The Catalonian Reconquista

Catalonia has long been culturally distinct from Spain, with its own Catalan dialect preferred to Spanish. When the nations of Aragon and Castille merged in 1492, Catalonia still had a measure of autonomy, yet has been part of Spain ever since. Recent economic turmoil following the 2008 crisis spurred Catalonians to separate from Spain.

Catalonia is the most industrious part of Spain, and has long been sending “nearly 8 percent of its income ‘to the Center’ (Madrid),” which has pushed many Catalonians to try and break away from Spain, which seems to be in a state of economic decline. Catalonia’s fiscal deficit is currently 10-16 billion euros in tax revenue, which could disappear if they didn’t have to pay that to Madrid. What’s more, the Catalan independence movement calls for more toll roads and less taxation on the whole, which could incentivize industries and educated workers to immigrate and seek opportunity in Catalonia. 

Last year, Catalonia contributed 19% of Spain’s total GDP, while it is only 16% of the population. Further, Catalonia sends more (in taxes) to Madrid than they receive in public spending, which has begun to negatively impact the region’s infrastructure. In fact, the regional government suggests that Catalonia was “shortchanged by somewhere in the range of 11 to 15 billion euros.” For this reason, many Catalans believe they contribute more to Spain than they get back.

At the start of this fiasco in 2014, Catalonia’s economic prospects compared to Spain were stellar. Now, however, companies are pulling out likely due to instability and uncertainty about the Catalonian independence movement. Many are relocating to Madrid.

A highly industrialized land, the nominal GDP of Catalonia in 2014 was €200 billion (the highest in Spain until it was surpassed by Madrid region in October 2017) and the per capita GDP was €27,000 ($30,000), behind Madrid (€31,000), the Basque Country (€30,000), and Navarre (€28,000) In that year, the GDP growth was 1.4%. In recent years there has been a negative net relocation rate of companies based in Catalonia moving to other autonomous communities of Spain. In 2014, for example, Catalonia lost 987 companies to other parts of Spain (mainly Madrid), gaining 602 new ones from the rest of the country.”

  • What economic and political impacts would Catalonian independence have on the EU? Spain? The Mediterranean? Will it give momentum to other national self-determinism movements like Scotland?
  • Spain Unemployment rate: 17.1%, as opposed to Catalonia’s 13%
  • If Catalonia seceded, economists estimate that Spain’s GDP would fall 25-30% and unemployment would double. 

Sources

INE Prensa article, Spanish macro data site and CNN story

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15 Responses to The Catalonian Reconquista

  1. ahny19 says:

    The independence movement and deep self-determinism of Catalonia is fascinating particularly in the context of Brexit. As the UK’s decision to secede from the EU–and the perceived consequences of its departure–has drawn a plethora of commentary, it’s interesting to read the range of opinions on the Catalonian Separatist parties. Catalonia’s striking economic success and strong industrialized sectors certainly makes its bid for independence troubling for Spain. However, what’s especially interesting is the shared cultural identity Catalonians share. Supporters of Catalonian independence possess an unyielding conviction that Catalonia contributes more to the Spanish government than it receives. However, I’m curious as to how this (presumed) transition of identity from Spain to the autonomous community of Catalonia developed; is this movement rooted in a divergent set of cultural values and beliefs that distinguishes the community from its mother country? Or possibly a product of a region’s tremendous economic achievement and ambition for further gain?

    • the prof says:

      Catalonia surely has many residents who were not originally from there. Brexit looks to be a disaster. So what would “independence” mean? They would have to negotiate their status within the European Union and the Euro Zone. And Spain would have some say on “national” assets that the new government would inherit. Why should Catalonians get all that for free? And what happens to

  2. rietanob18 says:

    As with all things related to the economy, uncertainty is an important consideration. Catalonia separated from Spain for a number of reasons, one of which was a frustration with their contribution to the Spanish economy despite their limited recognition and reaping of the benefits of their work. Catalonia has been a great contributor to Spain’s troubled economy, but now, as Catalonia works to leave, the uncertainty around their departure looms and thus puts their former economic strength into question.
    In considering Catalonia it might also be helpful to consider Brexit, Britain’s leaving the European Union. Of course, Britain has been an economic powerhouse and a strong country for many years. However, with uncertainty ahead as leaving the EU takes real action, economists are producing “gloomy forecasts” for the future of their economy (BBC News, How has the economy fared since the Brexit vote?). Additionally, large banks and other companies are moving headquarters out of Britain and into other nations because of the uncertainty around Britain’s exit. Will this uncertainty and the results of it parallel each other with Catalonia and Britain? Time will tell.

