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Freedom for Catalonia!

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The viability of our country

(An adaptation of the article published in ElSingulardigital.cat and written by Carlen Toronjoy i Manyé from the association Cercle Tecnològic de Catalunya)

[Cercle Tecnològic de Catalunya is an independent non-profit transversal association composed by companies and free professionals that aim to become a reference in regards technology development in Catalonia and to improve negotiations between companies, institutions, technologists and scholars.]

 In economic terms, Catalonia is, indeed, a viable country. Well-known economy scholars and organizations have verified it in several reports. As for example the Wilson group (www.wilson.cat), a new organization that is developing an important pedagogic initiative, by providing clear and conclusive data in regards to the economic viability of our country.

col.lectiu-wilson

 

However, and aside of the economic data, there are other strong points for Catalonia. I am talking about the diverse and flexible composition of the business network, with both small and medium size companies, industry of all scopes, strong drive to export abroad (precisely, Catalan  exports have lately risen up to 50% of what is produced in the country), the good approach in international recruitment (ICREA program is a nice example), the will to develop our technological infrastructure (Marenostrum super-computer), important clusters in biotechnology, a fast-growing technology industry, hospitals and medicine professionals who become a worldwide reference in their fields, prestigious universities and business schools, presence of important multinationals (T-systems, BASF, Siemens, Alstom, Telefónica, Indra, Gas Natural, Microsoft, Seat, Nissan etc.), courageous entrepreneurs and qualified professionals, technology development centers, a very strong tourism industry, a relevant presence online… But what is most important is that Catalonia has millions of citizens that work hard every day and who generate richness. Above I have only mentioned a few examples which are evidence of the strength of Catalan economy. Therefore, now the question is, why are we living in such scarce circumstances? Why is there no money in the safe-box?

RH1471-8
Super computer Marenostrum at Torre Girona, Barcelona

better europe in crisis

The answer here is pretty obvious. We are going through a very tough crisis and we lack liquidity, plus the credit provided by banks has disappeared. But this is not the worst part. We can also blame the real state bubble.  And there are other issues worth to mention, and we must emphatically express them, we must not stop to firmly say what is wrong. Despite the global crisis, Catalonia keeps on generating money, but we do not administrate our wealth very well. This is our tragedy: we work hard, we do things quite good, but we are unable to manage our benefits properly. Why? Mainly, because we have a relevant flight of capital called Spain that jeopardizes the growth of our economy.

Nevertheless, the last elections have defined a specific roadmap. And now we must rise to the occasion, with sensibility and steadiness. Catalonia is a millenarian nation with enough social and economic drive to move forward into independence.

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A new state of Europe

Translation of the interview to Joan Canadell, General secretary of the business association “Cercle Català de Negocis” and co-author of the book “Catalonia, state of Europe” (Catalunya, Estat d’Europa).

(Written by Alèxia L.Ferret and published in ElSingulardigital.cat)

“When Catalonia becomes independent it will be the fourth country in Europe of GDP per capita”. Mr Canadell, states that Catalonia has an economy very similar to the one of Holland, Denmark or Belgium. He is convinced that if we would have a fiscal agreement with Spain it would not be sufficient to solve the problems our country has as of today. According to him, only independence can provide the frame to create the necessary policies to take the country into a better future, building, for example, the Mediterranean corridor project(1).

What scenario will we find in an independent Catalonia?

Our studies forecast that Catalonia would be in the top five countries of GDP per capita, and one of the three strongest exporters. It will be very similar to countries like Holland, Belgium or Denmark, which in this moment work very well.
How much unemployment will Catalonia have?

7%, approximately.

Is it true that an independent Catalonia would be out of the EU and would have a risk prime similar to Greece?

No, absolutely not. Catalonia is the third most dynamic region of Europe. Therefore, other countries of Europe are not interested in getting Catalonia out, but all the opposite. The EU trend is to adopt new countries, not to take them out. However, we should agree under which conditions will Catalonia be member of the European Union. As for example, with decisions like how many European representatives would the country be entitle to have in the EU parliament. Independence would neither mean being out of the Euro zone.

 What similarities are there between Holland and an independent Catalonia?

In economic terms, Holland is the second country in the EU of GDP per capita. Catalonia would be the fourth one. In 2008 Catalonia was at the same level of Holland. In regards to unemployment, Dutch have a 5% right now, and Catalonia will have only a 7% when independent. And if we talk about exports, Catalonia is the third EU country that exports more with a 59% of exports, while Holland is the fourth in the ranking with a 56% of exports.

