Monday, 28 September 2015

Independent Catalonia: the Spanish flag and Barça's greatness

Plebiscitary regional elections were held yesterday, 27th of September, in Catalonia. The coalition "Junts pel Sí" won (note: "Junts pel Si" comprises parties across the whole political spectrum solely united by their desire of Catalonian independence). And combined with the left-wing CUP party, also pro-independence (and anti-system), they have a majority of seats in the regional parliament. However, the combined votes of the pro-independence parties fell short of a majority of popular votes (48%). Where does this leave us? In a grey zone. What will happen next is not clear. Except that negotiations between the Spanish government and the new Catalan regional government will have to take place at some point to accommodate Catalonia's growing discontentment with the current status quo. Possibly something along the lines of a new-Spanish-constitution-creating-a-federal-state-followed-by-a-referendum-in-Catalonia-to-decide-on-be-part-of-a-federal-Spain-vs.-independence?

Whatever the next steps in the Catalan saga will be, it is time to ask the question: why do so many in Catalonia want to be part of an independent country? There are basically three reasons:

1. The "independence dividend". The pro-independence movement calculates that Catalonia pays EUR 16bn (c. 8% of Catalonian's GDP) more in taxes to the central government than it receives in benefits. We could discuss at length the appropriateness of the methodology used for the calculation (e.g. monetary flows vs. tax contribution-benefit method). However, we don't need to go that far to see what is at stake (for those who want to go into detail: CAT fiscal transfers).

The pro-independence movement assumes in its calculations that the Spanish government would have to continue to pay the pensions of Catalans, who paid their national insurance contributions into the Spanish social security system over the years, following independence. While 100% of the Catalan citizens' national insurance contributions post-independence would flow to the new Catalan government. The argument is that there is a "pension contract" between each individual taxpayer and the Spanish government that the latter has to honour. It is an apparently sound and compelling argument. And then it is not. It is disingenuous and wrong.

Spain's pension system (like basically all others in Europe) operates on a pay-as-you-go basis. Not on a funded basis. This means that pensions paid to current pensioners are financed from contributions paid by current workers. It is an inter-generational contract supervised by the state. The older generations pay healthcare and education for the younger ones while they are growing up, and once the latter enter the workforce they start paying the pensions of the former who retire.

In such a system, if the pensioners move to a new country after retirement (Germans, Swedes who decide to move to Spain after retirement or Spaniards who worked in Germany or Sweden and after retirement decide to move to Spain) the inter-generational contract remains intact. The pensioners will have reached an age where they will not make any additional (roughly speaking) contributions into the social security system anyway. No matter where they decide to spend their lives. And the younger generations remain in the country that pays the pensions. Working, paying their social contributions and keeping the pay-as-you-go system running.

Things change if a significant part of the entire population, young and old, working age citizens and pensioners, decide that the region where they live should become and independent country. In that case both the younger and older generations "move" to a new country. The younger generations of the "new" country will have to pay the pensions of the "new" country. Even because the shrunken number of young people in the "old" country, from which the "new" split off, will not be able to pay the pensions of both "old' and "new" country pensioners (the inter-generational contract would effectively be broken). So, the inter-generational contract remains in place but supervised by the newly created independent state and binding young and old generations of the "new" country.

Once you take this into account, the numbers change dramatically. Pensions paid in Catalonia amount to Eur 19bn per year. With the "new" independent Catalonia state having to pay for them the "independence dividend" turns into an annual "independence burden" of Eur 3bn.

The "independence dividend" is not the reason to become independent.

2. The construction of a new model state - the Sweden of Southern Europe

Spain has weak political end economic institutions. The judiciary is not fully independent. Neither is the press. Corruption abounds. Being part of Spain holds Catalonia, a more dynamic and entrepreneurial society, back. So the pro-independence argument goes.


Have there been notably less (proportionally to population size) corruption cases in Catalonia than in the rest of Spain in the last 10 years? 20 years? Is the Catalonian press less captured by corporate and political interests limiting its freedom of reporting and opinion? Are smaller countries, by design, less corrupt than larger ones? Is the former long-serving (23 years) president of the regional government (Jordi Puyol) not under investigation for money laundry and corruption? Has any president of the Spanish government (current or former) been under investigation for similar crimes? Do the political parties that comprise the coalition "Junts pel Sí" and the CUP party share a common political and economic agenda for the post-independence period?

The answers to all these questions are the opposite of what would be consistent with the "construction of Southern Europe's Sweden" pro-independence argument.

This leaves us with one last and powerful pro-independence argument:

3. Emotions, national identity

A large part of Catalans may feel that they are significantly different from the rest of Spaniards in the way they think, behave, approach life. That having their own language is a sign of a well defined and separate identity. These are all very respectable reasons to want to be independent. But then it should be made clear, and people be fully aware of it, that these are the reasons to want to be independent. Not something else.

This should also help to clarify what an independent Catalonia would likely to be politically, economically and socially in 20 years time (after a more or less long, more or less painful transition period). Looking at Spain's and Catalonia's history, at Spain's and Catalonia's path of development over the past 40 years of democracy and 30 years of EU membership, the conclusion seems reasonably straightforward: an independent Catalonia would tend to be more or less the same thing as a Catalonia part of Spain.

A prosperous country, just as the rest of Spain. More prosperous than today, just as the rest of Spain. With a 25%-30% higher GDP per capita than that of the rest of Spain, just as today. With stronger political and economic institutions, just as the rest of Spain. With a more independent judicial system, just as the rest of Spain. With a more independent press, just as the rest of Spain. Part of the Eurozone, just as the rest of Spain. With an ageing "native" population, higher retirement age and more immigrants, just as the rest of Spain. With a more innovative economy, just as the rest of Spain. A place with a high quality of live, just as the rest of Spain.

And with two important differences: there would be no Spanish flags hanging on official buildings. And FC Barcelona would have become an irrelevant club in European and world football.

Catalans should ask themselves the question which of the two differences does the more good to their emotions and sense of national identity. By answering it, they will know if they want to have an independent Catalonia. Or not.

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