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Technological re-industrialization: a quiet transformation

Technological re-industrialization: a quiet transformation

Technological re-industrialization: a quiet transformation

Will this be an era of reindustrialization? Spain, like other developed countries, intends to increase the share of the industrial sector in the economy and move closer to the level of Germany or the Baltic States. However, this will not be an easy task unless we move from the traditional notion of "industry" to that of "technology industry".

The industry sector will develop in areas such as technology, robotization, digitalization and related services such as logistics, maintenance, design, engineering, etc. This will have two effects. On the one hand, the growth of the sector will not be counted in the total gross value added (GDP) that we call 'industry' today, but in the sector we call 'professional''or technology services', and on the other hand, the process of robotization will limit job creation in the industrial sector in the future.

Data suggests that this transformation process has already begun. The machinery industry created wealth (GDP) at an annual growth rate of 1.3% from 2012 to 2022. This growth is the result of a 0.6% annual increase in full-time employment and a 0.7% increase in productivity. Thus, productivity has become the primary factor explaining the growth in industrial activity. This is in contrast to the rest of the economy, where productivity growth has been zero or negative due to strong employment growth in low-income sectors.

This increase''productivity associated with the process of productive specialization and digitalization is what is behind the increase in industrial competitiveness, which is reflected in the growing success of the Spanish economy: a positive external balance.

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The structure of GDP reflects three changes, reflecting the increasing competitiveness of the economy, the impact of digitalization and technological investment.

The silent transformation

The first change is due to the sharp increase in non-tourism services exports in recent years, among which information and communication services, business services, transportation and goods support services stand out. Such exports accounted for 19.3% of total exports at the end of 2019 and''rose to 22.3% in the second quarter of 2023. Improved competitiveness in increasingly internationally integrated sectors such as information technology and business services has allowed Spain to run growing surpluses in this type of services, compared to the deficits experienced by Germany or Italy, which have serious supply problems.

Secondly, the investment structure reflects the increasing share of investment in intellectual property (innovation, R&D, patents, technology), which rose from 16.4% of total core investment in 2019 to 19% in the second quarter of 2023. Certainly Europe's Next Generation funds have been able to contribute to this growth, but the pandemic has also accelerated this.

The third element,''which has increased its share in GDP is capital depreciation. The cost of replacing worn-out capital to keep it in working order (depreciation) explains the increase in the share of gross operating profits (corporate profits) in GDP over the past five years. This is the result of both the increase in investment in intellectual property relative to investment in equipment and infrastructure, as already noted, and the fact that the rate of amortization of intangible capital is five times faster than that of physical capital.

These three elements exemplify the silent transformation that is taking place in the productivity structure of the economy due to the effects of the digital economy and the robotization of industry. If we want to''reindustrialize the country, we need to continue to support this transformation with public funds, create more talent, effectively apply digital knowledge in industrial activities and reduce the bureaucratic burden in public administration. Only if a large ecosystem of digital companies in our country can transform and expand the industrial sector will we be a little closer to the German economy.

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