A tale of two cities

In a 2012 book (Modesta España), veteran journalist Enric Juliana explained Spanish governments’ consistent economic discrimination against Catalonia by pointing out that Europe will in the future look like an “archipelago: islands of economic prosperity surrounded by vast depressed areas.” Indeed: market integration concentrates production in a few locations to maximise synergies so, over time, the contrast between these prosperous “islands” and the surrounding, downbeat regions intensifies.

Overlay on top of this the political jigsaw of independent states. Each state monopolises violence within its borders (Max Weber dixit) and uses it to redistribute resources to the groups it wishes to favour. Therefore, if the integrated market’s dynamics endanger the power balance that drives those decisions, the state may be tempted to economically clip the wings of regions, industries and people favoured by the market to benefit others more to its liking. Such policies preserve the power balance, but at the cost of causing major inefficiencies and thereby lowering the population’s welfare.

Perhaps nowhere is this conflict as stark as in Spain. Indeed, in countries around Europe’s economic core (the pentagon around London, Paris, Milan, Munich and Hamburg), the regions most favoured by integration happen to be also those that have historically had most weight in their power balance. At the other end of the spectrum, those at the continent’s fringe (Portugal, Greece, Bulgaria, Romania) are losing weight respective to that continental centre but, within their territories, are seeing their capitals more favoured by the market than the rest of the country, so the internal power balance comes out reinforced. In Spain, however, those same market winds are increasingly promoting its Mediterranean axis and, particularly, its core metropolis at Barcelona, whereas its traditional political core in the Peninsula’s central plateau is steadily depopulating. This poses a major challenge to Spain’s long-standing power balance.

Hence the state bets on Madrid, its oversized capital and traditional seat of power, becoming the great Iberian prosperity island instead of Barcelona - which requires deliberately clipping the wings of the latter. Hence, for example, Spanish governments pour generous public investments into Madrid as well as across “empty Spain” while displaying a remarkable stinginess regarding infrastructures around Barcelona. Today, Madrid is indeed Spain’s largest economic centre, and its growth rate is also the fastest within Spain, but its success is hugely dependent on the state’s support. Indeed, the services it provides are only truly competitive within the territory where that state wields its coercive power, while its productive efficiency keeps dropping even faster than Spain’s average (which is already dismal).

Barcelona’s case, and more broadly Catalonia’s, is the opposite: although its GDP growth rate is lower than Madrid’s, its productive efficiency is steadily improving and, as its products are competitive beyond Spain’s borders, the share of Catalan production crossing those borders has grown from one third to two thirds of its total exports in the last fifteen years. The state’s policies favouring Madrid at the expense of Barcelona have thus so far succeeded only in part.

Enric Juliana’s hint was very subtle, and for good reason: for a state, clipping the wings of one of its regions to favour another constitutes an odious abuse of power, since all citizens must be equal under the law. Killing the goose that lays the golden eggs to preserve the power balance is also a luxury Spain should not be able to afford - but, then again, so far the EU has been all too happy to print more money to finance the cost of these policies. How long this may last, with Barcelona’s economic prospects being purposefully undermined by the state, remains to be seen.


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