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On September 11, during the eve of the Scottish independence referendum, another Western European independence movement was brewing 1,300 miles to the south. Hundreds of thousands of residents of the Autonomous Region of Catalonia gathered in the streets of the capital city of Barcelona to demand a vote for their region\u2019s independence from Spain. As many as\u00a0 1.8 million people<\/a>\u00a0participated in the demonstration, making it one of the largest the nation has seen this millennium. The historic turnout made at least one thing clear: the lid could no longer be kept on the Pandora\u2019s box of socioeconomic grievances that Catalonians have been voicing for decades. But behind the romantic notions of separatism that have engulfed the Spanish northeast lie a set of concrete, legitimate economic incompatibilities driving the push for an independent Catalonian state.<\/p>\n

It is important to acknowledge the plethora of social and political factors associated with the recent spike in the desire for Catalonian independence. These include the region\u2019s long history as a sovereign entity, its own language, spoken alongside Spanish by a\u00a0 vast majority<\/a>\u00a0of residents, and its unique culture, which, for example, denounces the popular Spanish tradition of bullfighting as inhumane. But perhaps the most important considerations for the independence movement are the potential\u00a0economic<\/em>\u00a0consequences of independence for the area.<\/p>\n

If Catalonia were to form its own sovereign country, its 7.5 million residents would make it the 99th most populous in the world. The gross domestic product of the region\u2014$314 billion<\/a>\u2014would rank it as the 34th largest economy, with a GDP exceeding those of Portugal, Hong Kong, and Egypt, to name a few. Its GDP per capita, at\u00a0 $35,000<\/a>, is greater than that of South Korea, Israel, and Italy. It\u2019s therefore likely that an independent Catalonia would fare better than many on the global economic stage. That fact alone, however, isn\u2019t enough to justify outright separation. The relevant question is whether or not the region\u2019s fiscal relationship with the rest of Spain is more of a detriment than a benefit.<\/p>\n

A Parasitic Relationship<\/strong><\/p>\n

Leonid Peisakhin, a political science professor at New York University, discussed Catalonia\u2019s economic prospects with the HPR. \u201cCatalonia is the economic engine of Spain in many ways: certainly when it comes to established industries, but also in the service sector,\u201d he said. \u201cIt\u2019s just a lot more diverse than many other regions [of the country].\u201d<\/p>\n

To give some numbers, Catalonia serves as home to approximately\u00a020 percent<\/a>\u00a0of Spain\u2019s total economic activity, and contributes roughly\u00a0 25 percent<\/a>\u00a0of the central government\u2019s tax revenue.<\/p>\n

Madrid, however, directs a mere\u00a0 11 percent<\/a>\u00a0of its spending back toward the region. Some officials in Barcelona claim that their constituents pay about $19 billion more to the nation\u2019s capital each year than they receive in return. An economically imperiled Spain has no choice but to redirect some of the revenue from its most booming region toward its struggling ones. Nevertheless, the current system seems to unfairly and ironically punish Catalonians for their relative success. It\u2019s easy to see why\u00a0 60 percent<\/a>\u00a0of the area\u2019s population wants out.<\/p>\n

Artur Mas, the region\u2019s right-leaning president, has been pushing for a fiscal pact with Madrid, by which Catalonia would be allowed to collect and manage its own taxes. Spanish officials, however, have been turning a blind eye toward the issue. \u201cBasically what the central government is doing right now is pretending the problem doesn\u2019t exist,\u201d Peisakhin explained. \u201cThey are trying to establish tough credentials early on in the negotiations and say that whatever concessions [they] do make won\u2019t be substantial.\u201d Mas has declared that without an agreement, he will be forced to support a referendum on secession.<\/p>\n

Even under the current system of tax collection and redistribution, what little money the region does receive from Madrid is invested unwisely. The central government directs funding without consideration for Catalonia\u2019s export economy, which is based largely on small- and medium-sized enterprises. The rest of Spain\u2019s economy, excluding the agricultural sector, tends to rely on large corporations with strong ties to the state. Therefore, business leaders in Barcelona claim that much of Madrid\u2019s spending decisions are politically rather than economically motivated. A popular example is the \u20ac41 billion\u00a0 bailout of Bankia<\/a>, an entity formed through a state-sponsored merger.<\/p>\n

If Catalonia wants to reach its economic potential, investment in infrastructure is crucial in order to facilitate international trade. The region is currently responsible for\u00a0 35 percent of Spain\u2019s exports<\/a>, including 45 percent of high-tech exports. The direction of state funds toward small-scale firms is also a priority for the city\u2019s commercial elite. Unfortunately, Catalonians can no longer rely on the Spanish government, which has political interests and an economic model different from their own, to invest responsibly in their regional economy.<\/p>\n

