Archive for the ‘European Union’ Category

In Which I Lose a Bet

Last year, I offered a bet that if an election were held this year in Catalonia, Catalan independentist parties would win a majority of valid, nonblank votes. One was, and they didn’t. The only person to take me up on the bet was Bernat Gispert, who bet me dinner next time I’m in Barcelona, hoping that he would lose. Alas, I owe him dinner now!

Why didn’t independentists win? Shortly after I offered that bet, in November 2014, support for independence declined precipitously, with a June 2015 survey from respected outfit CEO putting opposition to independence at 50-43%. I explored some reasons for that decline in another post, even as I predicted a rise in support before the September 27 election (I was right about that!).

In the rest of this post, I will explore the results from Sunday’s election in greater depth and what they imply about the views of the median voter in Catalonia. Here are the party results in votes and seats.
election results

The two independentist lists, JxS and CUP, between them won a majority of seats but only 48.0% of the valid, nonblank votes. The UDC is a Catalanist party that used to be in a longterm alliance with one of the constituent elements of the JxS list, leaving this year over the issue of independence. Their leaders have favored confederacy or freely associated state status for Catalonia, which international lawyers generally consider a form of independence. However, they opposed JxS’s roadmap to independence because it involved an illegal declaration of independence. Their campaign focused on “the power of good judgment (seny)” and was aimed at voters who might be pro-independence but are above all pro-stability and pro-business. The leader of the list has said that the UDC’s votes cannot be considered votes either for “yes” or for “no” to independence.

Catalonia Yes We Can, a radical-left list, supports a referendum on independence but is internally divided on whether Catalonia should actually become independent. The leader of their list has likewise said that their votes cannot be considered either “yes” or “no” on the issue.

Therefore, independentists are claiming that when one adds together the votes for the two independentist lists (JxS+CUP), they exceed the votes for the anti-independence lists (PSC+PPC+C’s), 48.0%-39.4%. JxS supporters, in particular, are claiming a mandate for the roadmap to independence. To their credit, the radical-left party CUP says that this is not enough for a unilateral declaration of independence. Because their seats are essential to an independentist coalition, CUP will likely be able to negotiate with JxS some amendments to the roadmap. One of those amendments is likely to be a definitive referendum, in which the Catalonian government agrees to respect whatever outcome the majority decides, declaring independence if a majority votes “yes” and shutting down the secessionist process for a generation if the majority votes “no.” Of course, Spain says such a referendum is illegal and will try to stop it by imprisoning officials, etc. It’s not clear that they’ll be able to prevent it from happening, however. Nor is it clear that the hardline unionists will boycott this vote as they did the 9-N consultation, if they know a declaration of independence will immediately follow a “yes” victory.

Do the majority of Catalans support independence? It’s impossible to be certain. Suppose half of the minor parties’ (PACMA, RC-EV, Ganemos, Pirata) electorates support independence. That adds 0.6% to the independentist total. Then add a mere 20% of the votes won by the anti-roadmap but pro-right-to-decide UDC and CSQEP. That adds another 2.3%. That extra 2.9% would give independence an extremely slender 50.9-49.1% majority. I don’t think it is plausible to think that fully half of CSQEP and UDC voters support independence.

A final issue is that of votes from Catalans abroad. The Spanish government was responsible for sending them ballots, but apparently the vast majority did not receive them. Catalans abroad are overwhelmingly pro-independence. The returns from international ballots for the Barcelona province allegedly show more than 65% voting for the independentist lists. Turnout from Catalans abroad was a mere 7%, so clearly there was some kind of snafu. The voting period for Catalans abroad has been extended to Friday, but it’s not clear this will resolve the problem for most.

How would 70% participation among the 200,000 Catalans living abroad affect the result of the election? (This is just below the 77% turnout overall for this election.) If we add 0.7*200000*0.65=91,000 votes to the independentist lists and 0.7*200000*.35=49,000 votes to the other lists, the independentists still end up with just 48.56% of valid, nonblank votes.

