The Economic Value of Spanish

Rodrigo Garza Arreola y Mireya Tijerina González
The economic value of Spanish is unquestionable given the prominent place that it occupies at a global level according to the demographic and economic valuations registered by Cervantes Institute. This institute assigns an economic value to the language depending on the number of speakers. For example, according to the figures in its latest report (Instituto Cervantes, 2022) [see infographic in pages 29], Spanish ranked second in the world in terms of the number of native speakers and third in terms of the share of Spanish-speaking countries in the world’s gross domestic product (GDP). These figures, while expressing the indisputable relevance of Spanish, raise a dilemma that has been overlooked and that we wish to highlight here: if the value of a language increases with the number of speakers, how is it possible, then, that the contribution of Spanish speakers to world GDP is not proportional to the size of their population? That is to say, if it is true that the value of a language increases with the number of speakers and if, for example, the proportionality that exists between the number of speakers of Mandarin Chinese and its contribution to world GDP were maintained, then the purchasing power of Spanish speakers should be 63 % higher than it is today; that is, 3.73 trillion per year whose absence in the world GDP accounting we need to explain. If used the proportionality of English speakers, the shortfall would be even greater. As we can see, such big differences, even if they are general estimates, are no longer irrelevant. In this brief essay, we venture a solution to the enigma and draw conclusions that we believe are relevant not only to understanding the current situation and the future of Spanish but also to understanding what conditions could modify the future of English and Mandarin Chinese, offering a window of opportunity to increase the value of Spanish.

Many of the few studies that have addressed the economic value of a language such as Spanish have begun by considering the language as a commodity whose value is determined by its exchange in the market. According to this approach, there would be supply and demand for the language called Spanish. From the interaction between supply and demand, a price and an equilibrium quantity would be determined, through which anyone who wanted to participate in this exchange, supplying and demanding the Spanish language, would find the satisfaction of their need. If the demand for Spanish suddenly increased, the market system would cause both the price and quantity of language offer to increase accordingly. Finally, through this equilibrium, we could infer the value created by the Spanish language as the sum of the surpluses of the suppliers and demanders of Spanish. If these exchanges happened freely, it is easy to conclude that acquiring and exchanging this language in the market generates positive value; however, the more relevant question would be to know if the value created is greater or lesser when it is a language other than Spanish.

This approach is perhaps more relevant to understanding the language teaching market, which is a significant, large, and growing industry. UNAM, through the Teaching Center for Foreigners (CEPE), has specialized in teaching Spanish, developing excellent work that has already completed its first 100 years. Following economic reasoning, rather than a commodity, language should be understood as an input to production, more specifically, as an investment in human capital. In this framework, the economic value of Spanish would be calculated as a rate of return on the investment made, and the relevant comparison would be against the returns on other human capital investments, not just that of learning a language other than Spanish; comparisons are facilitated since the profitability on studying a language is expressed as a percentage. Investment in human capital is time-intensive and its cost also rises with age. Likewise, profit depends on the life horizon of the project (how many years it will be useful to speak the language), which shortens with age. Because of these reasons, profit from learning a language as an investment in human capital, is generally higher in childhood than in adulthood. However, if the labor market rewards learning a new language, as may currently be the case with English or Mandarin Chinese, the investment can pay off in adulthood. According to this human capital approach, it is possible to make specific calculations on the performance of speaking more than one particular language in certain labor markets; for example, Fundación Telefónica has studied the effect of bilingualism as reflected in the salaries of workers of Latino origin in the United States. The human capital approach has also produced the endogenous economic growth theory that highlights the positive externalities of human capital investment; this means that human capital investment does not only pay off for the individual who invests in education but also communities benefit from it, which leads to the conclusion that subsidizing education to speak other languages, as UNAM has consistently done, can be a very good social investment.

While considering language as a commodity may be a good starting point, we believe it does not take very far. According to Fundación Telefónica data cited by Cervantes Institute, language as a commodity explains 15% of US GDP, a not insignificant amount, although we consider that the value of a language is even greater. Our hypothesis is that the role of language in the generation of wealth is more similar to the role played by the price system itself than to the role played by a commodity; indeed, we claim that both systems, language, and price, interact to determine the overall ability of world regions and their speakers to generate wealth through exchange and the specialization of labor. With this hypothesis we intend to explain the 63% of annual GDP that should be added up by the Spanish-speaking countries and that does not exist.

