Public production vs inflation: the old debate is back

Can public production tame inflation? The data behind a clash of two models

Inflation is not easing, and the spectre of price controls and public production is back in economic debates. But what does historical experience say? While one camp argues that state monopoly was the recipe behind the Spanish miracle between 1923 and 1930 and from 1939 to 1975, another dismisses it as a self-serving myth and points to monetary policy as the real cause.

Defenders of the public model: full employment and zero debt

Those who advocate public production as an antidote to inflation recall that, under state monopolies, Spain achieved full employment (3.7% unemployment in 1975), zero sovereign debt, and purchasing power that allowed any worker to buy a newly built home in the capital with one year's salary and support a family of five children. 3.3 million homes were built between 1950 and 1975. The thesis is that today's inflation is not a monetary phenomenon but a speculative scam by multinationals that raise prices in a coordinated way. Price controls by law, in this view, would fail because producers would cut supply; the solution is for the State to once again produce basic goods directly.

The critics: monetary inflation and an inefficient state

At the other end, it is argued that inflation is essentially a monetary phenomenon: the central bank prints money without restraint, and the State makes matters worse with deficits and taxes. Public enterprise, far from being efficient, breeds cronyism, deficits and expensive services. The Telefónica example comes up again and again: in its public era it had the highest tariffs in Europe and the worst service; today, with private competition (Digi), prices are far more competitive. It is also argued that the Franco era was not a model of public production: the vast majority of goods and services were produced by private companies, and it was the private sector that built the millions of homes. The 90% loss of purchasing power since then is attributed to higher taxes (income tax, VAT) and excessive regulation that makes everything more expensive.

The elephant in the room: housing

The debate is fiercest over housing prices. One side blames pure speculation by those who control the stock, pointing out that millions of empty homes still exist. The other points to the massive demand created by immigration (6 million people) and the absence of new construction, worsened by protectionist laws and red tape. One damning figure is cited: the same flat that someone's grandfather bought for 100,000 pesetas now sells for 300,000 euros, a 50,000% rise that no tax or wage increase can justify.

The clash of models is total. Historical experience is invoked on both sides, but the available data do not close the gap. What is clear is that the solution is not simple: neither price controls nor public production seem to be miracle cures without side effects, but neither has current monetary policy managed to contain an inflation that keeps hitting people's pockets.

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The detailed purchasing power calculations, the evolution of housing prices and the efficiency comparison between public and private companies in key sectors can be found in the full analysis that sparked this intense exchange of views.

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