Aznar’s Model

As the death toll mounted in Madrid, on April 9 the regional government finally moved — taking control of the thirteen homes where the highest number of deaths were concentrated, which, along with facilities owned by DomusVi and Orpea, included the Reina Sofía Alzheimer center. Run by Clece, a company that forms part of Real Madrid boss Florentino Pérez’s ACS group, the center had fired three care workers only last year for reporting a lack of basic health supplies and unsanitary conditions to authorities. Unions have also denounced its unilateral reduction in carers’ pay in the center as well as in the two other outsourced public homes it runs in the capital.

Pérez — who is best known internationally for spearheading the galácticos (or superstar) transfer policy at Real Madrid — has built up ACS into one of the world’s largest construction conglomerates. Indeed, it is the largest in terms of international revenue generated outside of a company’s home territory. And with Clece, its services division, no other company has benefitted more from the outsourcing and marketization of Spain’s social services. Beyond its sixty-one nursing homes, it runs public kindergartens, hospital cleaning and catering services, homeless and women’s shelters, day centers for disabled people, as well as employing thousands of carers in its management of municipal home-help services in cities like Madrid and Barcelona.

The logic of this business model is clear: sacrifice working conditions (of the predominately female employees) and the quality of basic public services so as to extract massive profits. Yet this is just the tip of the iceberg for the wider ACS group — which, like a number of other Spanish construction and infrastructure companies, was transformed into a global player thanks to state largesse during Spain’s pre-2008 boom years.

After being elected prime minister in 1996, Aznar initiated a reordering of Spanish capitalism — through a wave of privatizations, the expansion of domestic capital markets, and the shaping of a new growth engine for the economy, based around finance and construction. But as sociologist Ruben Juste notes in his book IBEX 35, this was not simply a question of implementing a pro-market reform agenda. Rather Aznar’s ambition was to secure a permanent hegemony for his state project — one that would last “in the long-term, beyond his physical presence in government.” To this end, he pursued a twofold strategy: on the one hand, seeking to generate a broad social consensus around a model which promised mass home ownership and individual prosperity while also organizing a new leading bloc within the capitalist class, which would be centered around, and dependent on the PP’s patronage.

For the construction conglomerates, in particular, this network of patronage meant access to two essential resources: public contracts and credit on tap (through Spain’s politically controlled regional savings banks known as cajas). In the case of Pérez, the pharaonic public works projects (motorways, airports, high-speed train networks) undertaken by the PP were a key source of revenue for ACS. At the same time, Caja Madrid — under the direction of Aznar’s lieutenant Miguel Blesa — bankrolled everything from his buy-up of millions of ACS shares (to become the company’s leading shareholder) to the financing of key Real Madrid signings, including a controversial €76 million loan to the club at the height of the financial crisis in 2009 to buy Cristiano Ronaldo. This was a moment when credit in the economy was frozen for the vast majority of small and medium-sized businesses.

Spanish Parasites

By 2003, as Aznar entered the last year of his presidency, five out of the ten construction companies with the highest stock market capitalization in Europe were Spanish — with ACS leading the pack. In an increasingly deindustrialized economy, construction was a field in which Spain could project its power internationally — as was football. And in Florentino the two became intertwined into an irresistible force — with the presidential box in Real’s Santiago Bernabéu Stadium becoming one of the centers of power and influence in Madrid.

Yet even before the bursting of the housing bubble in 2008 shattered the popular basis for Spain’s growth model, the forms of corruption and cronyism it had generated were eroding the public institutions of the state. The various criminal investigations around the kickbacks-for-contracts, which engulfed the PP (and resulted in former ministers and three of the party’s ex-treasurers being jailed), represented the most venal manifestation of this. There was also the systematic abuse of public funds, particularly in relation to state infrastructure projects — with which construction firms ran up billions of euros in unnecessary overrun costs.

The remodeling of the M30 motorway in Madrid, of which ACS was one of the three main contractors, was one of the most egregious examples of this. Initially budgeted at €2.5 billion, the final cost came in at more than double that, at €6.5 billion. A report published under Manuela Carmena’s subsequent progressive city council talked of “the collusion (of former PP Mayor Alberto Ruiz-Gallardón) with the companies that were contracted for the works” and of “overrun costs without any certificates or documents to justify them and millions of euros being paid for infrastructure and (maintenance) services that did not exist or were never completed.”

Such “collusion” in PP strongholds like Madrid was universal and came to constitute its own form of crony governance, which Manolo Monereo memorably described as la trama (the plot). Alongside outright corruption, a broader network of political favors, revolving doors, and shared class allegiances closely bound together the PP and strategic economic players like the construction magnets. A similar dynamic was also evident with the Socialist Party (PSOE), Spain’s other main party of government, in relation to somewhat distinct circuits of economic power. But in Madrid, the close alliance between PP and the construction sector resulted in these corporations gaining a grip over much of the region’s state infrastructure as it took over the running of key capacities and services.

