For decades, we have identified economic growth with prosperity. If an economy produces more, creates jobs, and generates more income, we tend to think that society is living better. In general, this is the case. Without wealth creation, there can be no well-being.
However, growing is not enough to prosper.
Imagine a paper factory that, to reduce costs, dumps its waste into a river instead of installing a treatment plant. The factory produces more cheaply, sells more, and the consumer buys the paper at a lower price. The river pollution, however, does not disappear. Someone will have to bear the cost.
Neither the factory nor the paper buyer pays for it. The bill ends up falling, one way or another, on society as a whole.
Economists call this situation an externality. When an activity transfers part of its costs to others, prices cease to reflect the true cost of what is produced and consumed. The market, under these conditions, stops sending the correct signals.
That is why there are rules that require these costs to be incorporated into prices. This is not a criticism of the market. Quite the contrary: it is a condition for it to function correctly.
It is surprising that some of those who declare themselves great defenders of the market then reject such a basic principle of economics. But it is also understandable that many people end up distrusting the market when they see that it does not work as it should.
The problem, often, is not the market. It is a market that does not comply with its own rules. I do not defend a market without rules; I defend a market with all its rules. And one of the most fundamental is that prices incorporate the real costs of activities.
This same problem can also occur in a tourist economy.
When a visitor books a hotel room, an apartment, a rental car, or an excursion, they pay a bill. The question is whether this bill truly incorporates all the collective costs generated by the activity they are consuming.
We are talking about road maintenance, water consumption when it is scarcer, waste collection, health reinforcements, security services, beach lifeguards, conservation of natural spaces, and pressure on the residential market, among others.
This is not an argument against tourism. It is simply acknowledging that a tourist economy generates collective costs that someone must bear.
It is not about denying that tourism contributes fiscally. Visitors pay taxes and also the Sustainable Tourism Tax. The issue is something else: whether this system manages to ensure that the social costs generated by tourist activity are truly incorporated into the price paid by those who consume it. It is difficult to understand that an activity that exerts such intense pressure on the territory, housing, and public services continues to benefit from a reduced VAT rate, while the Sustainable Tourism Tax has such a limited scope that it can hardly compensate for these costs. It is not a question of collecting more. It is a question of prices better reflecting the real costs of the activity.
When this does not happen, a significant part of the bill continues to fall on the residents of the Balearic Islands. They pay it twice: first, with their taxes, financing public services subjected to increasing pressure; and, then, directly bearing the effects on housing, mobility, water availability, and land conservation.
We have long been discussing whether to set limits on tourism. Perhaps the debate should be framed differently. Before deciding how many visitors we want to receive, we should ask ourselves whether all tourist activities truly assume the collective costs they generate.
If hotels, tourist apartments, cruises, rental cars, excursions, and the rest of tourist activities had to incorporate these costs into their prices, a part of the demand would probably be reduced. But this would not be a failure of tourism. It would be the natural consequence of a market that, ultimately, functions with all its rules.
Visitors would assume the real cost of the services they consume. Residents would stop paying part of a bill that does not correspond to them. And tourist activity would be much more aligned with the general interest.
The best limits on tourism are not necessarily those set by a decree. They are those that appear when prices honestly reflect all the costs of the activity. When this happens, it is the market itself that determines what level of activity is compatible with the well-being of the territory.
Prosperity does not consist simply in producing more. It consists in generating more well-being. And this is only possible when prices honestly reflect all the costs of economic activity. When these costs are left out of the market, we may continue to grow. But it is no longer certain that we continue to prosper.
