Public-Private Sector Cooperation Necessary to Relaunch the Economy, Say Business Leaders and Economists

29 May 2020

Representatives from the Institute of Family Businesses (IEF) and IESE Business School joined forces to prepare a 48-page document titled “Boosting Employment and Relaunching Business:  Reflections for Action.” It proposes the formation of a multi-lateral working group to lead the way back to the economic productivity interrupted by the COVID-19 crisis.

The pandemic is not only a health crisis, but an economic crisis as well. Battling this pandemic has come at a high social and economic price, with economic activity forced to stop, provoking a dramatic fall in GDP and a sharp rise in unemployment. The consequences of this economic downturn could reach far beyond the virus that set it off.

Spain’s Congress of Deputies (the lower house of the country’s legislature) recently established a Social and Economic Reconstruction Commission to formulate a recovery plan.  Yet, while it left open the possibility of taking into account “experts and members of civil society,” its 46 members were all representatives of parliament from the different political parties.

This IEF-IESE document encourages establishing a group including input beyond the government, with high-level representatives from business and civil society. This would not only take advantage of a much wider pool of experience and expertise, but would also instill confidence in all levels of society. Experience from past crises, the authors assert, demonstrates how important it is that all actors have confidence in the project of rebuilding. They urge Spain to take the example of other EU countries like Austria and Germany – among others - that have had good experience with public-private sector cooperation, to incorporate a wider perspective. 

Jordi Canals - professor of economics and former dean of IESE, and vice president of STI – describes the reasoning behind the document he helped to prepare:

“This economic crisis created by the pandemic has unleashed a global recession that can turn into a depression if there is not a proper policy reaction. Governments should act with intelligence and courage. However, governments alone will not solve this crisis of trust. Civil society, in particular, entrepreneurs and family businesses – together with large companies - have a very important role to play in it. They can help by diagnosing well the problem in each industry and each region, because the pandemic is having different impact depending upon the type of activity and geography. Companies understand and should suggest ways to come back gradually to normal activity.  This is a time for public-private partnerships to get the recovery back on track. This is a complex situation, but the effort is necessary. At stake, we have the survival of millions of companies around the world and the protection of jobs and family incomes.”

The document benefits from survey data from more than 550 Spanish companies and direct responses from more than 50 senior executives, and explains the specific situations of 16 essential sectors of the Spanish economy. It does not purport to recommend any specific economic policy measures.  Rather, it proposes an overarching policy goal that would protect the economy as well as citizens’ health: to retain jobs and improve the employability of workers by stimulating the relaunching of businesses.

The group formed to design the recovery would begin with a rigorous diagnosis of the current situation and potential effects of various solutions. As “uncertainty paralyzes decision making,” says the report, it is important to have broad consensus of a shared agenda and working methodology.  The authors challenge the working group to produce a roadmap within 5 to 6 weeks of its constitution, in order to inspire confidence in citizens, and to have a solid plan in place when the EU decides how to distribute reconstruction financing. Alongside clear norms for preventing the spread of the pandemia, the roadmap would seek to lay out an anti-cyclical fiscal policy that stimulates demand, invests in job training, promotes efficient public spending and manages increased deficit wisely and within EU guidelines.

The plan should go beyond short-term solutions, taking into account medium-term issues of 1-3 years in order to provide the stability to make plans within and across sectors. Its work would complement not only the government commission’s work, but also the indispensable, permanent dialogue between the Ministry of Labor, unions and business associations with regard to labor relations.  

IESE’s Antonio Argandoña, who also contributed to the paper, sums it up as follows:

“The labor market has been a serious problem for the Spanish economy for years. Not only are there many people capable of working but unable to find a job, but in many cases, any job they could find would be insecure and short-lived. This type of work does not constitute a secure basis upon which people can develop a meaningful and satisfactory working life that allows them to build a family, have access to housing and secure a future for themselves and their children. That is why it is important that companies, unions, governments and the civil society commit to adopting the measures - public and private - necessary to solve the problem of employment, not only now, due to the pandemic, but for the future as well.

 

Employment is not only a contract between an employee and a company, but it involves families, local communities, the economic sectors, the authorities, schools, social services and many others. That is why it is important that a long-term dialogue be opened, in which all relevant points of view can be taken into account.”