  3. reamest18 says:

    In talking about Brexit and Catalonia, one has to wonder where the European Union has been amidst the turmoil. The Catalonian referendum was illegal and organized by a populist movement. Though it may appear democratic, many voices were suppressed with the vote. The purpose and values of the EU can be found here (https://europa.eu/european-union/about-eu/eu-in-brief_en). If the European Union operates according to these values, then why was it so quiet during the Catalonian Crisis? This Reuters article quotes European leaders as fearing the consequences of taking a side on what is an internal Spanish matter.However, as the article states, the EU has held many talks during other major crises over the years. (https://www.reuters.com/article/us-spain-politics-catalonia-eu/catalonia-finds-no-friends-among-eu-leaders-idUSKBN1CO31E) The consequences of such movements as Brexit and the Catalonian secession are enough to cause ripples throughout the European and global markets. Should the EU be doing more? Or are they right to let the countries handle the matters internally?

    • the prof says:

      EU leadership is almost an oxymoron, since the overarching institutions have very, very limited power. Divergences over immigration from Syria are highly contentious, and pits member against member given open internal EU borders. This may also “simply” be a lower-priority problem. But if there’s no consensus among individual EU members, then wading into controversy isn’t going to happen.

  4. pezzij19 says:

    There a couple things this post makes me think about. First, the fact that the per capita income Spain’s is $30,000 or so while in America I think it’s something around $49,000-$51,000. I understand their economy isn’t doing to well and the unemployment is high, but after spending some time there it doesn’t seem like the average disparity between Americans and Spaniard or Catalonians is actually $20,000. Not that I have spent an extensive time in Spain to give an expert opinion, but the average Spaniard seemed to be living relatively well, or at least didn’t seem to be living on nearly half of the average American’s income. Now maybe this is due to anecdotal bias, but that experience may be a good indicator of the importance of PPP and the necessity of context for aggregate production values. My guess is that the average Spaniard is not actually living to the exact ratio of their per capita numbers, but that value is likely affected by extremes from those who are unemployed or that purchasing power may be slightly different.

    Further, I understand their problem with paying more than they are getting out, but my impression is that even if Catalonia seceded, that issue would still be present within their tax structure anyway. So that issue would transcend to the individual regardless; therefore, their argument against the progressive tax structure for secession seems interesting.

    • the prof says:

      PPP per capita (Wikipedia articles) is $36,000 for Spain and $57,000 for the US. Part of this can be housing and cars – smaller and fewer of the latter in Spain. There are also many pensioners (Spain is a below-replacement-level fertility country so will have an older population than the US) who are not poor but not consuming much, after all today’s 70-year-olds grew up in an Franco-era Spain, which was not very prosperous.

  5. Ezequiel Piantoni says:

    This is a very interesting topic. I have been following the Catalonia vs. Rest of Spain discussion for quite a time now. Last year’s unofficial independence referendum resulted in 92% of positive votes, with around 50% participation of the population. While one could argue that the other half of the electorate did not vote because they were against of the referendum (and hence the independence) in the first place, participation was lower than expected due to the high level of violence imposed by the police (under the orders of Madrid). It is clear that most of Catalans are in favor of going independent. But why? I would say it is 50% pride and 50% media. There has always been a sense of pride and rivalry between Catalonia and the rest of Spain, that could justify the first 50% of the explanation. But the other 50% is based on what the media says. Pro-independence media claim Catalonia would be better off economically by leaving Spain, and throw some statistics that seem to be enough to convince the people in Catalonia. But there are two main things these statistics fail to consider. The first is addressed in the post: many firms are leaving and will leave Catalonia if it is not part of Spain. This is logical, no firm wants to take the risk involved in such a big uncertainty. Even the famous Barcelona Football Club is looking into joining the French or Italian Football League! The second is the dilemma involved in the EU membership. By leaving Spain, Catalonia is leaving the EU as well. Several EU authorities have stated they will not let Catalonia back in not to leave a precedent. These two issues would cause a huge crisis in Catalonia’s economy. So, is it really worth it to separate? I personally find it hard to believe.

