Walter Block, the Austrian School Economist and Anarcho-Capitalist, defines secession as 'the right to stay put, on one's own property, and either to shift alliance to another political entity, or to set up shop as a sovereign on one's own account.' There seems to be little by the way of subversive dissenting activity by the region under this definition. So why all the fuss from central government?
It may prove fruitful to look at the regions geographical position and its output contributions relative to the Spanish economy in order to find the answers.
Catalonia is the eastern coastal region of Spain, from the Mediterranean Sea up to the Pyrenean peaks. It boasts 70% services-based economy, with GDP per capita of 30,000 euros last year, 5,900 euros greater than the rest of Spain. With trade prowess representing over a quarter of Spain’s export values, and an outsized 20% contribution to the Spanish economy standing at 223.6 billion euros, Catalonia is also the most prosperous of the 17 regions. Benefitting from tourism, exports, manufacturing and industry, it should come as no great surprise that the stakes are so high in the debate for the region’s possible secession.
Not wanting to lose such an integral fragment of their nation, the central government of Spain responded by enacting Article 155 of constitutional law, declaring Catalan’s government ineffectual and incompetent. An automatic call for new elections was scheduled for December to replace them.
In all the commotion, the voices of the vocal minority rang out above the apathetic majority constituting the demos. In seeking to holistically analyse the historical precedent for two states, it may prove wise to pay closer attention to the experiences of individual niches in society. It is hoped in doing so, we may negate some of the singularity media bias is prone to in oversimplifying multifaceted situations.
It is typically more expedient to explain away a political situation as ‘good versus evil’ rather than attempt to understand individual narratives. For an independence movement centred around human rights, THE MANCHESTER MAGAZINE questions whether the Catalan independence movement left behind the average voter.
Barcelona was conquered by Bourbon King Phillip V in 1714. He commissioned the dissolution of Catalan institutions and the end of self-administration. Every year on September 11TH, Catalans commemorate this end to their right to autonomy.
Catalonia has seen a dictatorship under General Primo de Rivera and later a military junta under General Franco. Franco prevailed in the Spanish Civil War (1936-9) and crushed the Republic’s 1932 Statute that granted Catalonia autonomy, ruling instead with an iron fist for 36 years. Catalan language was expelled, culture suppressed, and political parties banned. 1978 welcomed the first formal autonomy for the region until the Castilian conservative party appealed against the devolution of powers. Ballot papers and independence referendum were suspended in 2014 by the courts. The two questions were ‘Do you want Catalonia to become a state? Affirmative answers would then point to ‘Do you want this state to become independent?’ Carles Puigdemont became president of Catalonia in 2016. His predecessor, Artur Mas, became a martyr for the independence movement by a trial accusing him of abuse of power and disobedience, leading to a 36,500-euro fine and 10-year disbarment from politics.
Puigdemont’s October 2017 referendum forced him into exile, while the Vice-president, Oriol Junqueras, and leading Catalan cabinet members were imprisoned. Mariano Rajoy, Prime Minister of Spain, sent in the police to disrupt polling. Meanwhile, Catalonia is now under direct rule of the Madrid government.
Thousands took to the streets with slogans to protest the violence accompanying the vote. 400 polling stations were raided by police, leaving hundreds injured and 770,000 of the 2 million votes cast lost. Catalonian police officers had to secure the police headquarters and quell the thousands marching for justice, as officials stirred the nationalist sentiment by informing 90% of votes were for independence.
400 polling stations were raided by police, leaving hundreds injured and 770,000 of the 2 million votes cast lost.
Elephant in the Room
Incidentally, were Spain prosperous enough, the debate on secession may have fizzled out already, or at least been swept under the complacency that seems to come hand in hand with a comfortable standard of living. The resurgence of the pro-secession movement over the past few years can be attributed then to Spain's economic woes, a 2010 constitutional court decision to lessen Catalonia's sovereignty, and a distrust of Madrid or the centralized Spanish government.
Nationalist sentiment of 10 years ago was muted by the excitement of real estate growth and the associated illusory wealth effect. Times were good, and people lived beyond their means.
Meanwhile, the Spanish banks started to expose themselves more and more readily to the American securitised repo market. The buyers of securitized bonds, often made up of mortgages, received protection from the seller in the form of a repo agreement: the investor buys some asset representative of collateral from the bank for a set amount and the bank agrees to repurchase that same asset some time later at an agreed upon price.