Would the fiscal agreement with Spain fix the economic problem of Catalonia?

No. Maybe it would reduce the impact of the current problem, but the fiscal agreement with the Spanish state does not provide a mathematical operation with results, but it is only a political issue. Every time we have agreed on a new tax system with Spain, we were told it was very good, but with time we all could see it was so limited. In the last 25 years we have suffered a fiscal deficit of 10 to 7% of the Catalan GDP.

 

What are we missing?

Freedom. Freedom to create the necessary policies that help taking our country into a better future. A very clear example is the Mediterranean corridor project (1): Spain does not want to do it; the government in Madrid pushes for building a central “corridor”. It is obvious Catalan people cannot decide for themselves now, but only if we would be independent, we would be able to take our own decisions. In addition, a fiscal agreement would still mean to sustain one part of the fiscal deficit, between 8 and 10 million Euros. It is a lot of money that we cannot give away now the country needs it.

Why small countries grow more than big ones?

In one of our most recent studies, we have found out that small states grow a 40 and even 50% more than states with big territories. Small countries are more flexible and adaptable to maintain an economic model that works, that is very important.

Are there Catalan companies with a specific economic volume that do not support the secession of Catalonia from Spain?

This is changing. But obviously there is always some reluctance, since we have been many years believing that an independent Catalonia could not be economically viable. And now we know that is not true. It is all about lack of information.

Maybe banks are more reluctant?

No, no. I think that when the moment comes,  they will also support Independence. However, they are afraid of the Spanish boycott afterwards. But when the self-determination process is finally triggered, big companies will be the first ones interested in showing they support it. They will not likely leader the process, but they will support it for sure.

Company owners know what is best?

Catalonia is made of middle and small companies. And I can ensure you that there are more and more owners who have it quite clear. I would say that more 50% of Catalan companies think that an independent Catalonia will be better for them. And the big corporations will be changing soon, with a bit more effort, but they will also see it. All this is a process that requires time and information.

After the demonstration of the 11S and the declarations of President Mas at Madrid, is independence closer than ever?

Of course. Now the question is to have it all ready to make it happen. We must do it in a short time frame, but without missing any step. We are talking about some months or a couple of years the most. But not 5 or 10 years as others may say.

How can we declare independence?

There are several road-maps towards Independence. But, now, we cannot decide for any specific one, as it will also depend much on the international politics, how politic parties will play internationally, and Spain… So we will be seeing this coming soon. And we will decide when required.

 Do you think Catalonia can become independent in full agreement with Spain?

Yes. Catalonia has more influence on Spain that we think. In fact, they should be interested that we leave in agreement, so that Catalonia can take part of the Spanish debt towards Europe. If Catalonia leaves the Spanish state without an agreement, we would not have the obligation to assume any part of any debt from the Spanish state.

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A new order is required in the XXI century…

Today 15th of May of 2011, thousands of people went out to the street they do not want to be treated as bulk merchandise in the hands of bankers. The website/organization democraciarealja is the responsible several demonstrations that have taken place today along Catalan territory, the biggest one in Barcelona.

5000 people demonstrated in Barcelona today

This happens the same week when the European Union has instructed the Spanish government to take further measures to fulfill the current deficit. According to the EU, the Spanish deficit will involve the 6,3% of its total GDP in 2011 and a 5,3% of its GDP in 2012. The EU forecasted figures are higher than the ones foreseen by the inefficient Spanish administration.

It is very important to remark that most of the media also stated that the EU pointed out that fulfilling these figures would much depend on the regional governments fulfilling objectives. I myself read that new in AVUI newspapers too, and by chance I decided to scroll down and found among others a very interesting comment about this new from Mr. Manel Santiago… He stated that taking the declaration of the EU this week, the Spanish administration should decide to support those regions/nations which are truly capable to produce higher revenues, like Catalonia. Indeed, supporting what it’s called PIMEs (Petites i Mitjanes Empreses-Small and medium size companies), which keep our markets productive and flexible, is absolutely necessary to properly reactivate an economy that is striving to survive.

But in order to truly make the economy richer, it is mandatory to support the establishment of abroad partnerships with international companies and entities which are interested in developing or producing in the Mediterranean. Better fiscal conditions for foreign companies that need to have a strategic site in the Mediterranean markets. Catalonia used to be considered a strategic location for developing business not only int he Iberian Peninsula, but as a catapult to the rest of the Mediterranean and with it, Middle East, Africa and Asia.

