“All Together, Or Not at All”
Lessons from the Basque Country’s Economic Revival
In the early 1990s, Juan José Ibarretxe was handed a seemingly impossible task: to find the $100 million dollars necessary to build Frank Gehry’s bold new Guggenheim Museum in Bilbao. At the time, he was the President of the Basque National Party’s Economic and Budgetary Commission. When Ibarretxe argued that it couldn’t be done, the Basque president, José Antonio Ardanza, turned to him with a smile and said, “it’s your business now.”
As the iconic building makes clear, Ibarretxe — who would go on to succeed Ardanza as president in 1999 and serve as the Lehendakari for ten years — found the money, and the museum opened in 1997 to much fanfare. Twenty years later, the Bilbao Guggenheim is the linchpin of the Basque Country, contributing 425 million euros to its GDP and providing over 9000 jobs.
The museum’s impact has been so striking that it coined the “Guggenheim effect,” which describes the ability of a single architectural investment to revitalise an entire region. As far as the world is concerned, the Guggenheim museum in Bilbao rejuvenated the Basque Country almost single-handedly — or so it seems.
The real story, of course, is much more complex.
“The Guggenheim Museum was just one decision among many,” Ibarretxe explains. “[If it had been] isolated from the rest of the decisions and from the rest of our holistic approach, it would have been a less successful idea.” The Green European Journal confirms Mr Ibarretxe’s view, explaining that the success of the Guggenheim was due to the part it played in a much broader urban and socioeconomic regeneration plan.
This regeneration has created a Basque Country that is unrecognisable to the destitute region left in the wake of the Franco dictatorship. Today, forty or so years after the Statute of Guernica was signed to protect the region’s autonomy, the Basque Country is an example of how economic transformation can be achieved without compromising social equality.
In 2017, per capita income was greater than €36,000, an amount exceeded by only seven EU-28 countries. Life expectancy is amongst the highest in Europe. Just shy of 40% of the Basque population has received a university education, a level similar to that of Iceland, Norway and Switzerland. Serious poverty hovers around 5%, lower than the European average.
Given the challenges currently facing the world — ranging from climate change to worsening inequality to the COVID-19 pandemic — it is clear that the Basque Country’s approach to equality, innovation and economics contains important lessons.
How did the Basques address the crisis?
As the Basque people surveyed their devastated region in 1979, they faced the impossible question of what to address first. It quickly became clear that problems of such magnitude could not be fixed with siloed, uncoordinated interventions. “We looked at the whole area as a system,” said Gorka Espiau, a mainstay of the social innovation and policy scene in the Basque Country. “The crisis was so systemic. Everything was collapsing. And that’s why we created a systemic response; we couldn’t solve this problem by doing only one thing.”
The first arm of the government’s systemic response focused on making Basque products competitive on the world stage. Espiau explained, “We can have a lot of interesting projects, but if they can’t compete in the market, they’re not going to succeed.”
This approach saw numerous organisations and initiatives established to facilitate a wide range of outcomes in the areas of industrial development and advanced manufacturing; takeovers, mergers and technology acquisitions; energy production and distribution; technological innovation; exports and internationalisation; and the development of small and medium-sized enterprises. Between 1980 and 1986, spending on research and development as a proportion of GDP increased sevenfold, while cluster organisations were formed to encourage collaboration and innovation in the paper, automotive, telecommunications and maritime industries.
The government also collaborated with private-sector players to create several public-private partnerships, for instance in education and public transport, in order to engage all possible levers of change in the fight for economic and social prosperity. Pedro Etxenike, the former Minister of Education in the first post-Franco Basque government, described these partnerships as “the key.”
It was this early hunger for a better future that fuelled the competitive spirit of the 1980s. Over time, after learning how to compete in industry, technology and education, and with social and economic indicators improving, the Basque government was ready to turn to the next stage of its revival plan.
The focus for the 1990s was on learning to compete and cooperate on an international stage, of which building the Guggenheim was a central part. Ibarretxe explained that the government’s main objective in building the museum was to change the view of the Basque Country in the eyes of the world. By creating a new perception of the region — taking it from a place of destitution and terrorist violence to one of culture and innovation — the Basque people found it easier to innovate in collaboration with others, which became the priority for the new millennium.
What else mattered?
However, while competitiveness, collaboration and innovation were defining features of the Basque transformation, the Basque people knew that their success depended on other factors too. Ibarretxe speaks often of what the Basques called the “K” factor, which is the government’s commitment to the Basque region’s history and distinctive cultural and linguistic identity.
