The desire for an independent country
Will it soon be Scotland everywhere?

“All peoples have the right of self-determination. By virtue of that right they freely determine their political status…“ (Human Rights Covenants of the United Nations 1966)

Scotland and Catalonia are just the tip of the iceberg. An increasing number of regions worldwide are awakening to their desire for political independence. For them, more independence from the federal government is often not enough. They aspire to become their own country. This trend of the previous decade remains intact. Since the “˜50s the number of countries has nearly doubled, increasing from 100 to almost 200. Quebec was a trailblazer in the early “˜80s whose aspirations for independence are absolutely comparable with the present development in Scotland. First in 1995 it won additional federal concessions in a referendum whose result was the razor’s edge decision that Quebec remain as part of the Canadian state. The fall of the Iron Curtain at the beginning of the “˜90s, however, led to the most significant push for the formation of new countries. With the disintegration of the Soviet Union many new countries arose in Eastern Europe. Spectacular, however, was the case of Czechoslovakia in 1993. The two countries split very suddenly. The shared currency was no obstacle to the separation and the prognosticated political and economic drama failed to appear. Many fear and others hope that a new wave of regional country-forming will begin. Regions seeking political independence often want more than mere autonomy. Their goal is the formation of their own country.

Globalization propels Autonomy

The trend towards more governmental independence is unbroken. It has many causes, both political and economic. The fight against political oppression of regions, resistance to long-lasting colonialism, the arbitrary adjustment of borders achieved through political maneuvering often following wars, as well as linguistic, ethnic, and religious heterogeneity are only a few non-economic reasons. All of these factors can, but do not always, lead regions to desire to become independent countries. The Soviet Union was a negative example of political oppression of entire regions, Switzerland a positive one, Belgium a negative example for language diversity, Yugoslavia a negative example of arbitrary demarcation as a result of world politics. Additionally, the period of military relaxation beginning in the “˜90s has accelerated the desire of smaller nations for governmental independence. Now smaller nations felt themselves to be less threatened by larger military powers and as a result no longer needed to seek out the military protection of a larger country.  Or they placed themselves under the protection of the shield of NATO, as in the case of the smaller, western-oriented Eastern European countries.

Additionally, there exist also economic driving forces which prompt regions to take their decisions of (economic) policy into their own hands. One reason is the size of the selling market and the mobility of labor and capital. Do companies have the possibility to sell their products worldwide and can they use “economies of scale“. They also profit from investing and hiring workers worldwide. If national selling- and buying markets are, however, fenced-in, companies do better in larger countries than in smaller ones. Fully accessible internal goods- and factors markets are an incentive for companies to press for political integration. They prefer larger countries to smaller ones. This argument has lost weight with the worldwide opening of the goods- and factors markets. Political decisions and technological developments have riddled the fence of international barriers with holes. Politics has encouraged this integrative development through the WTO and in regional areas of integration. And technological advancement has reduced the cost of international transactions and spurred on globalization.

Globalization has shrunk the economic significance of the size of a country. Companies in smaller countries can now also make use of the advantages in terms of efficiency of larger more worldwide goods- and factors markets. With globalization the economically forced trend towards incorporation of countries becomes broken. Almost everywhere centrally organized countries are on the retreat. With one exception: the European Union is still on the political integration kick moving towards a stronger federal government. Small countries are hardly economically disadvantaged in a globalized world. And they make use of these new economic advantages, as shown by their higher degree of economic openness. For many regions these more open worldwide markets were also the go-ahead for them to emphasize their own heterogeneous preferences more strongly. They distinguish themselves considerably from one another (economic-) politically, economically, socially, and culturally. In these areas the regions demand more regional autonomy. Where they don’t receive it, they press for governmental independence. Some, for instance the Basque, have traditionally done so with violence. Meanwhile others, like Catalonia and Scotland, have avoided the use of force from the beginning. Still others, for example South Tyrol, changed their strategy and methods over time.

It is not only more open worldwide goods- and factors markets which strengthen the desire of regions to split off from the federal government. Another inter-regional distribution of wealth powder keg threatens governmental unity. It is undisputed that globalization helps the prosperity of  nations to converge. More open worldwide markets also, however, contribute to a divergence in the regional differences within countries. And with this comes an increase in the danger of regional economic tensions. This is the case when inter-regional financial transfers are intended to provide equal living conditions. This is the case in Spain, Italy, and Belgium. It is however also true in Germany. Persistent regional differences in market incomes lead to a constant transfer from richer to poorer regions. No wonder that sooner or later dissatisfaction spreads in the donor regions. Constant inter-regional transfers in one direction are an accelerant of governmental separation. As such is the “Cassa per il Mezzogiorno“ partially responsible for the political rise of the secessionists Lega Nord in Italy. Catalonia’s current desire to separate from Spain is partially based on the continuous inter-regional transfers out of Catalonia into other Spanish regions. This is also true of the rich Flemish in Belgium who no longer want to be the cash cow of the poor Walloons. Meanwhile here in Germany the dissatisfaction of the only three contributing states in the system of financial equalization among federal states is increasing. The Bavarian desire for separation, however, is still low. But that could change.