D\u00eddac Querlat, a political scientist at the Juan March Institute in Madrid, told the HPR that \u201cthe Catalonian authorities have reached the conclusion that the promises and commitments that come from Spain are not credible anymore. They [no longer] believe that they can reach a better economic and political agreement [through cooperation with Madrid].\u201d Without control of its own taxes, remaining politically attached to Madrid only hinders Catalonia\u2019s progress as a region.<\/p>\n

Even so, anti-separatists point toward the region\u2019s massive debt, the largest of any territory in Spain, as a reason to keep the country unified. While Catalonia\u2019s debt is sizeable, it amounts to only\u00a0 80 percent of its GDP<\/a>\u2014less than the EU average. As an independent state controlling its own tax program, therefore, the region would have the ability to gradually repay what it owes. It certainly would not be able to do so with Madrid continuing to siphon off its economic resources.<\/p>\n

The EU Question<\/strong><\/p>\n

However, one major reservation many Catalonians still hold is the uncertainty of the would-be new nation\u2019s entrance into the European Union, especially with Spanish officials fervently declaring that they would block its incorporation.\u00a0 The region\u2019s export-driven economy relies on easy access to the markets of other EU member states. Additionally, since\u00a070 percent<\/a>\u00a0of imports to the other 16 regions of Spain flow through Catalonia, a healthy economic relationship with Spain is particularly crucial to the area\u2019s commercial success.<\/p>\n

But it is exactly this codependence that would preclude the Iberian nation from blocking Catalonia\u2019s entrance into the European Union. Unless an already financially crippled Spain would be willing to pay higher tariffs for goods passing through a non-EU member, it would have no choice but to accept the new country into the union. Furthermore, if Spain refused to officially recognize Catalonia, the latter would carry no responsibility for assuming a portion of the former\u2019s debt (as other nations in the Eurozone currently do). In its current state, Spain would have almost no hope of reducing its more than $1 trillion debt without its economic powerhouse. Transferring some of its financial obligations to Catalonia\u2014and thus recognizing the new state\u2014would be critical to Spain\u2019s own self-interest should the region break away.<\/p>\n

Moreover, many other EU powers have a stake in Catalonia\u2019s quick entrance into the union. Over half of Germany\u2019s investment in Spain, for example, is directed toward Catalonia. Berlin surely would like to avoid exchange fees in its transference of capital to Barcelona. Furthermore, even if Catalonia were initially unable to enter the EU after secession, the effects, according to Queralt, would not be catastrophic. \u201cThere are many other countries with close ties to the union, who have various trade agreements and pacts. In the first couple of years, the GDP would drop,\u201d he acknowledged, \u201cbut only by maybe 2 or 3 percent.\u201d Queralt, like many in Spain, speculates that the EU member states wouldn\u2019t allow Catalonia\u2019s absence from the free trade zone to persist for more than a few years.<\/p>\n

Nevertheless, Catalonia\u2019s potential membership in the European Union is far from guaranteed. Application to the European Union requires adherence to complex\u00a0 set of political and economic regulations<\/a>\u00a0as well as a unanimous approval by member states. Although no nation besides Spain presently appears intent on blocking an independent Catalonia\u2019s entrance into the union, a variety of economic and political factors could motivate such action. For instance, a country might aspire to move into the market space once occupied by Catalonian firms. Even so, Catalonian leadership evidently feels confident that the interests of the entire continent would encourage a smooth transition into the Eurozone for the nascent nation.<\/p>\n

A Forced Detour<\/strong><\/p>\n

A consideration of the economic rationale behind the growing sentiment for Catalonian independence, without even delving into the wide array of sociopolitical concerns in play, is enough to see why many in the region want secession.\u00a0 Understandably, however, Spain won\u2019t easily let go of 16 percent of its population and one-fifth of its GDP. Central authorities have been\u00a0resisting<\/a>\u00a0regional officials\u2019 call for a November 9 referendum on independence. They claim that the maneuver would be unconstitutional and plan to block it in court.<\/p>\n

Queralt proposes a likely solution: \u201cThe [Catalonian] government would call for a new regional election, which is completely legal and constitutional. The parties that favor secession would add the statement in their party manifestos, and so people would know that by voting for these parties they are voting for secession.\u201d Queralt calls the method \u201cimperfect,\u201d but says it\u2019s an acceptable alternative to calculate the popular support behind the independence movement.<\/p>\n

The droves of Catalonians who occupied the streets of Barcelona on September 11 weren\u2019t just there for show. It\u2019s becoming clear that the secessionist movement that has long been building in the Spanish northeast is reaching its boiling point. In recent months the region\u2019s leaders have demonstrated focus, determination, and a strong case behind their cause. The very foundation of liberal democracy is the citizenry\u2019s right to abandon a government that fails to serve their interests and construct another, more effective one. There are few better contemporary examples of such a situation than Catalonia\u2019s one-sided economic relationship with the central Spanish government. Whether they decide to stay or to leave, therefore, Catalonians should at least be given the power to choose their own fate.<\/p>\n

Image source: The Guardian<\/em><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"