ABRAHAM: Self-determinaton may have unsettling results

Opinions Column: Unconventional Wisdom

Many Americans tend to sympathize with those who invoke the principles of self-determination, independence and freedom. This country, after all, was founded by challenging the world’s most prominent imperial power at the time: Great Britain. Some argue that the rise of politicians such as President Donald J. Trump, Geert Wilders, Rodrigo Duterte and others are indicative of a global movement toward populism and collectivism.

Considerations for these global attitudes taken into account, it is reasonable that now seems to be an opportune time for the autonomous regions of the world to make moves in securing their independent states. In the past week, both Catalonia and Iraqi Kurdistan have held their own referendums, with 90 percent and 93 percent of voters expressing attitudes in favor of independence, respectively. These referendums make it apparent that both the Catalans and the Kurds express a unified readiness for national sovereignty.

So in the spirit of traditions laid out in the Treaty of Westphalia, Woodrow Wilson’s Fourteen Points and, more recently, the Brexit vote, how can a cohesive community’s claim for sovereignty go wrong?

As it turns out, a lot can go wrong. The dissolution of Yugoslavia and the American Civil War, for example, were two, far-from-perfect examples of secession that resulted in the deaths of hundreds of thousands. Furthermore, the annexation of the Crimean peninsula by the Russian Federation following its independence referendum from the Ukraine is a more recent reminder that self-determination brings with it turbulent times.

I will provide economic cases against Catalan and Kurdish secession. I will not make considerations to the political legitimacy of these referendums, and will instead look at the economic costs of secession.

The rhetoric of secession often includes the notion that independence brings about subsequent financial fortunes, a phenomena LSE economists Andrés Rodríguez-Pose and Marko Stermsek refer to as “independence dividends.” This notion is not necessarily true. In their analysis of secession of former Yugoslavia, Rodriguez-Pose and Stermsek found that secession had no favorable impact on the seceding countries’ economies. At best, economic prospects are unchanged following a secession. At worst, violent conflict may erupt, bringing down standards of living for all parties involved.

While this empirical research only analyzes the cases of former Yugoslavia and other literature on the economics of secession is hard to come by, there is little reason to buy into the platitudes of “independence dividends.”

In the case of Catalonia, secession would necessitate Catalonia’s immediate eviction from the European Union and a haggard process of renewed inclusion in the Eurozone. According to Dutch bank ING, approximately 65 and 70 percent of foreign investment in Catalonia and Catalan exports respectively involve the European Union (EU). Independence would instantly evict Catalonia from these markets, and the restructuring these trade agreements entails foregone economic activity. Placed at the mercy of other European governments, the extent of Catalonia’s involvement in the EU single market is uncertain.

Similar negative forecasts are looming for Iraqi Kurdistan. Following its referendum, Baghdad has urged countries to cancel all flights to the region, with Turkish President Recep Tayyip Erdogan issuing an economic ultimatum for Kurdistan. Due to the Kurdish Regional Government’s (KRG) dependence on imports from countries such as Egypt, Iran, and Turkey, with imports amount to 90 percent of goods in the region, Kurdish independence would most certainly result in stagnation. What’s more, Kurdistan’s extreme reliance on exporting oil through Turkey’s Port of Ceyhan is also bad news, as Turkey could effectively cut off a majority of the KRG’s trade to Israel, one of the KRG’s biggest economic partners. Without any institutions in place for diversification and self-reliance, Kurdistan’s economic prospects for independence look very bleak.

In addition, secession has the negative impact of reduced consumer optimism and investment. The same ING report also found that 62 percent of Catalans were worried about the future of the region, a finding that certainly doesn’t reflect well on the macroeconomy of Catalonia. This is further confounded by the fact that moderated consumption would also mean reduced business investment in the region. If recent history can attest to anything, it’s that reduced demand and low investment is not a recipe for economic growth. Not only do these factors endanger the Catalonian economy, but could potentially be felt by the rest of Europe. Uncertainty of Kurdistan’s future economy could lead to similar lack of consumer confidence, but this is more speculative.

These are a few of the many economic costs of secession. Even without considering the restructuring of La Liga in Spain, the weighing of territorial claims of Kirkuk and, of course, the broader political implications of Catalan and Kurdish secession, the familiar and comforting ideals of self-determination seem just a little bit more unsettling.

Nour Abraham is an School of Arts and Sciences senior majoring in Mathematics and Economics. His column, "Unconventional Wisdom," runs on alternate Fridays.

*Columns, cartoons and letters do not necessarily reflect the views of the Targum Publishing Company or its staff.

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