Demonstration in Barcelona

However reality strikes and these days, due to price increase and detrimental fiscal conditions, most of multinationals had to leave Catalonia looking for shelter in their native countries or wherever they were more economically welcomed. Revelant industry shows left the capital Barcelona during 2008 and 2009, to go to cheaper locations, curiously to North Europe, which has become cheaper in some ways than the province of Barcelona.

The Spanish government keeps oppressing PIMES around the state, but especially in Catalonia, where the fiscal conditions have become so tough than most companies have decided to open little offices in Madrid to benefit of Madrid fiscal conditions, or even abroad, like in Belgium. Is it that Spanish plan to relocate Catalan power and capital out of our nation, to make it weaker? And further on, bankers and politicians go on squeezing people, while the Spanish administration continues to generate more unemployment and more misery.

Declaring independence is seen now as a definitive solution by the Catalan people in order to put a stop to the current problematic and start from new.  Yet the current political élite from Catalonia is still interested in being a region of Spain (traitors!); no matter what, while they are still corrupted by the Spanish, independence will always find a wall.

Catalan language for business

INDEPENDENCE OF CATALONIA: ECONOMIC VIABILITY

Essay published permanently at http://webs.racocatala.cat/cat1714/d/salamartin2.pdf

 Authors: Xavier Sala-i-Martin, Columbia University and UPF

* THIS SCRIPT WAS PREPARED FOR A CONFERENCE AT THE ÒMNIUM CULTURAL *

<<Once upon a time, there was a country with a population of 6 million, with a territory of 40,000 square kilometres. The country had as next door neighbours, two big European powers, traditionally colonists and their languages were a constant threat to the existence of the local language. The auto-governed population was being forced to speak and use two (or more) languages. The capita growth of this country was high, one of the highest of the world, a complete economic success.

Is this science fiction or reality? When we speak about the independence of Catalonia, the first question that a non-economist person would ask me (being an economist myself) is “if Catalonia could be viable” to sustain itself as an independent state. But if Catalonia would not be viable as an independent economy, the description on the first paragraph would be all science fiction and therefore it would not exist. However, the country that I have described above is in fact a real country, that exists and is independent: I am talking about Switzerland. Switzerland has a 6 million population and approximately 40,000 square kilometres. Switzerland has borders with Germany and France, two European powers, traditionally colonists and the local language, the Swiss-German (which is  different to German) is being threatened by the French and German languages (and Italian as well, which is spoken by a very small minority in the south of the country).

Switzerland is one of the richest countries in the world and is not a UE member

So, before we even start to talk, you can see that  all the arguments given against the viability of Catalonia as an independent state are basically erroneous: if Switzerland is viable (and not only it is viable, but it is also the second richest country of the world) why wouldn’t Catalonia be feasible too when our country is not up in a range of mountains, has key sea ports and it has easier accesses to the rest of the world? In this script, I will try to analyze the arguments that the anti-independents use to say that Catalonia is not economically viable as an independent state.

The most common argument is “Catalonia is too small to be able to become an independent state”. The truth is that no serious economist can agree with this statement. There is no economic theory that says that a country must be of a minimum size to be viable or that bigger countries in size are more viable than small ones. If this theory exists, it would be totally wrong because, in the world we live in, the expenditure per capita or the economic growth rate of a country are not related to the size of its territory (measured, for example, by area and/or population).

It is simply false that larger countries are more economically successful. If not, then why do we such big countries like China, India and Russia generate so much poverty? And how come we find among the richest countries of the world, little states like Belgium, Holland and Switzerland?

Another argument against independence is that “a country can not prosper without natural resources like land, gas or petroleum, and Catalonia doesn’t have any”.  This theory is completely false too. For example, Japan or the “miraculous tigers” from East Asia (Honk Kong, Taiwan, South Korea and Singapore) are not producers of petroleum or  natural gas, and the fertile land to which they have access to, is very limited, (actually, both Honk Kong and Singapore are one city countries!). Saying this, the economic growth achieved by these countries during the last decades has been remarkable. Furthermore, if we apply this argument to our text, it is true that Catalonia, even though it has a great quantity of fertile land, does not produce some of those natural resources… but neither does Spain. So, independence would not bring any loss at this respect.

