The largest and some smaller political parties in Catalonia, one of
the richest parts of Spain, want to have a referendum in that region
on whether they should secede from the rest of Spain. This is despite
the fact that during past several decades the central government of
Spain has ceded considerable fiscal and other independence to
Catalonia and other regional governments. Those supporting a breakup
argue, among other things, that Catalonia is being heavily taxed to
help support poorer and less hardworking regions of Spain. The
opposition to a breakup both within and outside of Catalonia claims
that secession would be illegal under the Spanish constitution, and
that it would destroy Spain's culture.
Spain is not the only country that is experiencing pressure either to
breakup, or to become much more decentralized politically. Major
parties in Scotland want independence from the rest of the United
Kingdom. As a result of this pressure, Scotland and other regions of
the UK have received much more autonomy than they had in the past. The
independence movement has quieted down in Quebec, but only after
Canada established French on an equal footing with English, and after
the province of Quebec received other special treatment from the rest
of Canada.
The Western and Russian-influenced part of the small country of
Georgia is essentially independent in most respects from the rest of
Georgia, while Georgia only became independent after the breakup of
the Soviet Union into many independent countries. At the close of the
nineteenth Taiwan, which had long been part of China, became a colony
of Japan until World War II ended. Taiwan was returned to China at
that time, but became an independent republic in 1949. China is
pressing hard for Taiwan to once again become a province of China,
probably with a large degree of autonomy. However, the great majority
of Taiwanese prefer the status quo, in part because per capita incomes
are so much higher in Taiwan than in Mainland China.
Although emotions usually overflow on the subject of secession and
forcible integration, I will not try to evaluate the significance of
nationalistic feelings in a region or country. I will instead focus on
the economic consequences of a country's breakup into smaller and
largely independent countries. Often stressed is that since larger
countries have bigger domestic markets, companies in larger countries
can utilize economies of scale in production.
The movement toward free trade agreements and globalization during the
past 60 years has enormously reduced the economic advantages of having
a larger domestic market to sell goods ands services. Small countries
can sell their goods to other countries, both large and small, almost
as easily as large countries can sell in their own domestic markets.
For example, during the past 30 years the small country of Chile has
had the fastest growing economy of Latin America, larger than Brazil
and Mexico, the two largest nations of this region. This would not
have been possible without the access of Chilean companies to markets
in other countries, both in South America and elsewhere. As a result,
Chile now exports around 40% of its GDP, compared to a ratio of
exports to GDP in the United States of about 13%.
To many in Czechoslovakia, the economic future seemed dim when
Czechoslovakia voluntarily split in 1993 into the Czech Republic and
the Republic of Slovakia. Similarly, emotions were strong after a
destructive war forced Yugoslavia to split into six separate
countries. Yet these separate nations are generally doing at least as
well economically as did Czechoslovakia and Yugoslavia.
Small countries can do well with small domestic markets by taking
advantage of a globalized economy by selling large fractions of its
production to consumers and companies in other countries. That is why
smaller countries usually export a considerably larger fraction of its
production, and import a much bigger share of its consumption, than do
larger countries. Size of country was much more important in the past
when many countries had high tariffs, and transportation costs were
much more important.
Political interest groups tend to be less able in smaller countries
in distorting political decision in their favor. This is partly
because smaller countries are more homogeneous, so it is harder for
one group to exploit another group since the groups are similar. In
addition, since smaller nations have less monopoly power in world
markets, it is less efficent for them to subsidize domestic companies
in order to give these companies an advantage over imports. The
greater profits to domestic companies from these subsidies come at the
expense of much larger declines in consumer well being.
The growth in the competitiveness of small countries on the global
market is in good part responsible at a deeper level for the
remarkable growth in the number of countries since 1950 from a little
over 100 to almost 200 countries now. And the number of independent
countries is still growing.
http://www.becker-posner-blog.com/2012/12/breakup-of-countries-no-economic-disaster-becker.html
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