Federalism or Separatism?

The experiences of the last decades show: economic integration and political disintegration often go hand in hand. More and more often regions demand more political independence. Some are content with more autonomy, others however insist on formation of their own country. In principle, increased regional autonomy is possible without major economic and political fractures. The method is a more competitive federalism. The principle of subsidiarity should act as guideline. The conflict of goals in the question “at what governmental level to act“ deals with heterogeneity of preferences and economic returns to scale. The wish of regions for their own country is, however, not so simple. The driving economic force is globalization. First more open worldwide goods- and factors markets make smaller government attractive. But this is only possible with the existence of an adequate worldwide regulatory framework. It must guarantee private ownership rights, individual freedom of contract, and free market access. Such guarantees can only be given worldwide by the large countries in the WTO or regionally in integration areas like the EU. Increased governmental independence can only flourish with such a worldwide regulatory framework. The smaller regions who desire their own country cannot achieve this alone.

Globalization strengthens regions’ desire for more autonomy and their own country. More open worldwide goods and factors markets intensify international completion between regions. This competition is only at first glance economic competition between countries. Such competition actually occurs primarily between regions worldwide. The inter-regional less mobile factors of production compete for the more mobile factors. The prosperity in the regions depends upon how successful they are in this competition. No wonder that they would like to get control of as many economic and socio-political parameters as possible. With this they attempt to make their position more attractive. Globalization has accelerated this development. In economically successful countries like Switzerland or the USA an economic policy in support of decentralization has long been the norm. The Swiss cantons and American states have more economic and political autonomy. They are also responsible for the consequences of their actions. Competitive federalism dominates. In Germany it is (again) different. Here in this country an old-fashioned cooperative federalism has say. Economic and political independence are not distinguishing features.

The economically driven process of political disintegration does not usually result in the formation of an independent country. This is often a triumph of reason. Centralized government fulfills the desire of regions for more political independence in that it grants the “rebellious“ regions more autonomy in economic, social and cultural areas. The regions stay, however, in the federation. The best example from the recent past is Quebec and currently there is that of Scotland. The longing for one’s own country is reduced in countries in which the regions can act with more political autonomy. The alternative way, which Spain would apparently like to go with regarding Catalonia, is most unwise. Those who would refuse a referendum in a time of globalization accompanied by heterogeneous preferences for regions fail to recognize the economic and political reality. And the problem does not end there, rather is only tolerated and remains on the political agenda. The economic factors of the inter-regional competition between regions further erode the central government.  Eugen von Böhm-Bawerk, the most famous Austrian economist, already knows that in the end political power has no chance against economic laws. If globalization goes on, regions will still receive more autonomy.

In Germany the desire of regions for their own country is not especially pronounced. This was also true during times of economic crisis, during which regionalism flourished. At most, every once in a while in Bavaria going the way of an independent country is philosophized about. Two years ago the old CSU campaigner Wilfried Scharnagl wrote a book called “Bayern kann es auch allein“. In his book he demanded that the free state separate from the German federal republic and the European Union. In this way one could finally escape the “double transfer union“, that is the inter-state fiscal adjustment in Germany as well as the constant transfers of money to the less wealthy countries of the EU. It is true that the constant transfers of money out of Bavaria into Germany and Europe are an irritant. A reform of the incentive-damaging German inter-state fiscal adjustment  system and inefficient European regional- and structural policy is urgently necessary. This is also true of the outrageously expensive Euro-saving politics of the member countries and the EZB, and such reformation would presumably find a supporter in Scharnagl as well. One thing is for certain for all small nation-states – they get a free ride on regulatory policy. They can only survive if larger nations provide more open goods- and factors markets worldwide. This does not, however, require a political union in Europe with a single currency. A worldwide free trade zone is enough.

Summary

The referendum in Scotland is a failure and that in Catalonia is blocked. That hasn’t stopped the wildfire of separatist movements. It also smolders on in Belgium, Northern Ireland, South Tyrol and in other parts of Europe. There are many good economic and political reasons for these regional movements away from central government. Among the economic factors, globalization is the most important force. More open worldwide goods- and factors markets open up the opportunity for regions to realize their heterogeneous preferences. Experience shows, however, that separatist movements become neutralized if the central government grants the regions more (economic-) political autonomy. There is a strong argument for the wave of separatism having already reached its zenith. Globalization has exceeded its peak and protectionism is once more fashionable. More economic, political, military and terroristic uncertainty worldwide is reducing the incentive in regions to stand on their own two legs as independent nations. The time of centralized super-nations is, however, also past. The regional preferences of citizens remain diverse. A competitive federalism is the dictates of the moment. In comparison, the centralistic politics of the EU-Commission are becoming outdated.

Hinweis

Dieser Beitrag ist die englischsprachige Version des Artikels „Der Wunsch nach einem eigenen Staat„, der auf diesem Blog am 2. Oktober 2014 erschienen ist.