As a political scientist, I don’t believe in “mandates.” Electoral choices revolve around many different issues, differential turnout can affect results, voters are often ignorant of party platforms and how policies affect outcomes, and cyclical majorities and different preference intensities complicate any attempt to come up with a “will of the people” under the best of circumstances. Yet if Catalonia’s election tells us anything about the position of the median voter on independence, it is probably this: the median voter may well support independence, but not a roadmap that includes a unilateral declaration of independence (at least not yet). The new government of Catalonia, whenever it forms, would do well to proceed with caution.

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On September 27, Catalonia, an “autonomous community” of Spain, votes in a regional election that will likely determine whether the region declares independence from Spain. The Economist and other global news outlets have generally not taken the movement very seriously, which is a grave mistake. According to a series of new polls, the independentists are likely to win this election, and if they do win, they will pursue a roadmap ending in a proclamation of independence within 18 months. It would be the first secession from an industrialized democracy since either Iceland (1944) or Ireland (1922), depending on how you count (Iceland had full internal self-government from 1918).

Catalan independence may well be a good outcome for the world. There are several reasons why Catalonia is likely to be more successful as an independent state than Scotland would have been.

First, Catalonia is significantly wealthier than the rest of the Spain and suffers a significant annual net fiscal drain to the Spanish treasury, on the order of 6-10% of GDP. Catalonia is also the least corrupt region of Spain.

The stock markets also suggest that independence might benefit or at least not hurt Catalonia. I examined the INDEXCAT produced by the Barcelona stock exchange, an index of all Catalan-owned, publicly traded companies on its exchange, to see how its prices responded to changes in the probability of independence. Since September 11, 2012, when the independence movement reached a popular crescendo on the streets, the INDEXCAT has grown 48.7%, compared to 26.2% for the IBEX 35 index of major Spanish firms, to 31% for the German DAX, to 24.4% for the Dow, and 21.6% for the EUROSTOXX index. This chart produced by the Catalan Business Circle shows that the fastest growth for the INDEXCAT occurred during the period when independence seemed most likely to occur, the late 2012 to late 2013 period when support for independence generally topped 55% of those expressing an opinion in yes-no questions and it still seemed possible a true referendum might be held.

Then I looked at how the INDEXCAT responded to the recent turnaround in polling for the September 27 elections. After several months of declining support for independence and independentist parties, public opinion started to turn around dramatically just two weeks ago. (Right after I predicted it would!) There have been three “polling shocks” since September 1. (The English-language Wikipedia article on these polls is rapidly and accurately updated.) The first and most significant occurred on the night of September 3, when three polls were released, all showing a pro-independence majority, after a series of July and August polls showing the independentist lists well short. We should expect investors to update their views about the likelihood of independence immediately and to trade on those views as soon as possible. Within a few minutes, the new market prices should reflect the public information. The INDEXCAT dropped just 0.31% between close on September 3 and five minutes after opening on September 4. That is consistent with a small negative impact of independence on major Catalan firms, but let’s look at the other shocks.

On the morning of September 9, a modest negative polling shock occurred, as following a string of four polls showing a clear independentist seats majority, a poll from the respected Spanish government research outfit CIS showed the slenderest of possible majorities for the independentists, just 68 out of 135 seats. It’s hard to figure out exactly when that information went public. A single tweet with the results went out at 9:00 AM exactly, but it seems to have broken an embargo, and those results weren’t confirmed until 9:30. In any event, between 9:00 and 9:10 AM, the INDEXCAT fell 0.22% and didn’t change much over the following hour. These results are consistent with a small positive impact of independence on major Catalan firms.

Finally, over last weekend a new series of polls seemingly have shown the CIS result to be an outlier, once again confirming a clear seats majority for independentists. Between market close on Friday and 9:05 AM Monday, INDEXCAT rose 0.26%. This outcome is consistent with a small positive impact of independence on major Catalan firms.

Unfortunately, I cannot calculate the expected value of independence for publicly traded Catalan firms as I did for Scottish companies, because there are no betting markets on Catalan independence or the majority in the coming election. (Unbelievable but true.) Still, on balance, the results suggest that investors expect Catalan companies to become more, not less, profitable with independence. In turn, that finding implies that the transition costs of independence are excessively hyped.

