October 8, 2017

Catalonian Independence - How Things Unravel

Posted in Economic History · 197 comments ·
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Do you remember the break up of Yugoslavia? At first people said it could never happen. Yugoslavia had been a federation since the First World War, it had Europe’s biggest standing army, it had been the ballast between East and West and yet, it disintegrated in bloodshed.

 

Initially, the independence movements in the various republics were minority affairs. Even in Croatia – always the Republic most likely to leave the Yugoslav Federation – the all-out nationalists were never the norm. Clearly, Croats and Serbs had their own unique histories, different forms of Christianity, and different alphabets. However, the huge rates of intermarriage between Serbs and Croats within Yugoslavia tells its own harmonious story. I spend a lot of time in Croatia and many of my friends, products of Yugoslavia, are half Serb, half Croat, while lots are mixed – a bit Slovene, Croat, Serb, and Bosnian.

 

Freud once described intense nationalism as being little more than the “narcissism of small differences”. In the case of Yugoslavia, such nationalist self-regard was always evident in football rivalry (just as it is in Spain.) However, for the most part, everyone got on. Sure, people grumbled about Yugoslavia – as they do in every country –  but there was a sense right up to the end that a multiethnic, multi-religious, multi-lingual state could be preserved.

 

This is why the Catalonia crisis is so unpredictable. Sometimes, as Yeats said, the centre cannot hold.

 

In Yugoslavia, until the Yugoslav Army (or the Serb Army as it was seen by Croats) became heavy-handed and then unnecessarily violent, there was a sense that a compromise could be reached.  Once there was bloodshed, however, the Croats moved to arm and defend themselves; within days, a situation that was regarded as difficult but manageable, descended into civil war.

 

Could Spain go the same way? Anything is possible.

 

The Croats were emboldened by a post-unification Germany, driven by the personality of its foreign minister, Hans-Dietrich Genscher. The EU stance is crucial. How long can it ignore the Catalan street while playing geo-political chess games?

 

One under-analyzed aspect of crises is the role of personalities at the moment of calamity.

 

Personalities matter.

 

In Yugoslavia, Tito mattered. He kept the country together for forty years. When he died in 1980, ethnic divisions became more evident and no single strong leader emerged. So, when disaster struck, there were weak men in power.

 

Worryingly now, there are weak men on both sides in Spain.

 

Prime Minister Rajoy has no majority. His Popular Party is a minority government and his selection as PM was more to do with being the last man standing during coalition negotiations than any ground-swell of national support. As a weakened PM, his priority is getting re-elected. He may use this crisis to appear tough on the Catalans for his own Castilian – and slightly nationalist – base. As we can see in the UK, playing party politics with issues of national destiny is highly dangerous.

 

Unfortunately, Spain doesn’t have a national figure that is respected by all, the role played by Tito in Yugoslavia and, to a lesser extent, by the old King Juan Carlos who stepped aside last year. Would the old man have been as tactless as his son, the new king, was the other night? Old Juan Carlos had widespread kudos as being the man who defused a fascist army coup in 1982. For Catalonians who detested Franco and his army generals, the old king had credibility in the bank. His son doesn’t.

 

As is so often the case, economic calamity precedes nationalist extremism. In the 1980s, Yugoslavia experienced three bouts of hyperinflation. This undermined the credibility of the central government. It also heightened Croat and Slovene fears that “their” hard currency, generated from tourism and light industry, was being squandered by the Serbs.  At the same time, the hyperinflation fuelled instability in Serbia, softening up the ground for delusional Serb nationalists with their talk of land grabs all over Yugoslavia, reigniting the suicidal myth of the Greater Serbia.

 

The economic crisis undermined the legitimacy of the Belgrade central government and gave the nationalists, on all sides, the financial expediency within which to frame their ethnic paranoia.

 

Economics has also played its part significantly in Spain’s crisis.

 

Since 2008, Spain has suffered enormously from the financial crisis and the resulting imposed-austerity. Unemployment increased dramatically, bankruptcies proliferated, and large parts of Spanish assets were sold to vulture funds. Since then, there have been three weak and divided governments trying to grapple with the crisis.

 

The seeds of the nationalist surge in Catalonia have their roots in the great financial crisis. Up to the early 2000s, the wily Catalan leader, Jordi Pujol, played a canny game, constantly demanding cash and concessions from Madrid and threatening independence if he didn’t get his way.

 

As long as there was money in Madrid there was wriggle room. When that dried up, the game changed and – as in Croatia after the Yugoslav hyperinflation – local Catalans began to further resent their money going to central coffers.

 

There is, however, one factor that is new. This is the profound disillusionment of the young with mainstream politics all over Europe, since the crisis. Young Catalans, like young people all over Europe, can’t find work, and if they do, it is extremely badly paid and finding a place to live is near impossible. Rents in Barcelona are up 16% this year and the city is also witnessing, like Dublin, high-end investors snapping up everything. Spain like Ireland, and unlike most other EU countries, is culturally a home- owning society.

 

If you are young and can’t get a decent job that pays properly, plus your rent is going through the roof, what’s the status quo doing for you? Why not back the separatists?

 

The Catalan nationalists say that by Monday they will have declared independence. It’s impossible to know what happens next. However, there is an unfortunate mix of weak leadership in Madrid, a weakened economy in Spain, the legacy of the financial crisis still playing out, and a “lost generation” of young Catalans who are fed up with the status quo.

 

In addition, there is a deep emotional resonance of nationalism all over Europe. At a basic level, nationalists have a better story to tell. They can promise a bright new future, together as one. There is a dramatic energy in the narrative. The image of the nation itself is powerfully exhilarating. This was very evident in the Scottish referendum.

 

Nationalism is here to stay in Europe, but Yugoslavia shows just how dangerous national disintegration can be. The day you leave may be the only high point.

 

For example, since Croatian Independence, various nationalist narratives have taken over the public discourse. Wrapping yourself in the flag is still the way incompetent xenophobes camouflage economic and national inadequacies.  Privately, many Croatian friends of mine lament the passing of the eccentric but reasonably successful federation that was Yugoslavia.

 

You wonder too whether the Catalans will in a few years look back nostalgically at old Spain, if they do decide to take the plunge now.