It was always clear to the Basque leaders that respecting and emphasising the bonds that connected the Basque people to one another was critical in creating a sense of solidarity amongst the members of their community. As Benedict Anderson argues in his seminal book Imagined Communities, a shared culture and history is an integral part of establishing a society in which people are invested in the welfare of all members, even those that they may not know or ever meet.
It is this cohesion that underpins the motivation to work with drive and agency for several decades in pursuit of the same fundamental aim, which is necessary for enacting systemic change of this scale. Ibarretxe describes the overall Basque strategy as having “both roots and wings,” because the focus on collaboration, innovation and the future is fortified by a deep appreciation of the glue that binds the community together.
Professor Etxenike agreed that the “K” factor has been vital to the government’s strategy. “It is not about only correctly defining the ends, but also correctly defining the means because if we do not pass a capacity to confront problems to the next generation, they will not have the instruments to deal with them.”
The government wanted to build a Basque region that could thrive in the long term, for which a shared vision, wider understanding of community and competitive investments were all critical. “It’s more important to have something to eat every day, than to have one great banquet and then starve,” Etxenike continued.
This commitment to a sustainable future led the new government to establish the Basque Country’s first public university as one of their earliest projects, with the explicit aim of developing individuals who would be able to carry the torch of transformation into the future. “You cannot have innovation if you do not have innovative people,” said Etxenike.
This is not to say, of course, that a centuries-old linguistic, ethnic and historical heritage is a prerequisite for achieving sustainable transformation. It does suggest, however, that non-financial factors are important for achieving transformative change.
Systemic investing of this kind offers a different perspective on the purpose of capital, one that regards wider environmental or social considerations in a way traditional finance does not. While the specific elements of Basque culture are not replicable in other places — nor do they need to be — that does not mean that the principles cannot be extrapolated to other projects.
Thinking beyond mainstream financial orthodoxy is an important aspect of transformative investment initiatives. This means including the public sector and policy initiatives alongside traditional investment strategies, to ensure that all useful actors are incorporated. By viewing the purpose and potential of capital in a more holistic way, it is possible to create change and unlock value that traditional financial practices leave untapped.
Onwards and upwards
Despite the impressive transformation that has occurred over the past forty years, the Basque Country is still not a utopia. By the admission of Mr Ibarretxe himself, it was comparatively easy to improve the situation in the face of the poverty and unemployment left in the wake of the Franco regime. “We were in the third league,” he says. “Now we are in the first league, and it is a lot more difficult to move forward.”
Professor Etxenike worries, for instance, about how to attract international talent to the Basque Country without compromising the economic equality on which the region was founded
However, continuous evolution is an integral part of transformative change. After following the instincts of a small group of individuals for decades, the Basque Country might benefit from a more rigorous analysis of its industries, to direct investment more purposefully and avoid the pitfalls of top-down decision making.
Similarly, both the economic and physical landscape looks very different now compared to 1980. Much of the 2010s has seen the Basque Country pivot away from heavy industry as environmental concerns have become more pressing, which has involved investing in electric vehicles, smart grids and unconventional gas sources, a shift towards the biosciences and tourism and a move away from the traditional manufacturing and resource extraction that characterised the early years of the Basque transformation. Hopefully, the Basque people will be able use the insights and experience they have gained from decades of economic development to combat the new challenges of the 21st century.
The Basque Country’s current economic and social position in Europe might also make new methods of progress available. In 1970, poverty levels were high, and very few Basque citizens had enough money to participate in the transformative investments taking place. Now, with one of the highest per capita incomes in Europe, there is an opportunity to raise capital from Basque citizens, corporations and institutions themselves, which would involve people in both the economy and sustainable development efforts at a much deeper level.
Mr Ibarretxe is keen to emphasise that the Basque transformation is not a recipe. The Basque revival cannot be replicated exactly — but it can be learned from.
The Basques have always understood the importance of competitiveness, and encourage keeping a close eye on whether products are successful in the marketplace. Achieving desirable returns is still a key piece of the puzzle, even when social equality is the ultimate aim.
However, this does not mean that non-financial considerations should be ignored. “The culture is key,” said Mr Ibarretxe, referring to a wider shared vision of the future than any specific cultural tradition. “In our case, it was simple: all together, or not at all. You need to engage people, otherwise it doesn’t work.”
For the Basques, the tangible investments made in technology, industry, education and transport were able to succeed because they were underpinned by robust goals for the future, informed by the strengths of the community, and enacted by individuals who were dedicated to social and economic development. Ibarretxe hopes that the Basque story can provide not just evidence but also the inspiration for people and communities who want to create a world that is sustainable, just and prosperous, even though there are few meaningful models of what that looks like.
By putting these ideas into practice, the Basques were able to “look the market in the eye while looking the people in the eye at the same time,” which seems a worthy aim at this critical juncture of human history.
