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  October 28, 2017

Catalonian Independence: What are the Economic Stakes?

The conflict has a lot to do with Spain's economic failure since the world financial crisis of 2008 and its impact on young people and the long-term unemployed, says Mark Weisbrot, co-director of the Center for Economic and Policy Research
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Mark Weisbrot is Co-Director of the Center for Economic and Policy Research in Washington, D.C. He received his Ph.D. in economics from the University of Michigan. He is author of the book Failed: What the "Experts" Got Wrong About the Global Economy (Oxford University Press, 2015), co-author, with Dean Baker, of Social Security: The Phony Crisis (University of Chicago Press, 2000), and has written numerous research papers on economic policy. He writes a column on economic and policy issues that is distributed to over 550 newspapers by the Tribune Content Agency. His opinion pieces have appeared in The Guardian, New York Times, the Washington Post, the Los Angeles Times and most major U.S. newspapers, as well as in Brazil's largest newspaper, Folha de Sao Paulo. He appears regularly on national and local television and radio programs. He is also president of Just Foreign Policy.


SHARMINI PERIES: It's the Real News Network. I'm Sharmini Peries, coming to you from Baltimore.

The conflict between Spain's central government and its region of Catalonia, which is seeking independence, is intensifying. Shortly after the regional parliament declared independence from Spain, Prime Minister Mariano Rajoy announced on Friday that regional government leaders have been dismissed, its parliament dissolved, and new elections are schedule for December 21st.

Now joining us to discuss all of this is Mark Weisbrot, the co-director of the Center for Economic and Policy research in Washington, D.C.. He argues that there are not only political and cultural reasons for the conflict and the cessation, but also economic ones. He joins me now from Washington, D.C. Welcome, Mark.

MARK WEISBROT: Thanks, Sharmini.

SHARMINI PERIES: So, Mark, in a recent article for Alternet, you outlined why the Catalan independence move could be motivated by economic issues. What economic reasons are there for Catalans to leave Spain?

MARK WEISBROT: Yes. Well, I think you have ... The economy is a big factor, here, and unemployment is the biggest thing, because you have 18% unemployment in the past year, and twice that for youth. More than 40% of that is long-term unemployed, people who have been out of work for a year or more, and even the ones who are lucky enough to get new jobs ... And the IMF says that the prospect for the long-term unemployed is very dismal, but the ones who get new jobs, they're not permanent jobs, and so there's a whole generation there that doesn't have much of a future in Spain.

There's nothing the government is offering. In fact, the government is not offering anything but more austerity, actually, and they're not going to do anything to really reduce unemployment. They've accepted it, and you can see this in the paper that the government does with the IMF, so it's not just speculation about their intentions. This paper actually ... Again, a joint paper from the government of Spain and the IMF, says that Spain is going to reach its full potential output sometime within a year, and yet unemployment will still be 16%.

They're defining 16% as as good as it gets. 16% is, for them, full employment, and that means just really a whole generation doesn't have much of a future.

SHARMINI PERIES: On the other hand, Madrid depends on Catalonia, one of the most thriving regions in Spain, for its tax base, and for the economy in general. If it's going to improve, they actually need Catalonia, hence not wanting to let it go.

MARK WEISBROT: There's no doubt that Catalonia contributes more to the tax base of the economy than it gets back, and that's a grievance of some people there, but I think the big thing is the economy itself. You have this failed experiment. Since the world financial crisis and recession, you've also had a huge increase in inequality. The ratio of income from the top 20% to the bottom 20% is, like, 7.5, which is the third worst in the whole European Union. So, you have the unemployment and the inequality, and this is something that, again, they're not offering any solution.

This is something that Spain shares with the rest of ... Or Catalonia, you could say, shares with the rest of Spain, and Spain shares with most of the rest of Europe, including France, and Italy, and Portugal, and most of the Eurozone countries, because they don't have any real control over their most important economic policies. It so happens that Spain has a right-wing government, so they go along with this austerity and the policies of the European Union, but the ones who don't want to, like Greece, who tried not to, they were crushed by the European authorities.

It really shows that there's a fundamental democratic, prices of democracy, I think Professor Faber has talked about on your show a couple of times, and it really, the economics is a huge part of that. I mean, before the creation of the Euro, you could say that Europe was generally more democratic, or had a more advanced democracy than the United States. Now it's quite the opposite, and that's one of the reasons why Europe has more than twice the unemployment rate of the United States, because they've taken away any ability, or most of the ability, of the members of the Eurozone especially, and to a lesser extent the European Union, to control the most important economic policies.

