Thursday, June 28, 2012

Is the Basque economy a model for Spain or a reason to separate from it?


In modern political thinking as well as scholarly analysis, nationalism and economic concerns are often seen as mutually exclusive and fundamentally opposed to one another. Even the concept “economic nationalism” is considered less as a form of nationalism -- in the sense of defining a nation and laying claim to the politic rights thereof -- than as a set of economic policies which favor domestic control of production and finance, often couched in "populist" rhetoric. 

I have never been very comfortable with this distinction between “nation” and “market.” My own research into the historical development of radical Basque nationalism and Irish republicanism has led me to conclude that nationalists are as obsessed as anyone with issues of class and growth. There is generally a fundamental distinction between “left” and “right” nationalists related to these concerns, leading often to alternate conceptualizations of the nation. Furthermore, politicos on both sides of the "normal" left-right political divide are themselves deeply nationalistic, if only in their assumptions. Even the most internationalist of socialists accepts the division of the world into defined nations and tailors her policies accordingly.

If we consider the last few years of American politics, the blurriness between the nation and the market cannot be avoided. Tea Partiers saw Obama’s presumed encroachment into the functioning of the free market as deeply un-American, while the Occupy Movement sees growing inequality as similarly contrary to American values. Both views are based on a fundamental misunderstanding of American history -- which is replete with economic inequality and state intervention into the market. But, this is probably the essence of nationalism: misunderstanding history. But the exemplify the way nationalism and economic concerns cannot be so easily separated from one another.

Amanda Cooper has a provocative article over at Reuters on the Basque economy as a model for the rest of Spain. Whereas Spain's economy -- reliant on tourism, easy credit, and housing -- has all but tanked the Basque manufacturing-export economy is quite strong:
The Basque Country is Spain's fifth largest regional economy, with a gross domestic product of 66.1 billion euros, meaning it accounts for around 7 percent of national GDP. The region's exports are more or less evenly balanced between the rest of Spain and markets beyond Spanish borders. 
Its deficit-to-GDP ratio is just 0.25 percent, compared with nearly 90 percent for the central state. It has the lowest unemployment rate in Spain at 13.55 percent, compared with 24.4 percent nationally… 
The region has the highest per capita output in Spain - 31,288 euros compared with a national average of 23,271 euros and an EU average of 25,134 euros, according to the national statistics office. 
"Euskadi is in better shape to weather this situation because over 20 years ago it bet on industrial policies," said Inigo Urkullu, the leader of the Basque Nationalist Party.
Many of Spain's biggest corporate names are Basque. 
BBVA (BBVA.MC), the country's second-largest bank, is a major player in South America, source of more than half its revenues. BBVA has said it has no need of EU financial assistance. Gamesa (GAM.MC) is the world's fourth largest manufacturer of wind turbines. CAF (CAF.MC), a producer of rolling stock, sells trains as far afield as the United States and China. 
The severity of the European debt crisis has pushed the borrowing costs of the Spanish state to their highest since the launch of the euro in 1999 and many of Spain's overspending regions are shut out of capital markets altogether. 
The Basque region, by contrast, can borrow two-year debt at 8.5 percent interest, compared with 18 percent for Valencia or nearly 14 percent for Catalonia.
The Basque Country's growth has slowed down in recent years, but overall it bears little resemblance to the faltering economy of Spain, as has been evident during my recent travels there over the last few years. As opposed to the empty apartment towers ringing most Spanish cities and towns, the Basque Country seems to be constantly growing -- new buildings and roads being a constant feature of the region.

Cooper argues that geography has contributed to the differences between the Basque economy and that of the rest of Spain, particularly vis-a-vis tourism. The Basque Country does not look anything like the typical image of sunny, sandy Spain one sees in tourism broachers or travel programs. But lush mountains and stormy weather haven’t prevented the Northern Basque Country in France from becoming a tourist haven. The geographic factors behind these differences are more likely the Basque Country’s abundant natural resources and proximity to continental Europe, rather than it's landscape -- which by any account is breathtaking.

