Against alarmism, serenity

EconomistOn Thursday December 28 [the Catalan equivalent of April Fools’ Day] most Spanish media highlighted that Spain’s Independent Authority for Fiscal Responsibility (AIREF) had revised upward its forecast for the growth of the Catalan economy for the fourth quarter of the year. While two weeks earlier it had said that it would be 0.4% or 0.5%, now it is saying it will be 0.7%. In principle, this is good news, but many news outlets chose to send a negative message. La Vanguardia, for example, used the headline: "Catalan economy grows less than Spanish average". This had been the Bank of Spain's line of thinking in its last report, in which it stated that the political situation "could lead to Catalonia having a lower rate of growth, in the final part of the year, than the Spanish economy as a whole, in contrast to the higher dynamism that the Catalan economy had had in preceding quarters".

All of this is nonsense. That is, that the Catalan economy should grow less than the Spanish is not -or shouldn't be- news. In fact, according to Spain’s National Institute of Statistics, the weight of the Catalan economy within Spain as a whole was 19.2% last year (the latest data available). It was also 19.2% 25 years ago. That is like saying that, in half of the last 100 quarters, the Catalan economy grew faster than the Spanish average, and in the other half it grew more slowly. In the fourth quarter of 2016 Catalonia grew at a rate below the Spanish average (0.5% versus 0.7%) and nobody gave it a second thought.

The fact that Catalonia grew less than Spain as a whole is not just not newsworthy, but it should also not be a concern if it only grows 0.7% in one quarter. First, because it would be a higher rate than the same quarter last year; second, because 0.7% in a quarter is equivalent to 2.8% annual growth, which is a higher rate than that of France and very similar to Germany’s; third, and above all, because it is a higher rate than needed to guarantee the material welfare of a society with a birthrate as low as ours.

There is no doubt that alarmism is tied to an interest in spreading the idea that the pro-independence project represents a threat to Catalan prosperity. For the same reason, for example, it has been tirelessly reported that Quebec paid a very high price in terms of impoverishment after its attempts at secession in 1980 and 1995. Or at the beginning of the debate, it was repeatedly said that independence would lead to an economic collapse, with drops in GDP and employment that have only been seen in the Soviet Union, Cuba, Kosovo, or right now in Venezuela. All of these statements are unfounded. In reality, the GDP per capita for Quebec is, in relation to that of Canada, at the same level as it was thirty-six years ago, and the analytical bases for predicting these catastrophes were far from serious.

In fact, we won't know the final results for the quarter now ending until a few weeks from now, but the evidence doesn't give any cause for alarm: the number of passengers going through El Prat is growing rapidly (3.9% in October and 5% in November compared to the same month in 2016), and the traffic in goods at the Port of Barcelona is growing at a spectacular rate (32% in October and 65% in November).

Now, that alarmism is unjustified doesn't mean that the pessimists don't have two pieces of data to support them. The first is the drop -moderate but unsettling- in the number of foreign tourists, and the second is the hundreds of companies that have moved their legal headquarters out of Catalonia for reasons related with the independence process.

In short, it seems that there is an impact -for now, very moderate- of politics on the economy, and it is natural -though not necessarily healthy- for each side to blame the other.

Having said that, it seems to me that if we want to serve our society we have to do two things: first, speak with equanimity, without exaggerating negative symptoms nor downplaying them. Second: to not ignore the fact that, beyond the statistics, there are many companies --especially, but not only, in tourism and commerce-- who are concerned about the political situation. I don't like the phrase “business-friendly" as a government program, but prosperity for everyone demands that stability be provided for companies. For this reason, the independence movement, now that it again can take the political initiative, has the obligation to respond to this concern by talking clearly about its plans for this term and act accordingly.