I think part of what fuels this, in addition to all the other legitimate grievances that the Catalans have, is I think a lot of people see this as the shortest route, possibly, to democracy, and a democracy that can help them create a future for this generation in terms of employment and income.

SHARMINI PERIES: All right, Mark. If Catalans were to achieve greater independence, and complete this desire, and complete and fulfill the referendum's democratic measure, what kind of economic policies could it adopt in order to reverse this situation there, which is they're not bouncing back from the great financial crisis?

MARK WEISBROT: It depends what kind of independence or autonomy they had, but even with more regional autonomy, you can imagine that they would be able to adopt better budgetary policies, and not be subject to the austerity of the central government. The what we call fiscal policy could change. If they actually left and became an independent country, they could have their own currency, and so they could control their exchange rate and their monetary policy.

Now, the monetary policy of the Eurozone is pretty good right now, but that could actually get worse. But the exchange rate is a big thing. The main economic reason, the rationale of economists for putting Spain through this prolonged high unemployment austerity since the world financial crisis and recession, is to achieve what economists call an internal evaluation. In other words, you make the economy more competitive by lowering, pushing down wages, with a high unemployment and the so-called structural reforms, the labor law reforms, weakening the bargaining power of unions.

That's the agenda of the Rajoy government, and the European Union, and especially the Eurozone. If they had, really, their own country, then they could change the whole set of macroeconomic policies. I'm not saying that that would be feasible, or that they wouldn't get a lot of retaliation and punishment from the European Union, for example. We don't really know what that would look like, but you can imagine that people would want that, given the prolonged failure of the current policies.

SHARMINI PERIES: Right. Now, you mentioned, if they get their own country, one of the major issues for Greece, which you also mentioned, as a comparison, has been the fact that it uses the Euro, just as Spain does now, which limits economic policy options. However, Catalonia, it seems, is not interested in leaving the Euro, or the EU, unlike the UK. This means that great autonomy from Europe is not the issue in this case, is it?

MARK WEISBROT: I think that you have to look at the different forces within that movement. I think some of them wouldn't want to get out of the Euro. This is a problem. The Scottish movement, also, for independence, didn't propose to leave the Euro, which doesn't make sense. Then what's the point of leaving the UK, if you're still going to be subject to ... They actually said they were going to join it, possibly. That, I think, is a misunderstanding of monetary policy. I think that's the big problem, people don't realize how important the exchange rate in monetary policy, how important those things are.

But in terms of the lack of democracy, Greece is the extreme case. Look what they did to Greece when they wanted to get out of the ... They've been in a depression for almost all of the last eight years. The European central bank actually shut down their banking system to force them to buckle under. This shows, I think, the terrible contempt that the European authorities have for democracy, and the same thing with Spain.

Rajoy didn't have to send in thousands of troops and send hundreds of people to the hospital on October 1st. They did that to really crush freedom of expression. If it was just about the referendum, they could have said, "Okay, you can have your referendum, but we're not counting it. We're not going to take it as legal." They didn't do that. They instead censored the newspapers, the internet, and beat people, and tried to stop them from voting.

This is really a violation of their basic human rights, and there you see the European authorities completely silent, just as they were when the ECB actively crushed the Greeks through crippling their economy, doing the opposite of what a central bank is supposed to do. This shows terribly, not only the lack of democracy, but the kind of lack of respect for civil liberties that these people will have when their goals are threatened. And their goals are not just to keep Europe unified. It's also a certain vision that they have for Europe, which is a very neoliberal vision, and that, I think, again, is part of the conflict.

SHARMINI PERIES: Yeah. And also, not only people's civil liberties, but also their democratic rights, in the case of Catalonia and of Greece, because the European Union did not want Tsipras's government to honor the referendum that they voted on in July of 2015.

MARK WEISBROT: Yes, and I think Professor Faber mentioned this, but it's worth emphasizing that the popular party, and Mariano Rajoy, the Prime Minister, they have deep roots in the fascist dictatorship, and when you have a dictatorship like that for 36 years, it really does something to the country that doesn't go away right away, and they didn't intend for it to go away.

The constitution was written in 1978, the constitution that Rajoy is claiming to uphold, and that wasn't a constitution. That was much more a product of dictatorship than it was of the democratic aspirations of people at that time. Rajoy is really showing the people of Catalonia why they might want to get out of Spain. He's really making it much, much worse. There has to be a negotiated solution, and the government is doing everything to try and make that impossible.

SHARMINI PERIES: All right. Mark, I thank you so much for joining us and giving us some reason why Catalonia might want to split off from Spain. Thanks so much.

MARK WEISBROT: Thank you, Sharmini.

SHARMINI PERIES: And thank you for joining us, here on the Real News Network.


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