She further argues that the endemic political strife of the past half-century prompted the region’s business class to focus on manufacturing rather than tourism. However, the historical record doesn't bear this out. First, the Basque Country has been an industrial powerhouse since the late nineteenth century, long before ETA’s campaign began. Second, during the fascist era the regime, while promoting development of tourism in the southern and eastern regions of Spain, actively maintained the Basque country as one of the country’s manufacturing centers -- along with Madrid and Catalonia. This policy was not an uncharacteristic act of beneficence on the part of the Franco regime: Basque workers were exploited relentlessly and the environment was allowed to deteriorate, while the regime and its allies in the Basque business class reaped the economic benefits of industrial growth.

The growth of Basque industry is intimately linked to the development of Basque nationalism. The earliest manifestations of the nationalist idea coincided with the migration of tens of thousands of non-Basques in the late nineteenth century. Many Basques saw these workers as a threat to the Basque language and nation: they brought with them alien values and contributed to the further deterioration of Euskera. Nationalism emerged then as a reactive ideology. During the Franco era, the exploitative economic policies of the regime contributed to the development of the Basque left and particularly influential among key factions within ETA.

Poster for last March's general strike
The current crisis of the Spanish economy has had a profound impact on Basque nationalists from both the left and right. The moderate Basque Nationalist Party, better known by its Spanish acronym PNV, has used these economic differences to argue for greater autonomy, claiming that “the Basque Country is to Spain what Germany is to Europe.” They envision greater control over taxes and an economic program that would bypass Madrid in selling Basque goods on the international market and establishing bilateral trade agreements -- a sort of economic para-state.

The Basque Left has been, unsurprisingly, more maximalist in their views on the crisis of the Spanish economy. A number of activists I have recently spoken with have pointed to the crisis of the Spanish economy as underlining their economic rationale for independence. The Basque economy is for them yet another demonstration of how different the Basque Country is from the rest of Spain, almost as important as the differences in language and culture.  Like their moderate counterparts in the PNV, they see the continued hegemony of Spain over the Basque Country limiting Basque economic development. As activist Mikel Etxeberria put it:
Exporting Basque products of any kind under a Spanish label may amount to reducing business opportunities and even the loss of international markets. The evidence is so great that more and more Basque industrials transact and invest abroad from a new framing outside of the Spanish to avoid identification with the state and to sell their products in other regions. 
For the world, the "Spain Brand" is synonymous with ruin and equals failure, hence you have to place a particular emphasis on products that are Basque…This is an impossible task in many ways due to the obligation to conduct business under the Spanish flag.
From both ends of the nationalist spectrum, the argument is for greater separation from Spain -- either more economic powers for the Basque Autonomous Government or outright independence for Euskadi. This sentiment is exacerbated by fears that Madrid will seek to extract a greater share of Basque revenue to pay for bailing out banks or promoting economic growth in the south of Spain.

But, if the Spanish economic crisis has caused Basques to reconsider their connection with Spain -- with 54% now favoring a referendum on self-determination -- the faltering Spanish economy has only hardened Madrid's intransigence and hostility to the demands of Basque nationalists. There exists a reverse dependency with the hegemonic state economically dependent on its peripheral colony. So long as the crisis persists, the likelihood of any political change in the Basque-Spanish relationship will remain very, very low.

Ireland stands as an interesting contrast. Earlier this month, a poll published in the Belfast Telgraph found that only 7% of people in the North approved of immediate unification with the Republic. Some observers point to the economic woes of the South as explaining why even Catholics are unenthusiastic about leaving the Union. However, the economic differences between the North and South may also have some bearing on the rise in Sinn Fein’s popularity in the Republic. An elected Sinn Fein official I spoke with last week pondered this basic conundrum, saying “they [the South] should want to join us in the North, not vice versa.”

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