Quo Vadis Catalonia? (Part 1) By Albert Pont, President, Cercle Català de Negocis (www.ccncat.cat)

Quo Vadis Catalonia? (Part 1)
By Albert Pont, President, Cercle Català de Negocis
With over 7, 5 million inhabitants, Catalonia is larger than many of the members of the European Union and has approximately the same population and surface area as Switzerland. Historically, Catalonia has been the industrial avant-garde of Spain. Catalan culture has developed its own unique and universal identity over the centuries. Most Catalans do not consider themselves merely part of a region, but of a nation that has not a state of its own. They do not see themselves as Spanish but exclusively Catalan. Such feelings raise eyebrows in other parts of Spain, Europe and elsewhere, but are widely accepted as legitimate within Catalonia. Yet, while secession from Spain is viewed as an option for a better future, some still perceive it as a utopian formula rather than a viable alternative. This may be the result from fear of the unknown and lack of information about the economic, political, social and cultural costs of remaining part of Spain and the potential benefits of independence. The Circle Català de Negocis (Catalan Circle for Business) is an entrepreneurs’ association dedicated inter alia to provide information both to governments and to grass-root citizens, in Catalonia and abroad, about the reasons and the rational arguments in favour of Catalan independence[1].
The purpose of this article is to review the historic, as well as present day claims for Catalan self-rule and to present the main arguments of political, cultural, linguistic and economic nature for the independence of Catalonia[2].  In a follow-up article, we shall elaborate on the relevant legal aspects related to the emergence of an independent Catalan State and the likely consequences for the European Union, third countries and their nationals residing or having properties or other interests in Catalonia.
Why do Catalans want to become independent?
There are broadly three main arguments for the independence of Catalonia. The first one is that since the Catalan culture and language is neither understood nor accepted in Spain (and are neither protected nor fostered), the best way forward is an independent state. This results from three centuries of linguistic and cultural discrimination, which reached its pinnacle under General Franco’s 36-year dictatorship. The second one says that a well-defined political entity such as Catalonia should be mature enough to govern itself with its own voice in the European Union or the United Nations in order to address the problems specific to it. Finally, there is the strong belief that Catalonia would be better off economically by seceding. In particular, proponents of the last argument refer to the fact that Catalonia pays much more into Spain’s central treasury than it gets back (subsequently referred to as the fiscal imbalance). In the following paragraphs we shall explore each one of these issues and will then try to answer the question about the viability of an independent Catalan state.
Catalonia: A Historic Overview
“Today Catalonia is a province of Spain. But what has Catalonia been? Catalonia has been the greatest nation in the world and I will tell you why. Catalonia had the first parliament, long before England”[3]
Presently, the pro-independence parties concurring to the December 2015 elections have an absolute majority in the Catalan Parliament and have initiated the process of legislating the disconnection with the Spanish State. A draft Constitution for and independent Catalonia is expected to be put to a referendum in 2017. The central government in Madrid is strongly opposed to the exercise of the right of self-determination arguing that Spain’s Constitution does not foresee that right. The caretaker government of the People’s Party has indicted the former President of Catalonia, Mr. Artur Mas, for organizing a non-binding opinion poll in 2014 (in which an overwhelming majority of Catalans voted in favour of independence) and has empowered the Constitutional Court to impose criminal sanctions against Catalan political leaders and parliamentarians seeking to implement their electoral pro-independence mandate. The struggle between a centralistic, authoritarian Spanish state (of Castilian matrix) threatening to undermine economically and to subjugate politically the Catalan nation may have reached yet another peak, but it is not new. In fact, it has been a constant feature of Catalan history for at least four centuries.
Catalonia has an ancient history. Greeks, Romans and Phoenicians have all left their mark on the country. Catalonia developed out of the “Marca Hipanica”, a buffer zone created by the Franks to contain the Arab advance in the Pyrenees and, unlike Castile or any other Iberian territory, was part of Charlemagne’s Holy Roman Empire. In the Middle Ages, as a central component of the Crown of Aragon, Catalonia became one of the most important powers in the Mediterranean Sea. In the 15th century the Crown of Aragon was united with the Kingdom of Castile through a royal marriage. Yet the resut was not a common state, but a confederation of states with separate parliaments, laws, language. In 1640, the War of the Harvesters was fought against the increasing centralistic Castilian government (the “Song of the Harvesters” is today’s Catalan national anthem). At the same time, Portugal (then also attached to Castile) fought for independence and won. Instead, Catalonia lost the war and was forced to cede its northern part to France. During the War of Spanish Succession in the 18th century, Catalonia supported the Habsburg  pretender to the Spanish throne, who favoured a federalized Spain, against the French Bourbon claimant, the future Philip V of Spain. Once again, Catalonia lost, and, as a consequence, the new Bourbon king wiped out all Catalan institutions and forbade the official use of the Catalan language[4]. This effectively ended the Catalan state structure and began a process of cultural assimilation that continued until the 20th century.