German investment houses took on bundled mortgage debt as bonds and later insurance on the bonds when the availability of fresh housing stock dried up. Spanish banks were keen to get in on the action and assimilated all this shifted debt and repackaged ‘subprime’ mortgages. These bonds were alleged to be diversified enough and so like their operants ‘too big to fail’. The ensuing collapse of the mortgage backed securities (MBS’s) and collateral debt obligations (CDO’s) and repo failings was undone by the mortgage default rates climbing to 8% and the lower rated mortgage bundles flopped first, kicking off a domino chain reaction. While tighter regulation should have contained the problem to hedge fund collapses, like Bear Stearns High Return Asset Management splinter, the true interconnectivity of the financial markets began to unravel. These credit-rated bundles were filled with zero income or identity verification clients, adjustable rate mortgages and negative deposit incentives. Spanish banks were slower to catch on and ended up being left with these toxic assets up to their necks.
Now that the consequences of complacency and debt-fuelled expansion have come home to roost, coincidentally the question of secession returned to centre stage. Likely then, secession reflects a frustration against the current economic climate.
In fashion with human nature, a scapegoat is always near to be found. In the case of Catalonia, its leaders and secessionists were able to offer the corrupt, centrist Castilian government to cop the blame.
The accumulation of profits made in the securitisation bubble found their way into the Spanish housing market. Between 2001 and 2011, the stock increased by 26 million units in a country of 47 million people, or 24%. To put this into perspective, this equated to a home per 1.9 people. More bricks were laid in Spain in 2007 than the US and China combined.
Youth unemployment topped out at 55.80 percent in February of 2013 from the record low of 17.20 percent in February of 2007. Household debt nearly doubled from 79.7% to 150%. The European Union bailed out Spain with a $100 Billion rescue package that came with clauses of vicious austerity cutbacks and disciplinary action to encourage ‘competition’ on the basis of disinflation and increased labour productivity. 600,000 mortgages defaulted. 1.5 million families moved into shelter in the aftermath and 40,000 were left homeless.
Speculative madness made Spain temporarily rich. But ultimately, it jeopardised its future as the economically incited separatist movements showed their true colours.
It would be easy to blame German action leading to the protracted nature of the crisis through capitalising on internal labour market flexibility (dampening unit labour costs). In so doing, Germany was able to boost competitiveness relative to her neighbours within the European periphery. Germany’s largest export partner is China, comprising $180 Billion in 2016, fuelling the debate about Germany’s export performance, its trade surplus and global economic imbalances. Its wine-imbibing neighbours, like Spain, are therein forced to facilitate their existing standards of living through debt subjugating financed consumption from the masses of German accumulated profits in a ‘beggar thy neighbour’ fashion.
Alain Cuenca, economics professor of Spain’s University of Zaragoza, believes the short-term outcomes of separation would be decidedly negative for both parties involved, ‘the establishment of a border would result in a loss of jobs, income and wealth for all’. Losses that would be compounded by obstacles to trade faced by a Catalonia outside the EU, and financial problems arising from creating institutions like government and a new central bank.
The issue of automatic EU membership harkens back to the woes Scotland faced in their 2014 referendum. To reach union status, the applicant state must receive a unanimous ‘yes’ from all EU members. An unlikely outcome given Spain and her allies have a say in the matter. Denied entrance would see transaction costs soar, as the EU accounts for 65.8% of Catalonian exports at present. Worse yet, trade boycotts from the rest of Spain may further compromise the fledgling state.
This is, however, not the deal-breaker it is made out to be. Catalonia has circumnavigated boycotts in the past. The other dilemma of separation from the European single currency, and goods and services tariffs could be more problematic.
Ultimately, were this exclusively a question from the domain of economics, the opportunity costs involved would out rightly declare in favour of union. The nationalists, nevertheless, run on pride and identity politics. Appeals to identity run thick with emotion. Prospectively, any price for autonomy and independence is worth paying, regardless of the economic loss. And, if the lessons of history have told us anything of those 2 million voters in October, it is that reason rarely ever trumps emotion.
The success in the event of secession is largely determinable by whether Spain forces Catalonia to assume their percentage share of the national debt or pay off their own debt. Either outlook may prove deleterious to the new nation finding its feet, curbing the potential for economic expansion.
Representations in the Press
Lots of press coverage of the Catalan independence movement has focused on the quasi-poetic notion of ‘freedom.’ After the Euro debt and employment crises, Spain relied heavily on Catalan productivity, leading to resentment in the region. This idea is rarely explored in the media, and yet is far easier to elaborate upon than nondescript notions of freedom. The key to solving this issue - and possibly the independence crisis - is to solve Spain’s economic issues, through more loans and economic liberalisation. I would argue that the romanticism of issues like freedom and the demonization of money has led to less sincere and narrowed political discourse. If one could openly talk about the financial issues that Spain faces as a catalyst for the struggle for Catalan independence, there could be a more productive dialogue as to how to solve the issue.
