private partnerships and experiments in the social economy have flourished. Social enterprises now generate ten billion Euros annually and 60,000 jobs in manufacturing, banking and services. Basque companies are clustered around a network for research and development that employs over 3,000 researchers in a population of less than three million people. Regional specialization strategies have utilized local human and environmental capital, skills and accumulated knowledge. The Basque Country has its own telecommunications provider, and thanks to a progressive taxation system, eighty per cent of Basques complete secondary school education. Taxes have also financed a system of universal health care that has elevated Basque women to the highest life expectancy in the European Union.

Key to these achievements has been the refusal to allow the global economy to “cancel out” the local, and instead to opt for a different paradigm of distributed knowledge and highly-specialized production. “Small is beautiful,” but it can also be very powerful. However, these successes were not simply due to economic strategy; culture also played an important role, with a return to local, independent thinking and Basque traditions running through both politics and economics. Special mention should be made of successes in recovering the Basque language. Thirty years ago, this pre-indo-European language was under real threat of extinction. Today, more than half of all students receive their education in the vernacular, all the way from kindergarten to university.

These successes have helped to anchor a shared understanding of progress for the Basque Country, and they have fostered a distinctive economic, social and legal culture that is focused on innovation and adaptation, collective decision-making, and a respect for the historical accumulation of education, experience and ideas. The focus has been on learning and sharing, not on imitating other countries. For many years the Basques have been associated with an entrepreneurial spirit of cooperation with other nations. Rooted in this tradition, it is now necessary to pin our hopes on the global village and make social and technological innovation a central part of Basque identity, with the Basque Country as a point of intersection for global, distributed networks.

In this task the Basques are not alone. Others, especially the smaller northern European countries, have made innovation an essential part of their national identity, and a platform from which to project themselves to the world. Engagement and independence turn out to be complementary to one another: it is perfectly possible to enrich society with elements from other cultures, and to enrich those cultures with elements from one’s own traditions and experiences. 

Societies have no alternative but to practice continuous, collective self-reflection. In the current scenario of failing institutions and destructive behaviors, only the capacity to inspire the collectivity with a shared vision of sustainable human development can unite a community of citizens. The Basque experience shows that “progress with roots” is not only possible, but necessary.

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