The Catalan national conscience remerged in the 19th century during the so-called Renaixença (“Renaissance”). The combination of cultural and linguistic reawakening and industrial and commercial vigour provided the basis of the concept of Catalanism. This would lead for call for autonomy, then separation and finally independence. During the early 20th century before the Spanish Civil War from 1936 to 1939, Catalonia enjoyed partial self-rule on several occasions and a Catalan Republic within the Iberian federation was proclaimed twice. However, with Franco’s victory in 1939, one of the darkest periods of Catalan history began. Franco’s dictatorial regime is key to understanding Catalonia today. Along with the regime’s ruthless and institutionalized violations of human rights, Catalonia suffered a cruel and systematic attempt at cultural annihilation. It endured repression of individual and collective cultural rights, such as the prohibition of the use of the Catalan language, the public denial of the Catalan identity and the punishment for cultural expression. Language is central to understanding Catalonia’s identity. Having survived three centuries of repression from Spain, Catalan is more widely spoken than a number of other official EU languages, yet it does not enjoy recognition by EU institutions, as all Spanish governments have consistently ignored Catalonia’s demand to press for this.
In 2005, after 35 years of (so-called) “transition” after Franco’s death, Catalonia set about updating its Statute of Autonomy to consolidate its self-government and readjust the relationship between its national reality and the Spanish state. The new Statute was approved in both the Catalan and the Spanish Parliaments, as well as in the Spanish Senate. It was then passed by a proportion of three to one in the subsequent referendum in Catalonia. Once it had been signed by the Spanish King, it came into law in the summer of 2006. But the ultraconservative People’s Party, in the opposition at that time, as well as the Spanish Ombudsman (appointed by the Socialist government) immediately contested it in the Constitutional Court. After a long process of deliberation the Court published its sentence in 2010, abolishing key articles of the text, particularly those dealing with recognition of the Catalan nation and the status of the Catalan language in Catalonia.  For some constitutional law experts this was tantamount to a “legal coup d’état” perpetrated by the Constitutional Court that inevitably led to a conflict between Catalan democratic legitimacy and Spanish party-controlled legality and demonstrated once again the difficulties Spain has in accepting and dealing intelligently with its national, cultural and linguistic diversity – a situation that has only increased the support of the Catalan people for independence. As Catalans commemorated the 300th anniversary of the War of Succession in 2014, the prospect of the creation of a new Catalan State in Europe was put on the table more clearly than ever.
The Fiscal Imbalance
The long history of Spanish centralism has resulted in Catalans traditionally valuing private initiative rather than the state in order to develop. Catalonia has a strong net of small and medium size businesses and many micro-entrepreneurs. With roughly 17 percent of Spain’s population, it provides about 20 per cent of its GDP and almost one-half of the total industrial production and exports. It also contributes about 24 per cent of Spain’s total taxes, but public investment in Catalonia is scarce when related to either population or GDP contribution or represents only about 10 per cent of the total. A number of studies in recent years have estimated the Catalan fiscal balance with Spain showing not only a deficit (i.e. pays more than it receives back) but one of the highest of any region in the European Union. These studies estimate the Catalan fiscal imbalance with Spain to be around 10 per cent of the Catalan GDP. This is a highly abnormal situation when comparing Catalonia to similar regions in other EU countries, where it is nowhere higher than 4 per cent. The fiscal imbalance has been sustainable in the past because of Spain’s relatively closed economy. However it is not sustainable in the context of globalization. Catalonia will never be globally competitive if it has to carry such a heavy fiscal burden. Catalan companies pay high taxes, only to receive few public services and low infrastructure investment. Not only does it hamper economic growth and the modernization of the Catalan economy, but also impoverishes Catalan citizens.  In 2010 the Catalan Parliament unanimously approved a resolution requesting the Catalan government to negotiate a fairer fiscal treatment for Catalonia (similar to the one presently enjoyed by the Basque Country and Navarra). But the People’s Party Spanish government simply ignored the request and scorned the Catalan institutions. In any case, one thing is clear: the fiscal imbalance is a key argument supporting secession. An independent Catalonia would not have to pay taxes to Madrid that are invested elsewhere. Instead it could invest them to the benefit of Catalans. Moreover, if Catalonia were an independent state within the European Union, roughly half of its territory would be designated as preferential area for EU structural funds. In spite of its intra-territorial disparity, Catalonia is considered as a single unitary entity by the European Union and thus, given its overall level of income is not eligible for these funds. Thus, significant parts of Catalonia that require public investment do not receive public aid neither from Madrid nor from Brussels[5].
Can an independent Catalan State be viable?