On the other hand, there are economic arguments that lead to conclude that to possess natural resources can be something bad for a good long-term growth (the economists named this phenomenon “Dutch Disease”). The argument can be summarized this way: when a country has a lot of natural resources (for example, petroleum) it tends to focus a great quantity of its human and technological resources to exploit that particular area of raw materials and it tends to forget other important business scopes. In particular, it tends to forget the innovative and technological scopes, which generate the required technological changes that guarantee long-term growth.  So, these countries can become specialists in the production of petroleum and other raw materials, but they do not focus on educating their population properly or adopting modern technologies; so they finish up by being poorer than they would have been without those natural resources. Typical examples of this type of countries that have suffered from this “Dutch Disease” are Mexico and especially Venezuela, they have become poorer after discovering rich petroleum banks.

This one is a very attractive argument and we have shown some examples that support this theory. However, the truth is that is when we analyze all the countries in the world at the same time (instead of just looking to Mexico and Venezuela) we will realize that there is no relationship between having natural resources and producing sustainable economic growth (as on the other side we can find examples of rich African economies, like South Africa and Botswana, both of them rich in natural resources, specifically in gold and diamonds).

Barcelona port at night


Therefore, it is not true that having natural resources would be indispensable for economical growth, though it cannot be said that it could be necessarily bad. The usage of natural resources, obviously, is a necessity if you want to gain economic growth. And, if one doesn’t have them, these can be obtained by other methods. The most logical way to do this is with international trade, and not by obliging a region into political submission. And even more, being a small country is as advantage, because it is an incentive for the government to do business abroad, for generating competition and for improving in general, because nowadays protectionism no longer is an option. Then we could say logically that a Catalan state, that would be open to establish business with all the countries of the world (including Spain) would have never had such problems as Spain has nowadays with the famous “artilleros”, an organization created during the alienated Spain from Franco era.

A third argument against the economic viability of Catalonia is: “Isn’t it enough to generate competition with Paris, London, New York or Hong Kong, that now you also want to compete with Madrid?” And this argument has become stronger with the financial crisis that some (not all) of the countries have been through recently. However, this statement is totally wrong as well. Catalan businesses are already direct competitors to Spanish companies, disregarding we may or may not be the same political unit. The interstate business rivalries within the Iberian Peninsula are as big as with international companies. Which businesses are direct competitors to Costa Brava hotels? (the reader should wonder..) They are competitors with Italian, Moroccan and Greek hotels, but the strongest competitor are Spanish hotels in the south of Spain (Costa del Sol) and even the hotels from the coast of Tarragona (Costa Dorada) which are located within Catalan territory. So, the independence of Catalonia would not bring a very substantial increase in regards to competition to the one we already face. And if, there was such an increase of business rivalries, it would be just even better;  as an economist and as a user, I should always celebrate the increase of business competition, since it usually provides better quality and service levels as well as lower prices.

Wines and Cavas of Catalonia

Another argument against the economic independence of Catalonia is that “to leave Spain would be an economic suicide because Spain is the biggest market for the Catalan businesses”. But the question is: Why? Why would the Spanish people still want to buy our cava and spend their summer holidays at Costa Brava? Because they love Catalonia as a region of Spain? Or because given the price and quality of our products that is the best they can find?

Obviously, economically wise, the latter is the right answer. So if the independence of Catalonia would not affect the prices and quality we are already offering now to the world, it means the Catalan markets would not lose anything by creating an independent state. Nevertheless, it is a fact that the most important abroad market for a country is traditionally its neighbour countries: the most important and biggest market for Mexico is the United States of America; for Taiwan, it is China;  and for France, it is Germany. But could the reader think now because of this that it would be better for Mexico to become the 51st state of the United States of America?

There are some people that claim “the dissolution of countries at the present time is against the current European trend to create one common currency, a unique fiscal system, one military unit and one unique political unit. To speak about separatism and independence at the end of the 20th century is old-fashioned and out of tune”. I think that this quote is not acceptable for several reasons. First, it is not true that there is a trend at the end of the 20th century to create a great super government like the European one.  In fact, in 1946 there were 74 countries in the world and in 1995 there were 192. So, if there is a trend in the world it is not the reduction of the number of countries but it is exactly the opposite; therefore the evidence in which this argument is based is just simply false. Secondly, the theory is based on the assumption that one unique European political and economic unit is beneficial for all the states (and, that to go against the current trend is bad). However,  I personally have serious doubts about the wishful European project, based on the creation of one bureaucratic super-structure that will end up sinking all European economies. And, third,  it is not necessary to venture into economic cooperation with the rest of the European countries as a region from Spain. It can be perfectly done from Catalonia as an independent state.

