by Xavier Sala-i-Martin, Columbia University and UPF

 Translated by Eva Guler

(Translation NOT supervised -and therefore NOT endorsed- by Xavier Sala-i-Martin)




Once upon a time, there was a country with a 6 million population, with an area of 40,000 square kilometres.  The country had as next door neighbours two big European powers, traditionally colonists, whose 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 per 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 potential independence of Catalonia, the first question that a non-economist individual would ask me (being an economist myself) is whether Catalonia would be "viable" as an independent nation.  If Catalonia were not, the description on the first paragraph would be science fiction.  But, the country I described above is a country that exists ... and it is independent: It is called Switzerland.

Switzerland has a 6 million population (exactly like Catalonia) and approximately 40,000 square kilometres (exactly like Catalonia).  Switzerland 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).  So, before we even begin to talk, you can see that the arguments given against the viability of Catalonia as an independent nation are basically erroneous: if Switzerland is viable (and not only it is but it is also the second richest country of the world) why couldn’t Catalonia be?  Moreover, Switzerland is located up in a range of mountains, has a no sea port and it has a complicated access to the rest of the world.

In this text, I will analyse the arguments that the anti-independentists use to demonstrate that Catalonia is not viable as an independent country.

The most common argument is “Catalonia is too small to be able to become an independent nation”.  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 existed, it would be totally wrong because, in the world we live in, the expenditure per capita or the economic growth rate of a country is not related to the size of a country (measured, for example, by area and/or population). It is simply not true that larger countries are more economically successful.  Notice that large countries like China, India and Russia and among the poorest countries in the world (although the first two have now a large growth rate), and that Belgium, Holland and Switzerland are among the richest. The correlation between size and wealth in the data is zero, a phenomenon that economists call "Absence Scale Effects".

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 also completely false.  For example, Japan or the miraculous Asian "tigers” (Hong Kong, Taiwan, South Korea and Singapore) do not have natural resources or lots of fertile land. Their growth rate over the last few decades, however, has spectacular. (1) And besides, using this as an argument in favor of Catalonia being part of Spain is ridiculous given that Spain does not have these natural resources either!

Moreover, some economists argue that natural resources not only are not beneficial but they can be detrimental to economic performance. The argument can be summarised as follows:  countries with natural resources use a lo t of resources to develop them and, in so doing, they reduce the resources used up in other sectors. This tends to hurt more dynamic sectors that are tied to innovation and technological progress, the sectors that generate the technological progress that guarantee long-term growth.  So, natural-resource-rich countries end up by being poorer. The typical examples of countries that have suffered from this (a phenomenon that economists call “Dutch Decease” or the "Natural Resource Curse") are Mexico and especially Venezuela, countries that have become poorer after discovering rich petroleum banks. This natural resource curse has been widely documented by empirical economists.

Having said this, it seems obvious that for an economy to grow it needs to use natural resources. But this, of course, does not mean that it needs to produce them. The alternative, of course, is to buy them from abroad. In this sense, being part of a small country may be beneficial because the government has little incentive to put trade barriers that are harmful to the economy.

A third argument against the economic viability of Catalonia is the following: “Isn’t it enough to compete with Paris, London, New York or Hong Kong, that now you also want to compete with Madrid”?  This statement is also totally wrong.  Catalonian businesses are already competing with the ones in Spain.  The interregional competition is as big as the international one.  Who does the reader think the Costa Brava hotels compete with? They compete with the Italian hotels, the Moroccan hotels and the Greek hotels, but the biggest competition comes from Spanish hotels in the south of Spain (Costa del Sol) and even from hotels from the coast of Tarragona (Costa Dorada) which are in the same Catalonian community.

So, the independence of Catalonia, would not bring a very substantial increase in competition to the one we already face.  And if, there was an increase, it would be favourable: as an economist and as a consumer, I always applaud new competition: it brings better quality and lower prices. And that is very good.