Michael Foucault in The Order of Things (1968) considers representing, speaking, classifying, and exchanging as the acts that allow the formulation of an archaeology of the human sciences. In this seminal text, Foucault reflects on language turned object and concludes:

At the moment when language, as spoken and scattered words, becomes an object of knowledge, we see it reappearing in a strictly opposite modality: a silent, cautious deposition of the word upon the whiteness of a piece of paper, where it can possess neither sound nor interlocutor, where it has nothing to say but itself, nothing to do but shine in the brightness of its being. (Foucault, 1994: 300)

Language, more than an object or a commodity (or in addition to it) is a system that allows speakers or users to generate social value in a broad sense. We could say that such a system consists of a limited set of rules and a finite vocabulary that allows speakers to construct and understand grammatically correct sentences, even if they have never previously uttered or heard them.

How this linguistic system interacts with the price system and with other cultural systems, such as that of representation, is precisely through the process of generating material and financial wealth in our societies, so it is important to understand how this wealth is produced. One of the first notions formulated in this regard was the idea—proposed by mercantilism—that associated wealth with the possession of raw materials and precious metals. This doctrine’s recommendation for governments seeking to increase their power and wealth was to impose barriers to international trade so that the government maintained a surplus in its current account with its political rivals, that is, its exports were greater than its imports. Through the balance of payments mechanisms and complex monetary standards, it could be thought that these mercantilist recommendations did indeed increase the wealth of nations because they implied—at least in the short term—the entry of precious metals such as gold or silver into the coffers; but in the long term, if that wealth was not backed by growth in labor productivity, it vanished through a sustained increase in the price level, a phenomenon known as inflation. This is not the place to review this subject, but we can mention that for some historians the prevalence of mercantilist policy in the Spanish crown partially explains the fall of its empire.

David Hume made significant advances in explaining the hoarding mechanism of mercantilism and how it was counterproductive in the long run, but it was his colleague at the University of Edinburgh, Adam Smith, who unraveled the origin of the wealth of nations. According to his famous work, it was not natural resources or accumulated precious metals that made a nation wealthier; the key to understanding the wealth of nations is the division of labor, i.e. the specialization of tasks, through which it is possible to incorporate accumulated knowledge into the production of goods and services. Adam Smith formulated what is considered one of his main findings: the division of labor is limited by the extent of the market. Thus, contrary to the mercantilists, who sought protectionism and autarky in international trade, Smith’s recommendation to nations was to expand foreign trade to achieve greater specialization of labor by exploiting the absolute advantages of each country.

It was David Ricardo, with his notion of relative advantage, who refined the theory of foreign trade. However, both versions seem to ignore that part of the specialization of labor occurs inside companies and that this specialization of labor is coordinated not only with prices but mainly with speech acts such as orders, instructions, rules, as well as shared norms that define culture and are codified through language and other symbolic systems such as rituals and celebrations. In this way, speech and price systems interact to determine the potential wealth of a territory and its speakers.
Speech and price systems interact to determine the potential wealth of a territory and its speakers

