Offshore Living

The Real Reason to Welcome Secession

I have a globe from the 1960s. It includes countries with names like British Honduras, the Union of Soviet Socialist Republics, and Rhodesia.

None of these countries exist today, at least not by those names.

Now, take a look at this map of Europe from 1914. Austria was several times as big as it is today. Slovakia and the Czech Republic didn’t exist. What is now Turkey was the much larger Ottoman Empire. North Africa was occupied by France.

Off the map, huge swaths of Africa and Asia were part of the British Empire. Alaska and Hawaii were still US territories, not states.

Borders change over time. And humans, when given the opportunity, tend to choose to live independently in smaller and more internally cohesive groups. That’s a big reason why there are more than 200 countries in existence today, versus around 70 in 1945.

And the process continues. On September 18, Scotland will hold a referendum on whether to separate from the UK after a 307-year-old union. The UK has promised to honor the result, but opponents warn of catastrophic consequences if Scotland becomes independent.

The Spanish province of Catalonia wants to separate from Spain. Once an independent nation, Catalonia was fully absorbed into Spain in 1714. Catalonians will vote for or against independence on November 9. Unlike the UK, Spain’s Congress has declared the referendum illegal and its result null and void.

Italy has at least three secessionist movements: the Northern League and nationalist groups in Venice and Sardinia. Last month, nearly 90% of voters in the province of Venice voted in favor of independence. The referendum was non-binding, but the vote will be impossible for Italy to ignore.

Outside Europe, Quebec has been threatening to secede from Canada for more than 50 years. A referendum for separation in 1995 lost by only one percentage point, and a large minority of “Quebecois” still seek independence.

The US has long been a hotbed of secessionist talk, even 150 years after the Civil War. Secessionist movements are active in Texas, Northern California, and numerous other states. Indeed, one researcher drew up a map of how the US would look  if all 124 US secessionist movements through the end of 2011 had been successful. (My favorite is the state of “Westylvania,” with “Yazoo” and “Muskogee” runners-up.)

Governments obviously don’t like secession movements because that would mean a loss of power. Small nations have smaller governments, smaller militaries, and can’t push around their neighbors as easily as big ones.

That’s probably why current and past secession movements in Iraq, Russia, Indonesia, and China have been brutally suppressed. That’s also the reason why, when the Southern US seceded from the North over 150 years ago, the North responded militarily in a campaign that eventually cost more than 600,000 lives. Politicians justified the war because of slavery, but few Americans were willing to fight a war over that issue.

Of course, larger nations can also better defend themselves against other larger nations than smaller ones can. We saw this first-hand in the Ukraine a few weeks ago. When Russian troops occupied Crimea, the Ukrainian military didn’t try to stop them. It fled the peninsula.

Was this just another example of a large and powerful country – Russia – swallowing up part of a smaller and less powerful one – Ukraine?

Perhaps. But the truth is more nuanced. Most people living in Crimea have Russian origins. Political separation from Ukraine was probably inevitable.

Opponents of secession point to Crimea as proof that it’s a dangerous trend that must be stopped. Take Lord George Robertson, for instance. He’s held posts as UK defense secretary and head of the North Atlantic Treaty Organization (NATO), the supposed bulwark of the US and Western Europe against aggression by the Soviet Union – and now Russia. He warns of dire consequences if Scotland votes for independence later this year. According to Robertson – himself a Scot – a “yes” vote would boost the “forces of darkness” worldwide. He predicts Scottish independence would have a “cataclysmic” effect on European and global stability.

We’ll see about that. Does Robertson really believe that if Russia – or anyone else – invades Scotland, England wouldn’t collaborate with its neighbor to defend Scottish territory?

Critics of secession also point out that newly independent countries, being small, would have to pay higher interest rates on the government bonds they issue. And that might be true, for the first few years of independence.

But it’s not an inevitable long-term reality. Tiny nations such as Switzerland and especially Singapore pay very low interest rates on their sovereign debt. Indeed, Singapore is actually running a government surplus.

European enclaves seeking independence have also been threatened with loss of EU membership. But Switzerland and Norway aren’t EU members, and they’re doing fine. Indeed, the Swiss franc and the Norwegian krone are two of world’s strongest currencies.

What makes the residents of places like Catalonia, Scotland, and Texas so anxious to separate themselves from their respective national governments? Humans have a fundamental drive to seek personal autonomy, and that drive carries over into our social and political lives. And, of course, smaller governments are more accountable than larger ones.

Justifying secession is easier if the region that wants to secede feels unappreciated. For instance, the area surrounding Venice – Veneto – has long been one of Italy’s wealthiest. Supporters of independence point out that Veneto receives only 5 euros in government services for every 7 euros it pays in taxes. They claim that, with independence, Veneto would receive billions of euros annually in surplus revenue.

Naturally, new countries like Scotland, Catalonia, or even Texas would be forced to compete economically, financially, and militarily. They would need new sources of investment, skilled labor, and many other things to build their new nations.

Looking for a higher return on your investments? New nations will have to offer higher interest rates on their sovereign debt.

Looking for a business-friendly environment in which to set up your next venture? New nations, if they’re smart, will roll out the red carpet to entrepreneurs.

For all these reasons, secession is nothing to fear. Indeed, for those of us seeking international opportunities, it’s something to look forward to.

Mark Nestmann

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