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Interview with Enrico Spolaore
"An independent Catalonia could be as economically viable as any other country"
June 2011 / By Joan Esculies
Enrico Spolaore is Professor of Economics at Tufts University (Massachusetts, United States). An Economics graduate from the Sapienza University of Rome and with doctorates from the universities of Siena and Harvard, he is a specialist in political economy, international economy and economic growth. His research includes the relationship between the size of states and their economic development. The conclusions of his work, alongside Alberto Alesina, were published in The Size of Nations (2003) / La mida les nacions (2008). He recently took part in the international seminar entitled 'Small nations at a time of crisis. Seeking the way out', co-organised by the UOC and the CatDem Foundation.

Is the size of a state important to its economic success?

It would matter if we lived in a world of protectionism or in one with trade barriers. When we see countries that are open to international trade, the figures show that being small is no setback. There is even an inverse correlation. In other words, smaller states are more efficient in a world without barriers. Therefore, the answer is that it depends on the degree of economic openness.

According to your work, a globalised, more democratic world with fewer conflicts fosters the appearance of small states. Why?

This is seen very clearly at times when dictatorial regimes emerge that try to extend the borders of their states. Also historically in the case of empires. By contrast, at times when there is a tendency to achieve a greater degree of democracy, we see the fragmentation of these regions. The case of the Soviet Union is a clear example of this. Throughout history, we also see that small states in times of conflict have been unable to maintain their independence and have ended up being conquered by bigger states or entering into alliances to protect themselves. I would also venture to say that small states tend to be more democratic because they can serve and provide their citizens better with the goods and services that they need. Normally, in big and highly centralised countries, there's a significant distance between the action of the government and public preferences.

Are small states therefore more interested in free trade?

Exactly. They are interested in it to be able to prosper and, generally speaking, they achieve it. This isn't to say that there haven't been exceptions, as is the case of Communist Albania or, at times, Uruguay, which have been closed countries.

In the theory set out in The Size of Nations you measure the internal balance of a state according to the result of the balance between its size and the political costs derived from the heterogeneity of its population. And according to that, you maintain that a state with a highly heterogeneous population is unlikely to find a balance. What role does immigration play in your model?

In the book, we don't speak of immigration. It's the chapter that's missing. We can imagine, however, that the ease of movement by people from one state to another today means that the size of the state is less important. If we speak, for example, of human capital, in a world where Italians could only study and work in Italy and they couldn't do it, as in my case, in the United States, it would be very important for Italy to be big, so as to offer more opportunities. But if that's not the case, the size of the state doesn't matter. What we don't know, though, is what type of population heterogeneity leads to a greater political cost to the state, because this changes over time. Throughout history, for example, we could speak of religious differences that led countries to split up, as is the case of Belgium and the Netherlands. Now, by contrast, in a Belgium that is primarily Catholic, the question is linguistic and cultural, between Flemish and Walloon.

During the seminar, you took part in the session devoted to debating whether the size of nations prevents the economic crisis. Who is more prepared to face the crisis, large or small states?

I don't think the size of the state has anything to do with it. There are small states that have suffered a lot, such as Ireland and Iceland, and large states like Germany that are doing better. The question has more to do with economies of scale and the internal heterogeneity of each state and how it affects it politically. It's the same as happens in Europe: due to the fact it's so big, it can't face the crisis as well as it could. Large states normally don't recognise the costs of internal heterogeneity. Europe acts like that, thinking that as we're all European, we're all the same. It's felt that the German debt and the Greek debt are the same, that there are no differences in productivity. But if there are already differences at the level of states, as for per capita income, this is even greater if we compare the regions of Europe. If you deny this heterogeneity, then the demands to satisfy the different specificities grow and the political cost of managing this heterogeneity is much greater. Cultural differences also create barriers, which are not insurmountable, but that have long-term solutions.

According to your model, do you think that Catalan society increasingly feels that the balance between the contribution of economic resources that it makes to the Spanish state and the lack of answers from the state to its specific nature is negative?

I'm not an expert on Catalan politics, but Spain has always been a highly centralised state with a rather low level of openness. My impression is that in terms of state decentralisation, there's still a way to go. This, especially regarding the matter of transferring taxes, is complex at the present time of crisis as the state government needs the resources from Catalonia more than ever.

A recurring argument of Spanish nationalism with regard to a possible secession by Catalonia is the lack of economic viability that this future state would have because of its size. What do you make of this?

I don't think this argument has any kind of economic basis. Catalonia has seven million people and one of the highest per capita incomes in the world. We have examples of smaller countries than Catalonia that are viable. A Catalonia that was open to the world economically would be as viable as any other country. Whether it's viable or not does not depend on economic but on political reasons.

Might the increased homogenisation that the secession of Catalonia and the Basque Country would entail be beneficial to Spain?

That's an interesting question. In principle, the resulting Spain would be a poor country. With everything, though, if the borders were open and, let's cite a case, an inhabitant from Madrid could come to Catalonia to study and trade was equally possible, the reduction in heterogeneity could be beneficial. In any event, I think the only way to solve these questions is democratically. The people need to be asked what they want and decisions taken through qualified majorities.

 

Profile

  • Professor and Chair of Economics at Tufts University (Boston, Massachusetts)
  • Ph.D. in Economics from Harvard University
  • Ph.D. in Political Economy from the University of Siena (Italy)
  • BA (Laurea) in Economics and Commerce from the University of Rome (Italy)
  • Co-authored the book The Size of Nations (MIT Press, 2003)
  • Co-editor of the journal Economics & Politics
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