At the municipal level, this meant contracts for major council services (sanitation, waste treatment park maintenance, etc.) were carved up by the usual suspects (ACS and three other construction firms: FCC, Ferrovial, and Sacyr) while in the wider Madrid region the key devolved powers of health and education were subject to a disastrous form of marketization.

The Health Bonanza

In terms of the consequences for the health system, Madrid now has the lowest level of public health investment per capita in of any of Spain’s autonomous regions, despite being the second richest. Moreover, by 2017 60 percent of all public health spending was ending up in the hands of private providers. Much of this is the legacy of former Madrid premier Esperanza Aguirre (2003–12) who while not able to contest head on the idea of universal public provision (because of its popularity), did spend nearly a decade undermining the public-health system’s ability to deliver.

One of her most absurd records was that despite having built eleven new hospitals for the public system through private finance initiatives (PFIs), the region had less beds per capita than before this expansion began in 2004 — with whole floors, and even entire wings, in some hospitals laying empty. The first of these PFI projects was the Puerta de Hierro hospital. It was built by one of ACS’s subsidiaries, which also had a thirty-year contract to manage the facility and run all nonmedical services – that was until Pérez sold his stake to a Dutch investment fund for €44 million in 2014. Other major construction firms involved in PFIs were Sacyr, FCC, OHL — all implicated in PP kickback scandals.

As the coronavirus pandemic hit, the Madrid regional government was paying for 135 beds at Puerta de Hierro that did not exist. The hospital had never delivered the agreed number of beds, even though they continued to be calculated in the public funding it received. In seven other privately run public hospitals there were similar situations, with El Diario reporting that a further 250 beds in these new centers had never materialized. According to a report Podemos lodged with public prosecutors, Madrid looks set to lose up to €3 billion in wasted public funds by the time ongoing PFI management contracts finish in 2035. At the same time, it has lost 6,000 health professionals since 2007 due to austerity.

As the medical doctor and Más País regional MP Mónica García put it: “we have thrown away millions and millions of euros along the way [with PFI] and now [with the pandemic] we are paying the price … This is the private sector as a parasitic presence within the public health system.”

A similar parasitic relationship is evident in the region’s nursing homes where a majority of the 400 privately run centers are primarily financed with public funds. As journalist Manuel Rico notes, with the Madrid administration offering a mere €55 per day per resident, only large-scale corporate providers with the necessary economies of scale can compete for the contracts. In turn, however, they stint and “save on every last cent – on food, supplies and staff”.

In the working-class neighborhood of Leganes, the consequences of such profit gouging were particularly tragic — with ninety-six people dying in one home run by a multinational headquartered in the tax haven island of Jersey. Each of the last three years that single center has extracted €1 million in profits for this offshore company while families have repeatedly protested at the level of care their loved ones were receiving.

The Challenge Ahead

The COVID-19 pandemic has laid bare the cruelty of Madrid’s model of care but for all the public outrage around the chaos in the region’s nursing homes, to begin changing it will require confronting an entrenched bloc of economic power — of which Pérez is the most visible face. Nor is this blocs reach confined to the capital, with outsourcing and privatization generalized, though more unevenly implemented, in the health sector across the Spanish state.

Any response to systemic failures of the COVID-19 crisis faces various limits. In Madrid itself the Spanish right remains in power — thus restricting any scope for reform of the nursing home system and wider dysfunctionality in its devolved health system. Tighter regulations and inspections are possible but the task of contesting the hold this oligarchic bloc has over the Spanish state will fall to the current PSOE-Podemos coalition at a national level.

In recent weeks, Deputy Prime Minister and Podemos leader Pablo Iglesias has been making interesting noises, proposing the renationalization of energy giants — other key players in Aznar’s network of patronage — as well as introducing a wealth tax on large fortunes. He has also been at the forefront of pushing through a number of important social measures despite the hesitancy of some of his PSOE cabinet colleagues. These measures include a guaranteed minimum income, which should benefit up to 5 million of the most vulnerable members of society.

Yet it seems unlikely that from its position as the junior partner in the coalition, Podemos can drive forward the alternative state project to Spain’s neoliberal regime that it articulated so powerfully in its initial institutional assault in 2014–15. If the failure of care in Madrid’s nursing homes point to the need for wider structural changes across the state, these are not going to come from a PSOE-led government fronted by a political opportunist like Prime Minister Pedro Sánchez. Even if the political will existed, however, the greater internationalization of capital in the Spanish state since 2008 — with Blackrock becoming a major shareholder in ACS and the arrival of foreign investment funds into health and social services — leaves the balance of forces even less favorable as we enter a new crisis.