  6. Chris DuPont says:

    This is a very interesting issue that Spain is currently dealing with, especially in the wake of Britain’s withdrawal from the European Union. Considering Catalonia is the most industrious part of Spain, I believe it would be in the country’s best interest to attempt to mend and strengthen relations with this region. Looking at Spain as a whole, I think a Catalonian secession would be incredibly detrimental to both the economy, as well as the political landscape. It’s hard to comment on the correct move for Catalonia, as I am not a citizen and have no personal ties, however I’m not so sure independence would be their best move either. A secession would mean a withdrawal from the EU, which would most likely have a strong negative impact on their economy, and because they would be a brand new country, there is an incredible amount of risk in all aspects of the new country.

  7. herndono20 says:

    ♣ Based on the data it seems as though Catalonia would be able to sustain themselves without the aid of Spain. They have a lower unemployment and the fact that they accumulate so much of the country’s GDP with low public spending in return, it seems advantageous for Catalonia to break off as their own nation. It would be interesting to see much Catalonia currently depends on Spain for natural resources, trade, as well as homeland security benefits. They would be free heavy taxation that supply’s so much of their fiscal deficit, and as their own nation they could still benefit from Spain through foreign investment. Economists estimate that the secession of Catalonia would drop Spain’s aggregate GDP by 25-30% with unemployment doubling. This could cause a flow of workers to migrate to Catalonia and increase their labor force. I believe that they could lead a self-determined movement like Scotland and thrive as an independent economy and country.

    • the prof says:

      Yes, but what would fiscal autonomy do to the rest of Spain, because surely the biggest external markets are Spain and not the EU as a whole? There’s a feedback effect (“spillover”), and it’s a negative not positive externality. Your numbers suggest that Catalonians would be slitting their own economic wrists.

  8. Banks Pflager says:

    While Catalonia is producing well economically, it is not guaranteed that separation from the would be a smart move for them. According to the graph, Catalonia’s GDP is more consistent than Spain’s as a whole and people believe that they are losing 11-15 billion euros to Spain. These facts make it seem like independence would be a good move but there are other factors that would affect the country negatively that need to be considered. If Catalonia seceded from Spain they would not be guaranteed to keep their spot in the EU. This would result in the relocation of major companies including banks that would negatively affect the overall production of the Catalonian economy. Catalonia could probably be able to support themselves, but the economy structure would change a ton without the support of Spain and potentially the EU.

  9. the prof says:

    This discussion has become distant from development economics. However, local versus national issues are pervasive, and many developing countries have gone through civil wars (a few are currently in the midst of one). Is going from a larger state to 2 or more smaller ones likely to be conducive to stronger institutions and better markets for domestic businesses and capital formation (human, physical) and TFP growth? Better financial institutions? Better roads going to the right places given the new national borders? And on and on.

  10. nshimyumukizas18 says:

    This is a very interesting issue and I wonder if it is the same as Brexit, where a good amount of British people said that they were not really sure what Brexit was about as a result of following the crowds and media campaigns. The referendum resulted in street violence and demonstrations. Will the independence sentiment result in something more than just street violence and protests? In developing countries such as Sudan, the Second Sudanese civil war for the independence of South Sudan, lasted around 20 years. All out war is not good for neither Spain nor Catalonia. Thus, I believe that if the sentiment for independence keeps growing, leaving Spain would take place in peace talks and democratic voting. Furthermore, as Ezequiel mentioned, is it worth it to leave Spain, as this means leaving the EU. I would be very very difficult for Catalonia, given how difficult it has been for the the stronger and mature economy, England.

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