Clearly, the argument that Catalonia is too small to be an economically sustainable independent state is incorrect. Another central theme in anti-secessionist economic discourse is based on the fact that Spain is the main market of Catalonia. Thus, seceding from Spain would result in an economic catastrophe because Catalonia would lose its main market. However, there is no reason to expect Spanish trade embargoes or a boycott of Catalan products, particularly in the EU context. Spanish citizens buy Catalan produces due to their quality and price and not for some abstract solidarity with Catalans. In a world of increasingly free trade and global markets, this rationale is no longer valid.  With its own state, Catalonia would benefit from improved administrative efficiency and still have access to foreign markets in which to sell its products.
Critics of secession also argue that being part of Spain makes economic sense because it allows Catalonia to share the costs of public goods of the military, diplomatic representations, etc. The fact is that these kind of “services” have traditionally been used (and are presently still being used) by the central Spanish government to the detriment of Catalan aspirations for self-rule, rather than to support Catalonia in any way. And the huge fiscal imbalance shows that today Catalans are paying for these services twice what they would pay for similar services actually benefitting them in their own separate state.
In conclusion, there is no objective reason to believe that an independent Catalan state should not be viable from an economic perspective. In the end, the success of a Catalan state will depend on its own government. Independence will be good for Catalans only if the Catalan state will be able to pursue sound macroeconomic policies that foster growth and economic welfare. While it is uncertain how well a Catalan government could manage its economy, Catalans know that the performance of the Spanish government over the last century has been decidedly poor[6]. Moreover, as independence would mean getting rid of the aforementioned fiscal imbalance with Spain at once, a Catalan state would enjoy significant room to manoeuvre. In addition, globalization is also compromising many of the traditional functions of mid-size countries such as Spain making them less desirable to their citizens, in particular to differentiated groups such as the Catalans. On the one hand, these states are not big enough to solve global problems like international terrorism, international capital movements, and regulation of transnational corporations or global warming. On the other hand they are still too large to solve local problems (or even to care about them).
Unlike many nations in Europe that have flourished due to the creation of a nation-state, Catalonia exists despite a unitary and centralistic Spanish state that has repeatedly tried to eliminate it as a separate cultural entity. Catalan independence will ensure the continuity of culture and language, but also allow Catalans stop paying an unsustainable price to be part of a unitary Spanish state. Catalans must realize that only with a new administrative structure can Catalonia be competitive in the international markets and guarantee better public services, modernization of its infrastructure, social cohesion and economic growth[7]. Among all options, it is independence that makes more sense economically, particularly in the context of globalization and the European Union. Secession will guarantee that the existing unfair fiscal balance will be eliminated. A Catalan state will still have access to international markets in a free-trade world. Finally, full independence will mean a direct voice for Catalans in the international forums that so much influence their lives. However, no referendum on the question of independence of Catalonia will be a fully rational exercise. Independence from Spain is not simply a matter of economics or administrative rationality. Identity issues, in Catalonia and elsewhere, are highly complex. Some Catalans might want to be part of Spain even with an unfair fiscal treatment. Others might want independence even if the cost is high. However, this does not negate the fact that economically, independence would not only be viable, but also significantly advantageous. Therefore, when they have the chance to decide democratically in a referendum on their own political future in 2017, Catalans might clearly want to vote from their pockets…as well as from their hearts[8].
[1]Relevant and detailed information can be obtained in form of articles, dossiers and other studies available in Catalan, Spanish and, in some cases, in English on the CCN website: www.ccncat.cat.
[2]The content of the following sections have been adapted from “Europe’s Stateless Nations in the Era of Globalization – The Case for Catalonia’s Secession from Spain”, by Josep Desquens (BC Journal of International Affairs, John Hopkins University), available under http://www.jhubc.it/bcjournal/articles/desquens.cfm). The CCN feels indebted to the author of the article.
[3]As stated by the internationally renowned cellist and composer Pau Casals in his speech before the members of the United Nations in New York on 24 October 1971.
[4]In remembrance of their lost liberties (“constitucions”) Catalans have made a national celebration of September 11, the humiliating day when Barcelona was forced to surrender to Philip V’s forces (this celebration was supressed during the dictatorship of General Franco – 1936 -1975 – but was restored after Franco’s death an remains the national holiday today!
[5]For a detailed analysis of the effects of the fiscal imbalances, see the CCN Study “L’impacte de l’espoli fiscal sobre el territori”, available on www.ccncat.cat.
[6]By way of example, see the CCN study on the completely inefficient and unsustainable Spanish highway network system (“Plà de viabilitat de la xara viària espanyola”), available on www.ccncat.cat.
[7]See the CCN study “Investment opportunities in the new Catalan State”, available on www.ccncat.cat.
[8]Catalans are frequently the subject of nasty “jokes” and derogatory comments from Spanish nationals, representing them as “Jews”, due to their emphasis on business-like approaches. Maybe this would be really the right time for Catalans to opt for an independent State for legitimate “selfish” reasons, including self-preservation.