The second reason why I think Catalan independence may be good for the world is that the Spanish government has not given any concessions to Catalans to prevent them from voting for independence. To the contrary, Spain has tried to recentralize powers and has even hinted at using military force against Catalans (almost certainly a bluff). The contrast with Britain’s response to Scotland could not be stronger. If Catalans vote against independence, it would send a bad signal to Spain: that threats work to deter secessionism. Moreover, it would leave Catalonia and all the other autonomous communities vulnerable to even more severe recentralization policies. Unilateral disarmament more often invites aggression than defuses it.

The final reason why Catalan independence would be good for the world is that Spain’s existing pattern of decentralization is dysfunctional, as just about everyone recognizes. Spain’s autonomous communities racked up excessive debt during the 2000s boom and have required bailouts from the central government (PDF). Those bailouts establish a moral-hazard incentive for autonomous communities to continue profligate spending and rely on the central government for assistance when borrowing becomes difficult. Why did the autonomous communities rack up excessive debt in the first place? Stanford political scientist Jonathan Rodden has shown that when there are no external balanced-budget requirements on lower-level governments in decentralized systems, the only way to encourage fiscal discipline is to require the lower-level governments to pay for their own spending mostly out of own-source revenues and to make credible promises to let these governments go bankrupt if they cannot pay back their bondholders. The bond markets then provide fiscal discipline: subcentral governments maintain fiscal discipline because if they borrow too much, they will end up paying higher interest rates. But what happened in Spain was that the autonomous communities (with the exception of Euskadi and Navarre) had vast spending rights and responsibilities but few sources of independent income. They depended on central government grants, and thus had little incentive to spend the money responsibly. So you got things like this.

If Catalonia leaves Spain, it will be a significant fiscal shock to Spain. One relatively easy way for the Spanish central government to deal with the shock is to reduce transfers to the autonomous communities and allow them more independent taxation powers. The autonomous communities will complain about the burden-shifting, but the more nationalist communities will be happy to enjoy more fiscal autonomy. Moreover, fiscal competition between independent Catalonia and rump Spain could encourage both governments to adopt more efficient and less corrupt policies.

Catalonia isn’t a free-market paradise. For instance, the regional government passed a protectionist law limiting shop hours that the Spanish government wisely overruled. Politics throughout the Mediterranean region are toxic right now, and Catalonia is not immune. The European Central Bank’s unconscionable policies of monetary austerity have kept southern Europe in economic crisis for years, and the region’s voters have turned against wealth creation and free markets as a result. That’s a different problem with different solutions. But in the medium term, would you rather see Catalonia as part of a Spain ruled by a coalition between the corrupt left (PSOE) and the extreme left (Podemos), since the PP will lose the next election, or would you rather see an independent Catalonia in which the largest party has always been of the center-right (Convergence)?

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I don’t blog much here anymore, in part because I’ve been too busy with Ethics & Economics Education, and in part because I find it easier to share quick thoughts on Twitter. Here’s a little tweetstorm I had recently on Catalonia’s independence vote next month:











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Bryan Caplan argues that social conservatives should prefer libertines to hypocrites, contrary to the common meme that “at least hypocrites have moral standards.” The argument is pretty simple: hypocrites seem to share your values, but when you least expect it, they will betray you. So far as it goes, the argument is pretty convincing.

But libertines and hypocrites aren’t the only two possible types of people who fail to live up to putative moral standards. A true hypocrite doesn’t actually have moral standards but merely pretends to them. After all, if one has moral standards, they should affect your behavior appreciably, but the hypocrite simply does what (s)he wants anyway while feigning belief in a stricter standard. That’s what makes hypocrites so dangerous.

The third type of moral failure is weakness of will. The weak-willed believe in moral standards and generally live up to them, but occasionally fail due to weakness of will. The weak of will acknowledge their flaws and try to do better, but you know they will sometimes fail. Unlike the hypocrite, the weak-willed is open about his/her failings, and therefore when dealing with them you know better what you’re dealing with. Unlike the libertine, the weak-willed often actually do live up to moral standards, so long as it isn’t too hard to do so.

Therefore, social conservatives should rank moral failures thus: 1) weakness of will, 2) libertinism, 3) hypocrisy. What some social conservatives praise when they praise “hypocrisy” is probably actually weakness of will, if they took some time to reflect on the distinctions.

