Despite economic might Catalan bid will fail

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By 2017-10-13

By Jack Salmon

Wednesday morning, Spanish Prime Minister Mariano Rajoy announced that he will be suspending Catalonian political autonomy and taking direct control of the region in an attempt to foil the recent moves toward independence. There have been countless articles published on the political and cultural factors behind Catalan secessionism since the disputed independence referendum on 1 October, but equally important, we should consider the economic factors that underpin this increasingly momentous movement.

A strong economy as a
foundation for greater
self-governance
Catalonia has a gross domestic product that places it somewhere between the economies of Portugal and Denmark, making up 19 per cent of the entire Spanish economy. The region is more business friendly and industrious than any other region in Spain, with the third-highest per capita GDP of all 17 autonomous regions.
However, even with great economic clout, Catalonia was never immune from the great recession that engulfed the global economy, and the region still suffers from the economic fallout of the financial crisis that hit Spain in 2008.
Youth unemployment still stands at more than 34 per cent, and the autonomous region has the highest public sector debt of all regions at more than 35 per cent of its economy.

The economic crisis has certainly given momentum to the secessionist movement in Spain, just as the secessionist movements in other parts of Europe have gained momentum in recent years. Indeed, in 2014, voters in Scotland held their first independence referendum, with 45 per cent of Scots voting to leave the U.K. and 55 per cent voting to remain.

The financial importance of Catalonia gives the region a much stronger footing toward independence than that of Scotland, which constitutes less than 9 per cent of the U.K. economy. It is no surprise then that this financial confidence fosters greater political confidence and a belief in self-governance which Scotland tends to lack.

The politics behind Catalonian secession is what makes independence impossible
The downfall of the Catalonian independence movement won't be the result of economic problems or financial insecurity, but political contradictions and socialist dreams of a participatory democracy. As with almost all secessionist movements, pro-independence politics in Catalonia are driven by a predominantly socialist agenda.

In the last two general elections, the three most successful parties in the region were left-wing political parties, with a combined share of the vote constituting almost three-fifths of total votes in Catalonia.

What's more, much like Scottish nationalism, the aims and aspiration of this leftist secessionist movement in Catalonia are on many levels deeply contradictory. Catalan secessionists are deeply pro-EU and maintain an unrealistic belief that after seceding from Spain, they will somehow be permitted membership into the eurozone.
British politician and member of the European Parliament, Daniel Hannan described these contradictions in the clearest terms. Hannan noted:

"Catalan nationalism, like most nationalisms, is based on the idea that decisions should be taken more closely to the people they affect and that multi-lingual and multinational states don't work as democracies. The EU, by contrast, is based on precisely the opposite idea, namely that self-determination is both irrational and dangerous."

Due to the EU turning a blind eye to the Catalan vote earlier this month, political separatists find themselves without allies, both nationally and across the continent. The only sympathizers that Catalonia can muster at this time are other failed separatist nationalists, such as those in Scotland.

The EU feels deeply threatened by Catalan independence, as it does by all separatism. If the EU were to endorse, or ignore the idea that people are better off governing themselves, the supranational case for European integration would collapse.

Secession may be a good thing, but the political
establishment is not ready
to permit it
Ease of movement, modern technology and the "internet of things" tends to favor smaller nations and makes large domestic markets increasingly less important. The wealthiest nations in the world per capita tend to be the smallest, or at least those that devolve greatest power to localities.

Greater fragmentation in Europe, such as a Catalan state should, therefore, be broadly welcomed in promoting a laboratory of democracies.

However, the more likely outcome of recent secessionist events in Spain are greater centralization of power to the Spanish government with the support of the EU to put pressure on Catalans to concede. (The Hill)

Jack Salmon is a Washington, D.C.-based researcher focused on federal fiscal policy. Salmon holds an M.A. in political economy with specializations in macroeconomics and comparative economic analysis from King's College London.

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