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Case of Building Industry

Essay Topic: ,

Countries often have different models of government business relations. The nature of the political system in a country has particular influence over the governments’ relations with the business. Despite the common ground of being advanced liberal democracies, the United States and Spain have markedly different models of government business relations. The aim of the essay is to compare the government business relations in the United States and Spain with special reference to building industry.

Different Trajectories The very business culture and the government’s relations with the business in Spain are markedly different from those of United States. For instance, it has been pointed out that “starting up a business in Spain remains more complicated than elsewhere, procedures more cumbersome, the steps more numerous, the documentation likewise. The twenty-eight weeks required to start a business in Spain contrast with the half-day required in the USA” (Rollin and Richardson, 2001, p.

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181). It is because of the prevailing nature of corruption that is resulted by the collusion between politicians and bureaucrats such obstruction of free enterprise exist in Spain. In the same way, closing down of a business in Spain too has been noted as extremely difficult. Eastaway and San Martin are of the opinion that “the housing market in Spain has become highly regulated through public intervention with the objective of satisfying the large and growing housing needs” (1999, p. 699).

The Spanish government has pursued a range of policies in order to mitigate the situation ranging from subsidies to market intervention. As a result, the construction industry in Spain is distorted and less competitive. Even the successes of the United States small scale and medium size industries are attributed to government’s desire to support small business owners and entrepreneurship; finance, tax inducements, mentoring, training, and legislation allowing limited liability for failure, all act in the interests of the entrepreneur.

The entrepreneurial fabric and the social/cultural/economic framework support and encourage those wishing to embark on or expand an entrepreneurial venture” (Rollin and Richardson, 2001, p. 188). The American government has been persistent in providing the necessary infrastructure and business environment over the post second world war period. Through a business friendly approach, the American government ensures that there are more rewards and fewer risks for doing business in the United States. Moreover, the USA has long tradition of free enterprises contrary to the Spanish trajectory of protectionism.

Historically speaking, the construction industry in Spain is deepened upon both the supply of domestic demand and the acquisition of foreign earnings. Franco’s dictatorial regime had installed a protective regime of business which perpetuated monopoly and discouraged free-market competition. The oil crisis in the mid 1970s had paralyzed the industry in a grave manner. The recovery came only with the join9ng of the European Community (EC) in 1986. The internal political situation had long been detrimental to the free economic development of Spain. Ahijado et al.

have argued that “the aftermath of the civil war of the 1930s was international isolation and acute economic difficulties resulting from the destruction wrought during the war. Indeed, it took until 1950 for industrial production to return to its 1929 level, and the country remained over-whelmingly dependent on agriculture for employment” (1993, p. 91). Then, onwards, Spanish economy took a radical turn towards accelerated economic development fuelled by tourism and the steady flow of migrant labor. Both the enhanced tourism related development and migrant labor have helped a boom in the construction industry.

However, the technological base of Spanish industry still remains low. In the recent period, Spanish construction industry has undergone “a dramatic decrease in the average size of Spanish construction firms, in particular, and an increase in their use of subcontracting” (Gonzalez, 1998, p. 432). It has caused a structural fragmentation of the construction industry as a whole. The changing nature of emerging construction technologies have primarily contributed to the instabilities in the construction industry all over the world.

The fragmentation of the construction industry in Spain is accompanied two different features of increasing number of firms and the decreasing average size of the firms. Gonzalez has forcefully argued that “the cause of observed fragmentation is changes in institutional restrictions, mainly labor and tax regulation” (1998, 440). The Spanish government has a lopsided and imbalanced policy towards competition in the construction industry as it promotes small business units against big firms.

As a result, to be competitive, big firms have compelled to reconstitute themselves as smaller units and thereby prevent them from mobilizing great resources for the benefits of consumers. This tendency in Spain is clearly not in par with the United States government policy of promoting mergers and joint ventures by construction companies. Moreover, in Spain, there is even lost cost for creating new firms which too acts against the size of existing firms. American construction policy is mainly aimed at ensuring the security of buildings.

There are large amount of regulations and standards set out by the various regulatory bodies appointed by the state governments and the federal government. It also aims to deal with possible production of low quality building materials. In brief, the building policy in the United States is highly bureaucratic and procedural as it attempts to save the industry from possible political corruption and the consequent violation of rules and regulations. It has been well observed that the politicians-businessmen nexus in Spain has caused unnatural price rises in the housing industry.

The effect such a phenomenal corruption cannot be contained within the borders of Spain as it is well integrated with the European Union Economy. In the United States, the use of precast concrete system is not widespread although it has proved to be more beneficial. Because, there is a major shortage of expert personnel that can design and manage building construction that makes use of precast concrete components. The main reason behind this general lack of expertise appears to be the deficient engineering and architecture curricula currently in effect in U. S. universities and colleges” (Polat, 2008).

Many researchers have well acknowledged the fact that “the USA owes much of the success of its entrepreneurial activity to its economic and cultural environment, including affirmative action, employment law, tax incentives, government support, mentoring, and a “can-do” attitude. Life-style changes in the USA accommodate entrepreneurs” (Rollin and Richardson, 2001, p. 187). Also, Choi and Russel (2004) argued that the construction firms in the United States have focused in enhanced diversification through mergers and acquisitions and thereby strengthens the growth in the industry and the profits and confidence of stake holders.

In Spain, the pattern of the developments in the construction industry is highly unbalanced and lopsided. It is well noted that “growth in the late-1980s was in the relatively more prosperous Madrid and Catalonia regions, as well as in the autonomous region of Valencia, all of which benefited disproportionately from the inward investment boom. In contrast, some of the ‘rustbelt’ areas in the North have been adversely affected by the decline of traditional industries” (Ahijado et al. , 1993, p. 98). In America, ethnic differences are noted on the matters related to construction industry.