Other people argue that “ to leave Spain would be suicidal because Spain is our biggest market for the Catalonian businesses”.  But the question is: Why? Why do the Spanish people buy our own cava and spend their summer holidays in the Costa Brava?  Because they love us?  Or because given the price and quality of our product, that is the best they can do?  If the answer is this last one, and if independence does not affect the price and quality we offer now, then the Catalonian markets would not lose. Perhaps it would lose in the short term because of boycotts, but boycotts are hard to maintain in the long run because they are expensive to the boycotter (that is, the Spanish boycotters would have to buy more expensive French Champagne and would all have to crowd in Marbella during their summer vacations; They might want to sacrifice for one or two years, but in the long run, they would do what is best for them and for their pocket and the boycott would gradually disappear). Having said this it is certainly true that the biggest international market tends to be the neighbouring country.  The biggest market for Mexico is the United States of America.  The biggest market for Taiwan is China and the biggest market for France is Germany.  The question is whether this implies, as the Spanish anti-catalanists say, that Catalunya should not be an independent state. In other words, does the fact that the largest market for Mexico is the U.S.A. is a good argument for Mexico to become the 51st state of the United States? Try to sell this one in Mexico!

Another argument against independence is that “the dissolution of countries at the present time, is  against the current trend in a time when Europe is nearing a one common currency, a one fiscal system, a one military unit and a one political unit.  To speak about separatism and independence at the end of the 20th century is old-fashion and it is out of tone”.  I think that this quote is not acceptable for several reasons.  First, it is not true that the trend at the end of the 20th century is to have fewer and larger countries. Quite the opposite: the number of countries in the world is increasing and has been increasing over the last 50 years. In 1946 there were 74 countries in the world and in 1995 there were 192.  Hence, the empirical premise of this argument is simply false. Second, the theory is based on the presumption that Europe as a political unit is desirable.  Personally, I have enormous doubts about the desirability of European political (I repeat, political) unit, based on the creation of one bureaucratic superstructure (interestingly, the Spanish nationalists that criticize catalanists  do also object giving up Spanish political independence in favor of Europe!). And third, even if a European political union were desirable, it does not follow logically that this is a good argument suggesting that Catalonia should be part of Spain (as opposed to another region in Europe).

Finally, the most feared argument: “to obtain the independence, we need a war and this would be more costly that any other economic benefit that you could get out of it; can’t 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 (by me or by anyone else that I know of) if the price we have to pay to obtain it is a war. I do not think that the gains from independence are worth a single human life. But what it is not true is that the only way of obtaining independence would be trough war.  Historically there has been three ways of drawing political borders: war, monarchic marriages, and peaceful referendums. Monarchic marriages are no longer used to draw political borders.  Wars of independence, on the contrary, are still being used. The latest tendency during the 20th century has been peaceful separation: from Sweden and Norway, to the Check Republic, Slovakia, Estonia, Leetonia, Lithuania and many more old soviet republics, the preferred means of achieving independence is a peaceful democratic referendum.

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 to adopt new technology. An educational system which helps the population to be more productive and a good government who encourages internal and external trading and never sinks a productive economy with excessive taxes, with a fair bureaucracy and intolerable corruption and maintains a fiscal and monetary stability.  From this point of view, the independence would not be positive if a Catalan state could not fulfil the above points or if its performance on these areas were worse than the current performance of the Spanish state.  Today we do not know how a Catalonian state would do it.  What we know for sure is how the Spanish state is currently performing.  And the truth is that the performance is not stellar.

It has been argued that, as time goes by, the desirability of having smaller nations increases. And the economists who say so are not (I repeat, NOT) some crazy Catalan nationalists. They are Harvard University professors Alberto Alesina, and Robert Barro and Stanford University professor Romain Wacziar. These economists have demonstrated that the 20th century trends of increasing trade and globalization explain empirically the increase in the number of countries that we have witnessed during the second half of the century. The reason? The growth in international trade and globalization makes it less desirable to belong to a larger political union like Spain. As globalization progresses, the need of one's industry to depend on a large local market is reduced. The gains from being small, on the other hand, remain the same. Hence, the optimal size of a country is reduced. Again, the scientists that say that are not radical catalan independentists, they are Italian, American, and French professors from Harvard and Stanford.










1. And this is true even when we take into account the financial crisis that some (not all) of them countries have been trough recently.