I thought about these distinctions while considering the case of corrupt socialists. In the Spanish news today is the number-three man at Podemos, the extreme-left party in Spain (more or less their answer to Greece’s Syriza – the relations between the two parties are extremely close). This man, Juan Carlos Monedero, took half a million dollars from left-wing governments in Latin America (most particularly the Venezuelan dictatorship) for “consulting” and failed to pay taxes on it. He also defrauded his university, a technical college in Madrid, which was contractually guaranteed 20% of his consulting contracts.

Does this fraud evince hypocrisy or weakness of will? After all, Podemos has taken the lead in denouncing corruption in other parties, whom they call “la casta.” Withholding taxes from the government has to be a cardinal sin for socialists. Can true-believing socialists excuse the act on the grounds that “at least he has principles”? Or is he really pretending at having socialist principles at all?

It’s difficult to answer this question, because socialism attracts the unprincipled. If you want to enrich yourself through government, there’s no better way to do it than to denounce corruption and promote populist measures against the rich in order to get elected, and then once elected, use state-controlled companies to feather your own nest. When the state controls the economy, it controls wealth, and it will be extremely tempting to funnel some of that wealth to yourself and your friends.

Not knowing more about the man, it’s difficult to know whether Monedero – and quite possibly the other leaders of Podemos – are hypocrites or merely weak-willed. But that fact alone shows one of the inherent problems of socialism: really existing socialism either brings about rule by the already corrupt or corrupts those who rule.

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Catalan President Artur Mas gave a major speech tonight, which fortunately Liz Castro live-translated on Twitter. To review, here’s where we are now: Catalonia held an informal plebiscite on independence on November 9, which the Constitutional Court had suspended, and 81% of voters supported independence. The Spanish state has refused to negotiate any constitutional revision that would permit a binding referendum on independence, and the state prosecutor has filed criminal charges against Artur Mas and two other cabinet ministers for going ahead with an informal poll. And a new poll (not from CEO, the Catalan government pollster) shows significant majority support for independence among those with an opinion, including support for a unilateral declaration of independence if independentists win the next election.

Since Spain has closed off all legal means to secession, the Catalans are now looking at extralegal means. In tonight’s artur masaddress, President Mas endorsed “plebiscitary elections” to the Catalan Parliament (previously discussed here). A unified pro-independence list would run in early elections, and if and only if that list obtained a majority of votes and seats, the new Catalan Parliament would declare its intention to secede. Within 18 months, it would set up the institutions of a new state and set the framework for elections to a constituent assembly that would draft a new constitution and declare independence. Anyone who runs on the unified list in the next election would be ineligible to run for the constituent assembly in the subsequent election. Mas himself says he will step down from Parliament at the end of the 18-month term if the plebiscitary election yields a pro-independence majority.

The unified pro-independence list would include members of all pro-independence parties as well as pro-independence members of civil society. Interestingly, Mas’ own party, a federation of a pro-independence party and a much smaller pro-federalism party, looks set to break apart now. The Catalan Republican Left (ERC), the second-largest party in Parliament, wants early elections now and an immediate declaration of independence if secessionists win a majority in that election. They have not ruled out participating in a unified list, however. A small, hard-left, secessionist party, CUP, has ruled out participating in such a list.

There are likely to be several consequences of Mas’ announcement. First, (more…)

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What Next for Catalonia?

Participation in the November 9 “participatory process” in Catalonia exceeded my expectations. According to reports, 2.3 million people participated in a nonbinding vote organized by volunteers, a figure that would amount to over 40% of the electorate. (No electoral roll was used for this election because of Spanish Constitutional Court rulings prohibiting the support of the Catalan government; voters had to show identification in order to vote.)

Of those who voted, 81% supported “Yes-Yes” (yes to Catalan statehood, yes to Catalan independence), 10% went “Yes-No,” and 4.5% voted “No.” Gràfic dades 3Many voters who would have otherwise voted “No” boycotted the process entirely. Still, in the last Catalan election, 3.6 million votes were cast. We could take that number to be a rough estimate of those who would actually turn out to vote in a binding referendum. Since over 1.8 million voters went for Yes-Yes in a purely nonbinding show of support, we can confidently predict that a binding referendum would yield a clear majority in favor of independence.