Doodrum and Dai have found out that “differences exist among the number and frequency of occupational injuries, illnesses, and fatalities between Hispanic and non-Hispanic construction workers, although the difference did not always disfavour Hispanics” (2005, p. 1027). Whatever reasons may be, the tendency in the USA is for Hispanic workers to be employed in more hazardous areas of construction. For instance, “Two of the top five Hispanic construction occupations, construction labourer and electrician, are in the top five most hazardous construction occupations” (Doodrum and Dai, 2005, p.

1028). Rollin and Richardson in their empirical research on Spanish business culture have argued that “[c]urrent Spanish legislation does not favour entrepreneurs or small-business owners. Changes in EU legislation, such as the Parental Leave Directive, requiring changes in national legislation, can hit this group hard” (2001, p. 185). It creates a condition that even businesspersons who otherwise would have been law-abiding step asides the paradigms of law as there are many contradictions within the law.

The multiplicity of legal frameworks in Spain by its integration with the European Union too have made a lot of confusion in the construction industry and added to the existing chaos. However, safety issues and environmental priorities that are directly linked to the construction industry have not got sufficient attention not from American or Spanish governments. In both countries, t is necessary for the construction policy to be framed on the “rationale as to why certain matters are considered to be safety issues has its roots in environmental concern” (Kibert, et al.

, 1995, p. 99). It means there needs to be a holistic to environment protection and safety management in the construction industry. The lack of labor flexibility has been “a major factor in the continuance of the very sizeable black economy (economia sumergida), estimated at representing some 23% of GDP” (Rigby and Lawlor, 2001, p. 169). Curiously, the black economy is the backbone of the building industry and the silent compliance of government policies based on corruption is leading into the deteriorating the healthy environment in the construction industry.

Historically, it could be seen that the “rigidities established in the labour market under Franco were consonant with the broader ethos of the dictatorship which was strongly protectionist, corporatist and characterised by strong state intervention in most areas of activity” (Rigby and Lawlor, 2001, p. 169). The recent Spanish government policy of artificially creating green jobs in construction industry too has failed and only contributed to the ongoing recession.

In the United States, although the general rate of occupational accidents and casualties in the construction industry very low, the roadway construction has reported to be more dangerous for workers. Through their research, Kale et al have proved that “construction companies that outperform their rivals adopt a hybrid mode of competition. In other words, successful construction companies place varying degrees of emphasis on more than one mode of competition (e. g. , cost, quality, innovation, and time) rather than focus on a single mode of competition” (2002, p.

246). It is apparent that Spanish construction companies have not diversified and the government is less encouraging to allow fierce competition in the realms of cost, quality, innovation and time. On the opposite the American government has introduced new schemes and policies for ensuring multiple competitions at the many realms of construction industry. Conclusion To conclude, it is possible to argue that the different traditions of government business relations in the United States and Spain are result of the wider historical processes.

The United States as a liberal democracy has encouraged free market and competition in favor of strengthening the construction as whole based on well established norms and procedures. But, Spain, following the trajectory of Franco’s dictatorial regime introduced the policy of protectionism and government interventions in the construction industry and thereby rendering it incompetent and distorted. However, governments in both the United States and the Spain have to redefine their relations to the construction industry in order to properly address the issues of safety and environmental protection in the context of increasing global risks.

Being competitive in the varied aspects of industry such as quality, quantity, labor and time with the active encouragement of the government but based on fair rules and its strict implementation by an impartial administration are the strengths of American construction industry. Spain too has all the potentials to diversify its construction industry and thereby strengthen the whole economy itself. Reference Ahijado, M. et al. (1993), The Competitiveness of Spanish Industry. National Institute Economic Review, Vol. 146. pp. 90- 117. Choi, J.

and Russell, J. S. (2004) Economic Gains Around Mergers and Acquisitions in the Construction Industry of the United States of America, Canadian Journal of Civil Engineering, Vol. 31, pp. 513-525. Eastaway, M. P. and San Martin, I. (1999) General Trends in Financing Social Housing in Spain, Urban Studies, Vol. 36, No. 4, pp. 699-714. Goodrum, P. M. and Dai, J. (2005) Differences in Occupational Injuries, Illnesses, and Fatalities among Hispanic and Non-Hispanic Construction Workers, Journal of Construction Engineering and Management, Vol. 131, No.

9, pp. 1021-1028. Gonzalez, M. (1998) Regulation as a Cause of Firm Fragmentation: The Case of the Spanish Construction Industry. International Review of Law and Economics, Vol. 18, pp. 433–450. Kale, S. et al. (2002) Competitive Positioning in United States Construction Industry, Journal of Construction Engineering and Management, Vol. 128, No. 3, pp. 238-247. Kibert, C. J. et al. , (1995) Integrating Safety and Environmental Regulation of Construction Industry. Journal of Construction Engineering and Management, Vol. 121, No. 1, pp. 95-99. Polat, G.

(2008) Factors Affecting the Use of Precast Concrete Systems in the United States, Journal of Construction Engineering and Management, Vol. 134, No. 3, pp. 238-247. Rigby, M. and Lawlor, T. (2001). The Spanish Labour Market: The Quest for Flexibility. International Journal of Iberian Studies, Vol. 14, No. 3 pp. 168–178. Rollin, H. and Richardson, R. (2001). The Impact of the Prevailing Business Culture on Entrepreneurial Activity and Small Businesses: A Contrastive Study of Spain and the USA. International Journal of Iberian Studies, Vol. 14, No. 3 pp. 179–189

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