The biblical tales seem to express this correctly. On the one hand, in the book of Genesis, we can read that Yahweh confused the language of men to avoid the construction of the Babel Tower; on the other hand, in the book of the Acts of the Apostles, it is said that the Holy Spirit gave the gift of tongues to his disciples to be able to spread his word. These accounts clearly illustrate the role of language in raising or lowering what economists call coordination costs. Thanks to the reflections of Gary S. Becker, a professor at the University of Chicago, we know that, contrary to what Adam Smith believed, it is not the extension of the market that limits the specialization of labor, but the coordination costs. The Roman Empire passed through this situation in Trajan times, and it was Hadrian and Marcus Aurelius who built walls at the borders of its domain, that were the beginning of its decline. This is also being experienced by large international companies such as Procter & Gamble, which have to adjust their organizational architecture to weigh the gains of job specialization against the costs of coordinating their specialists.
Understanding language as a system and not as a commodity allows us to understand that the phenomenon of speech, unlike the price system, is subject to what complexity theory calls path dependency, also known as hysteresis (the state of a system depends on the previous states through which it has passed). Although it might divert us from the main topic, it is important to clarify this concept. Language and price systems share some important characteristics; for example, both are spontaneous orders that do not require regulation to reach a state of equilibrium. However, it is worth noting here an essential difference between the price and the speech systems. While in the price system, the state of equilibrium of the exchange of goods exists, and is unique, stable, and optimal, in language as a system there can be multiple equilibria, not all of them stable, and it is not easy to establish the criterion of optimality because there can be asymmetries between winners and losers that are impossible to reconcile. One of the main differences to highlight is that, while in the price system initial conditions do not matter —sooner or later, equilibrium will be established—in a path-dependent system, as we claim language to be, initial conditions matter to the extent that a social group such as Spanish speakers can be trapped in history. This situation has been exemplified by cases drawn from the adoption of certain industry standards that, once adopted by a significant critical mass, are virtually impossible to change; however, these standards may no longer be optimal. A very popular example that illustrates the phenomenon very well is that of the configuration of computer keyboards that preserve the order of the keys of the old typewriters now in disuse. From this paradigmatic case, this type of phenomenon is called Qwerty. The speech system shares this characteristic with other standard systems adopted by user groups. For that reason, when talking about language, history matters. In this sense, we must briefly and schematically recall the history of the great expansion of Spanish language. The empire where “the sun never sets” reached such an extension that, from a certain moment on, it faced higher coordination costs compared to the so-called West India Companies, which were the exploitation schemes of the American territories chosen by the British and Dutch powers, among others. 
A first result of our approach is that the relevant economic value of a language should be the net value, i.e., the difference between the income generated by labor specialization and the costs of coordinating such specialization. Another relevant aspect of the history of our language is that the Spanish empire decided to prohibit trade between its colonies or viceroyalties in America, so as not to lose control over its overseas domains; a measure that proved counterproductive, leading to a progressive dismemberment of the empire that culminated in 1898. 
Then, a second result of applying our approach to language is that once a balance between the number of speakers is reached, it is difficult to modify it, even if the results are not the desired ones. For their part, the countries that emerge from this dismemberment are today’s Spanish-speaking nations in the Americas, which certainly seem to be trapped in history, unable to overcome the threshold that would allow them to achieve sustained prosperity. According to the World Bank’s ease of doing business rankings, Spanish-speaking countries have higher costs of doing business in terms of starting a business, financing, enforcing contracts, and dealing with insolvency, among other parameters. According to data by Transparency International, the perception of corruption is high in these nations. All of the above results in higher specialists’ coordination costs. A measure of coordination costs would then be precisely those 3.73 trillion dollars per year (this figure, of course, expressed in present value, would be much higher, and to some extent tragic, so we waive its calculation). Hispanic heritage is not a fact from the past; it is a present-past acting on our capacity to generate wealth, not only because of its value but also because of the costs of specialization. Alfonso Reyes used to say that American intelligence, compared to European intelligence, is less specialized. This sharp observation can be explained by our hypothesis based on high coordination costs. 
A third result of our approach is that, once an equilibrium is reached around that state of affairs, ways of life and narratives that support and maintain it develop. As Spanish speakers, we are also heirs to a narrative that we often accept without reflection. This story has two parts: first, the myth of the cornucopia, which points to the American continent as a land teeming with natural resources, be they precious metals or oil; hence our predilection for mercantilist policies. Second, the archetype of the victim of history whose revenge on behalf of all the oppressed drives one government after another to articulate unviable public policies, privileging protectionism and autarky that perpetuate the elites and keep very high percentages of the population below the poverty line.