Humans appear prone to select the most easily digestible answers to our problems before we look for the right ones. Often, this leads to scapegoating, as it has in Catalonia. The appeal of Neo-Gramscian doctrines may lie in its offering of elites to blame for the issues we collectively face. It takes away the autonomy of individual action leading to the life outcomes we experience, and all but negate the objective coercion of the system in which we find ourselves.
A convenient blame was to be laid at the feet of the prosperous bankers and speculators, government appointed regulators and judiciaries depoliticise direct state involvement, detaching it from any culpability heading its way.
An Barcelona Perspective
Nevertheless, the extent to which this is useful is put into question when we listen to stories of individuals. One such student, Maria at The University of Manchester, has lived in Barcelona her entire life, but has family in other regions of Spain. She explains how before the illegal referendum carried out by the government of Catalonia this October, she believed Catalonia would be stronger in Spain rather than as an independent country. However, after the violence perpetrated by the Spanish police on Catalans to prevent this referendum from happening, she feels disillusioned with the central Spanish government. She also has doubts as to the extent Article 155 is democratic and whether any other solution is viable. Consequently, Maria is thinking of voting in favour of independence if there is a second referendum, based purely on how this situation has been handled. I got the impression this was voiced from good intention as an anti-domination protest vote – voting with her feet as they say. Simultaneously, Maria is all too aware the feasibility of a Catalonia outside of Spain is highly problematic.
Before conversing with Maria, I thought a legal referendum abided by the Rawlsian principles of adequate participatory input into democratic procedures as desirable. However, the 50% plus one, simple majority means of declaring a victor negates the a not insignificant opposition. Particularly noteworthy in instances of close referendums like the UK on Brexit. Mere percentage points swaying such a pivotal election is unjust on those who lost the vote yet must live with the consequences of the alternative course. A better solution would be a three-quarter majority for the bills to pass.
In Catalonia, the decision split opinion. Contrast existed within families, workers affected by the business uncertainty aftershocks, students, the unemployed and other subaltern grassroots activists and informal resistances of autonomous Marxist disruption that sprung up.
As with the wake of the European Sovereign Debt crisis, informal movements like Plataforma de Afectados por la Hipoteca (PAH) rose to address specific issues. PAH tackled Spanish debtor foreclosures by mass sit-ins and campaigning for housing rights, engaging a wider collective action. This time around, it was sit-ins and marches protesting the brutish central government’s police hand.
All Spaniards appear to have unique experiences of the referendum situation. Yet referenda are binary, forcing us to neatly fit into one of the two categories, despite the complexity of an individual’s political opinion, let alone the whole demos. Otherwise we are left with abstaining and so negating our inalienable right to participate in a functioning democratic state. The experience of individuals dispels this notion of black and white, dual-category outcomes. Even the multifaceted grey area in between has blurry boundaries. Forcing a yes or no vote, influences collective thought in ways that present issues as ‘solvable’ with a simple correct answer. This may bear some weight on the noticeably higher participation rates referendums boast over general and local elections.
Solution to Independence
In terms of a top down approach, the European block could offer further loans to develop infrastructure and liberalise the economy. The resulting Keynesian multiplier should stimulate growth in the region that is creaking under the weight of involuntary austerity measures.
It appears the only feasible resolution, euphemistically labelled ‘internal devaluation’ is to further lower unit labour costs to improve productivity and global competitiveness. The EMU conceived of the disciplinary mechanisms of disinflation and boosting labour productivity in the aftermath of the Great Recession. This course of action remains ceteris paribus regarding any wider innovation or new entrepreneurial start-ups that could reinvigorate the Spanish economy.
As things stand, the political process of an ECB controlled monetary policy and conditionality placed on loans has been insulated from political contestation of the masses. An objective and stringent regime of depoliticization is an effective cushion to crisis strategy. Ultimately, Germany continues to thrive as the preeminent architects of the EU and EMU with the ordoliberal tradition of economic theory, posing the question: did the PIIGS really stand much of a chance?
In terms of a political consolation to the autonomy so craved by the Catalonian region, I will be honest and tell you I don’t know. And the more articles I read, the more speeches I hear and speakers I see, all serves to add to the ever-greater complexities and nuances I encounter. But what I have engaged with that has given me a real insight into the situation is listening to people.
I would encourage those involved to begin dialogue with the opposition and to give respect to different ideas and realities. I believe we should embrace the complexities of politics and resist fitting into binaries, rather than shying away from them. Additionally, we should aim to eliminate our societal fear of change; rectifying what was first proposed or altering initial ideas due to reflection and dialogue is a step forward, unlike many politicians would have you believe. I not only encourage dialogue between Mariano Rajoy and Puigdemont, which is of course urgently needed, but also between all of us. TMM