The "transfer problem"

Larry Summers today wrote an interesting piece for Reuters. His first point - worth considering - is that the German obsession with wrapping the private sector's knuckles and enforcing discipline is overblown + dangerous. It is, indeed, what many thought before Lehman, and that one didn't end well. The second point he makes is about the chances of Greece actually paying up. Summers says "...no country can be expected to generate huge primary surpluses for long periods for the benefit of foreign creditors." Of course, if true, it also means that countries cannot credibly run up sizeable foreign debt positions. Pointing to Keynes' famous point in the Economic Consequences of the Peace, he argues that transferring so much money abroad is simply politically infeasible.

If I get my numbers right, Greece would have to produce primary surpluses of 5-10%, to be transferred to the rest of the EU (in the main) for the next 20 years or so. Of course, many regions in Europe transfer this much to other regions -- but not in exchange for past goods + services received, contrary to the Greek case. One example, close to home? Catalunya. One of the most productive regions in Spain, it is currently sending approximately 9% of its GDP to the rest of the country. Of course, Catalunya is not a separate country, but part of Spain, and all the taxes for which its citizens get precious little payback were not exactly embraced enthusiastically. But pay they do, regardless. This simply shows that open revolt need not follow on the heels of high transfers of a region's riches elsewhere; it depends on the way this is sold to the population. Catalans, while grumbling, are on the whole remarkably placid on the issue. What surprises me is that, in contrast to the rest of the Europe, where regions with their own culture + language are normally "bribed" to stay, Catalans end up paying for being part of a larger entity they do not much care about. Perhaps they should take some lessons from Southern Sudan, and sign up George Clooney to push their case internationally...

Soccer and Autonomy

This week, I was getting quite a few emails from friends from all over the world, talking about soccer. The idea that a German in Barcelona isn't THAAAAT much into soccer takes some by surprise... Of course, not everyone in Catalunya identifies with the Spanish national soccer team, even when they are winning. Last time Germany played against Spain in the Eurocup finals, some of my Catalan colleagues said "We are counting on you guys tonight." This time, when asked if he was looking forward to the cup, one colleague born and bred in Barcelona said "My country is not competing." So I wonder who the press has been talking to that claims that issues of national identity and regional autonomy have been put on a back burner by the country winning the cup. As a matter of fact, and by strange coincidence, last Saturday saw a tremendously large demonstration in Barcelona. People were protesting against the Spanish supreme court decision that denies Catalunya many of the basic rights enshrined in its "Estatut", passed by referendum here and approved by the Spanish parliament. Gone is Catalan as the official language, a right to minimum expenditure of the Spanish state here, etc.

Oddly, the decision by the supreme court may actually be good news for those who favor Catalan independence. It is a miserly and narrow-minded decision, denying a people with a different language and culture even minimal symbolic recognition. This is the kind of ungenerous, stupid reaction to small requests for autonomy that has often led to independence in the long run. Britain's treatment of "Home Rule" in Ireland is a case in point. For many years before World War I, Parliament denied the most basic forms of autonomy to its conquered province. When it finally passed some minimal delegation of powers, implementation was delayed by World War I. When the British hugely overreacted to a minor armed rebellion (by shelling Dublin from warships, etc.), the political mood completely changed. Five years later, Britain ceded control over Southern Ireland. Now, the Supreme Court decision isn't quite the same as the bloody suppression of the Easter Rising in Dublin, but it has a similar, bloody-minded feel to it. What I don't get is why there isn't more of a systematic attempt to organize civil disobedience, withholding of taxes, etc.