So far, the approach we propose: to understand language as a system and not as a commodity, in addition to offering an answer to the problem posed concerning Spanish, allows us to explain the place that speakers of Mandarin Chinese and English currently occupy as the main contributors to the world’s GDP. Beyond explaining the obvious, the proposed approach also helps us answer the question about the future of these two languages. As Spanish, English and Mandarin Chinese are also subject to path dependency, although they are in different states. Let’s see it in parts. First, if the purchasing power of Mandarin Chinese speakers is mainly explained by the number of speakers, the relevant factor in its future will be the weight of coordination costs in setting the limits of China’s future GDP growth. Secondly, concerning the hegemony of English as the lingua franca of international trade, it could be threatened by the current wave of mercantilist and anti-globalization thinking (as happened with a president who led that country recently). It would seem that US hegemony today is suffering the same fate as Spanish hegemony did with the so-called black legend of its empire. As can be seen in social networks, narratives against the institutions of political freedom and free market are circulating with great contagious power, so that even English as a hegemonic language could find its decline.
We do not wish to conclude our essay without extracting a fourth result from our hypothesis: language as a system has multiple equilibrium points, not only the one in which Latinamerican countries seem to be trapped. Consequently, concerning the window of opportunity for Spanish mentioned at the beginning, with the scenarios we have seen for English and Mandarin Chinese, we could think of the possibility of a reordering of Spanish among the hegemonic languages in the coming decades. So, before giving Spanish up, it should be pointed out that within the lights and shades that make up the heritage of the Spanish empire and its broken hegemony (“invertebrate hegemony”, as José Ortega y Gasset would say) we tend to lose sight of certain flashes and clarities that Hispanic Americans, and in particular Mexicans, need to highlight. Such is the (unstable) equilibrium of humanism that flourished in Mexico City at the end of the 17th century, when a poetic text written in Spanish was able to harmoniously articulate apparently dissonant elements; let us list the main ones: the practice of human sacrifice among the native peoples of America; the Greco-Latin myth of Narcissus and Echo; the Song of Songs from the Hebrew Bible; the Passion of Jesus from the New Testament; the Eucharist from the Catholic rite, and non-Christian thought. All of the above, with the originality of a woman’s voice of American origin, through an auto sacramental with verses inherited from the spiritual chant of St. John of the Cross, as well as from the great baroque tradition of the Spanish Golden Century but endowed with unusual originality. We refer, of course, to The Divine Narcissus by Sor Juana Inés de la Cruz.
In times when discourses tend towards division and polarization, we must look towards other possible balances. As exemplified by the case of Qwerty, once an equilibrium has been reached by a critical mass of the population, it is very difficult to modify it; however, it is often the poets who reveal to us other possibilities offered by a system. The great civilizations of history have had epic poems or songs of deed; some arose spontaneously by anonymous authors and others were commissioned by the powerful, as happened with Virgil’s Aeneid. In both cases, these texts played a leading role in certain societies to move towards new forms of coexistence, which is why we want to emphasize the importance of having at our disposal the great wealth and universal treasure of literature in Spanish to find possible models of poetic living, as an antidote to the extremism of which Hölderlin spoke. Here it is perhaps easier to highlight the incalculable value of literature written in Spanish since, in addition to being a capital good with positive externalities, which, like Alfonso Reyes’ “Sun of Monterrey” (“It is a hoard—unending, / unending—that I squander.”) can play an important role as a focal point for collective action leading to the adoption of a new balance capable of reducing coordination costs and giving a fair space to different world views in a harmonious chorus where confrontations are resolved poetically. This great treasure of the Spanish language can contribute to giving meaning to our dwelling on earth, to our relationship with the everyday and with the divine, and can give a renewed purpose to our lives: all of this, without a doubt, is of incalculable value. 

Rodrigo Garza Arreola has a mater’s in Public Policies at the Chicago University. He has participated in several publications by UNAM’s Teaching Center for Foreigners.

Mireya Tijerina González is an economist with master’s studies on industrial economy at the Autonomous University of Nuevo León. She has worked in UNAM’s Coordination of Humanities and lead the San Agustín University Museum, Language, Information, Knowledge project.

Foucault, Michel (1968). Las palabras y las cosas. México: Siglo xxi Editores. English edition: The Order of Things, 1994, New York: Vintage Books.

Instituto Cervantes (2022). El español: una lengua viva. Informe 2022. Madrid (https://cvc.cervantes.es/lengua/anuario/anuario_22/informes_ic/p01.htm).
Current issue
Previous issues
No category (1)
Encuadre (8)
Entrevista (6)
Entérate (8)
Experiencias (2)
Extensión (4)
Enfoque (1)