Another data point in favor of this conclusion is that just under 1.9 million voters voted in favor of Catalonia’s proposed new statute of autonomy in 2006, which was 73% of those voting. A binding referendum on independence would surely attract higher negative turnout, but there is no way around the conclusion that support for independence could well reach 55 or even 60% in such a vote.

What next? Catalan President Artur Mas said in a speech after the vote results were announced that he would pursue negotiations over a legally binding referendum with the Spanish state. But what will happen when the Spanish state refuses to negotiate with him, as it will assuredly do? Mas seems to be leaving the door open to a prolonged period of stasis, which is exactly what the Spanish government wants, thinking as they apparently do that the Catalans will eventually “return to sanity” if they simply wait long enough. On the other hand, he could simply be giving the Spanish government one last chance to negotiate, and if that fails, to go ahead with an extraconstitutional plan, such as the “plebiscitary election” favored by the Catalan Republican Left.

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Last week I was in Barcelona for two days, giving a talk at an event on “the right to decide,” sponsored by the Centre Maurits Coppieters (nonprofit arm of the European Free Alliance, the European Parliament group for ideologically mainstream minority nationalist parties) and by the Fundació Josep Irla (nonprofit arm of the Catalan Republican Left [ERC], largest pro-independence party in Catalonia). I also did some media interviews. You can see some excerpts of my interview with Catalonia’s TV3 evening news here (in Catalan).

I was interested in going to find out more about Catalonia’s independence movement and its prospects. For background on the Catalan movement, see my post here on Pileus from September 24, 2012, two weeks after the massive Catalan National Day demonstrations that kicked off the current process. (That post, including its forecasts, has held up pretty well, I’d say.)

Now that the Spanish Constitutional Court has invalidated the consulta (consultative plebiscite) that the Catalan Government had authorized with the support of over two-thirds of Catalan MP’s and three-quarters of the Catalan electorate, the way forward is murky. An official consultation will not now happen. Instead, tens of thousands of volunteer poll workers are signing up to help with an unofficial poll that will involve ballots and ballot boxes and occur on November 9.

It remains to be seen how successful the November 9 consultation will be. The pro-independence parties and civil society organizations are trying hard to mobilize voters and volunteers for the event. The anti-independence parties are boycotting the vote, as indeed are some far-left types who hate Artur Mas, such as the leader of the ex-communist, ecosocialist party ICV-EUiA, which otherwise supports the “right to decide” and remains agnostic on independence.

If the November 9 consultation is successful, then the pro-independence parties will try to negotiate a “unitary party list” for early elections to the Catalan Parliament. They will treat this election as a plebiscite-by-proxy, and if an absolute majority of seats and votes go to the pro-independence list, Artur Mas will take it as a mandate for independence.

However, several difficulties remain. The more radically independentist party, ERC, wants to declare independence right away after a successful “plebiscitary election.” Artur Mas’ party, Convergence and Union (CiU), is divided between independentists and those favoring a solution like confederation. (Technically, the party is a long-standing alliance between two separate parties, the now-independentist Democratic Convergence of Catalonia and the autonomist Democratic Union of Catalonia.) Generally, the last few days have seen more division and acrimony among secessionist leaders than the previous two years, and if it continues, that division will alienate voters. Civil society groups continue to call for unity among the pro-independence leaders.

Another difficulty is that while a majority of Catalans with an opinion on the matter favor independence (a recent El Mundo poll had the anti-independence side ahead within the margin of error, but their polls have always been biased in an anti-independence direction), polls suggest the pro-independence parties would not together gain a majority in early elections. The reason for this is that many independentists are not in the secessionist parties. For a successful result, the “unitary list” will need to contain important leaders from civil society and non-secessionist parties.

If the Catalan process stumbles now, it will be a shame, because it will show the Spanish government that they can face down demands for more autonomy simply by standing pat and threatening to arrest politicians. Spanish autonomous communities like Catalonia enjoy far less autonomy than American states (they are not allowed, for instance, to vary the overall tax burden from a central standard).

The most likely outcome of the process now seems to be (more…)

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