 

Finally, the most feared argument is “to obtain the independence, we need a war and this would be more expensive than any other economic benefit that you could get out of becoming independent. Cannot you see what happened in Bosnia with the disintegration of the old Yugoslavia?”.  This is half true and half false. It’s true that the independence is not wanted if the price we have to pay to obtain it is a war and the loss of human lives. But what it is not true is that the only way of obtaining independence would be through war. Historically there has been two ways about drawing borders: war and monarchy marriages. The latter has not fully disappeared yet, but monarchy marriages are not used with a political goal. The war, on the contrary, is still being practiced. But we find ourselves in the 21st century and we should need to have faith in the freedom of a civilized democracy. Furthermore, the history of the 20th century can bring some optimism in giving us many examples of countries like Slovakia, Estonia, Lithuania and many more old Soviet Union Republics that have obtained their independence with a very peaceful and democratic process.

 Economic progress is gained by a creative population willing to work; a legal system that guarantees investors property rights, incentives to companies to innovate and adopt new technologies; an educational system which helps the population to be more  productive; and a good government who encourages internal and external trade and sustains fiscal and monetary stability, never sinking a productive economy with excessive taxes, bureaucracy or intolerable corruption.

From this point of view, becoming independent could be positive if the supposed independent Catalan government and institutions would proof their capability to fulfil the above mentioned points; or negative if these could actually perform worse than nowadays with the conditions provided from the Spanish administration to Catalonia as an autonomous community of Spain. Today we still do not know how an independent Catalan government would perform. What we know for certain is what has been done up to now and how the Spanish government is currently performing economically. And the truth is that if we put the cards on the table, the Spanish people are not doing good at all.

Iceland became independent during the 20th Century


The history of other nations that obtained their sovereignty and gained economical growth recently shows that the independence of Catalonia absolutely viable. Even some late studies show that the increase of international trade is linked to economic viability of new countries. Thus international trade is a good substitute as tool for enlarging business abroad;  and as the international trade keeps growing, it is less necessary to have a large country capable to absorb the exceeding products, as international trade would absorb it and create even more demand. In an article written at Harvard University by professors Alesina and Wackier have confirmed this is a real trend during the 2nd halft of the 20th century; which means that, the independence of Catalonia is not only viable but is positively possible and feasible.>>

Notes from the author:

  1. With what I have written, I have tried to leave aside the nationalism and cultural arguments to exclusively focus in the economic viability of a Catalan state. I am not saying that the independence would be a wish come true (this would be a different topic) or that there are non-economic arguments that need to be discussed as well. What I am saying is that there should not be any doubts about the independence being completely achievable and feasible from an economic point of view.
  2. An important economic argument that needs to be used when you weigh the costs and benefits of the independence of Catalonia is the fiscal deficit. A recent study from “Institut d’Estudis Autonomics” estimates that the Catalan fiscal deficit in respect to Spain during the 90’s has been of approximately 900,000 millions of pesetas-equivalent to 5.400 million Euros- (even though this has decreased a little nowadays, the amount continues to be shocking). What does this mean? Well, Catalans pay certain taxes to Madrid. From these taxes, a small percentage is returned to Catalonia for public expenses, social benefits, etc. Another quantity, though, stays in Madrid and never comes back. This the main cause of the Catalan fiscal deficit; and if we add up all this money for a decade -during the 90’s-, it gets to the 5.400 million Euros. To understand how much 5.400 million Euros means to the Catalan population, you must divide this amount by the 6 million people living in Catalonia and the total would be around 900 million Euros per person for a decade of taxes. This means that a typical Catalan family with 4 members (father, mother and 2 children) paid every year during the 90’s 3.600 Euros taxes to Madrid, which were never returned to Catalan territory at all. Can the readers please ask themselves what would they do with 3600 extra Euros every year? : Go to Disney World (the one in Florida, not the one in Paris) all the family every summer? Buy a bigger house (3600 Euros every year are 300 Euros extra every month that can be used to ask for a bigger loan for a bigger house)? Or to buy a car worth 7200 Euros every two years? Or to buy a BMW every five years? A lot of things can be done with 3600 Euros every year, can’t they? Well, forget it because this money is never coming back to Catalonia… and this is a very important economic cost Catalans pay every year for being under the Spanish administration. The main benefit is of all this sham, or so they tell us, is the inter-regional solidarity. But one thing is solidarity and another is to steal your wallet from your pocket.

			

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