Wales, Slovenia and Independence

If we want to compare ourselves with other similar countries in Europe, Slovenia is an almost perfect example. It is virtually exactly the same size as Wales, though with just over two million people.

     

It even gives us a run for our money in the spectacular mountain and castle department:

     

And the flag of the capital city, Ljubljana, bears an uncanny resemblance to a flag we are all more familiar with:

     

Slovenia used to be part of Yugoslavia until it declared independence in 1991 and became a member of the United Nations in 1992. Unlike Croatia and Bosnia, it was fortunate not to suffer from more than a few days of skirmishes with the Serbian army, and didn't require any post war rebuilding. So it has become a model of how a small country can prosper as a result of becoming independent.

Like Wales, Slovenia has a rich half and a poorer half with about the same degree of difference between them. These are the GDP per head figures (on Purchasing Power Standard, to adjust for differences in the cost of living as explained at the end of this document) for both countries going back to 1997, taken from this site:

Wales         EastWestSlovenia         WestEast
 
199718,90013,40014,90010,700
199819,80013,30015,80011,300
199921,00013,50017,10012,100
200022,40014,70018,00012,800
200123,90015,00018,80013,200
200224,30015,90020,10014,100
200325,10015,90020,90014,300
200426,20016,80022,50015,500
200526,10017,70023,60016,300
200626,80018,30024,90017,100
200727,50018,20026,60018,200
200827,10017,90027,30018,900
 
Growth43.4%33.6%83.2%76.6%

As we can see, back in 1997 Wales was significantly more prosperous than Slovenia. But in the past twelve years Wales' economic growth has been fairly pathetic, while Slovenia's rate of growth has been about double that of Wales. This means that West Slovenia has now become richer than East Wales, and even poorer East Slovenia has become richer than West Wales and the Valleys.

I see this as a good example of how a small country can benefit as a result of becoming independent rather than remaining in a comfort zone of being part to a larger state. Slovenia has become more outward looking, needing to adopt a more open trading and export orientated strategy with neighbouring countries to survive ... and has done very well as a result. It is another example of what Adam Price and Ben Levinger described in The Flotilla Effect.

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Now of course there are no automatic guarantees that Wales would do as well if we were independent. It would depend entirely on the policies pursued by the governments we elected. But there is a consistent pattern of small independent countries outperforming larger ones, and there's no reason to believe that Wales would be so different from Slovenia.

So if we imagine that instead of voting for a limited amount of devolution within the UK in 1997 we had voted for outright independence from the UK, then the GDP of East Wales would now be 34,600 per head if it had matched the performance of West Slovenia, and the GDP of West Wales and the Valleys would now be 23,700 per head if it had matched the performance of East Slovenia.

I wouldn't want people to think that I've cherry picked the best example in choosing Slovenia. I chose it because of how similar it is to Wales. In the Baltic States the rate of economic growth has been very much greater. Estonia (1.4m people) grew by 150%, Latvia (2.3m people) grew by 152% and Lithuania (3.2m people) grew by 143% over the same period [see this spreadsheet]. But as ex-Soviet countries they were starting from a very much lower base, and are still below the level of GDP per head for West Wales and the Valleys. Slovenia is a much more relevant example because it did not start from very far behind us, but has now overtaken us.

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Those who argue against independence for Wales say that we can't afford it. These figures are an indication of how much we are losing out as a result of not being independent. The choice for Wales is either to carry on as we are, tied to a United Kingdom that is more concerned to protect the interests of South East England and its financial services sector than it is about Wales, or to put ourselves directly into the international arena. We might well go through hard times for the first few years after independence as we rebuild our economy, but in ten or twelve years we will have more than made up for it.
 

 
Update - 23:00 14 March 2012

The 2009 figures have just been published. Looking through them, the figures for 2008 have changed quite dramatically, which I think probably represents a correction largely due to the impact of the debt crisis. But the figures for earlier years have also changed slightly, which might perhaps be explained by an adjustment to the PPS formula.

These are the newly published figures for all years. The figures for 1997 are not on the latest Eurostat table, so I have kept the figure published last year:

Wales         EastWestSlovenia         WestEast
 
199718,90013,40014,90010,700
199819,50013,10015,90011,400
199920,60013,30017,20012,200
200021,40014,40018,00012,900
200122,90014,80018,80013,300
200223,30015,60020,00014,200
200324,20015,70020,90014,400
200425,60016,60022,60015,500
200525,20017,50023,60016,200
200626,30018,00025,00017,000
200726,70018,10026,60018,200
200825,40017,30027,20018,800
200923,30016,10024,60016,900
 
Growth23.3%20.1%65.1%57.9%

The basic picture is still the same. Slovenia is more prosperous than Wales, and the rate of growth is much faster than in Wales. The previous figures to 2008 showed a total growth about double that of Wales, but the new figures to 2009 show that the growth in Slovenia is now more like three times that of Wales.

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18 comments:

Anonymous said...

Oh, and Slovenia also.speak a 'pointless, silly' language which nobody else does and has no natural resources. And, although it is geographically in the heart of Europe is flanked on one side by a sluggish Italy which has seen virtually no growth in the last decade or more, a weak Hungary and Croatia. Only Austria to its north is aogor economy. Wales would have a much bigger, richer and populous market on its doorstep.

Owen said...

An excellent article MH.

There's also an amusing element. The Welsh Conservatives in particular seem to relish comparing Wales with an idea of a psudo-Communist "Eastern Europe" that's stuck in the 1980's. Like the recent news of Brazil overtaking the UK in terms of GVA, I think it's a case of countries like Slovenia "catching up with us" not Wales falling to their level. I just wish more people saw it that way too.

There are two points I'd like to make. Firstly Slovenia, and indeed the Baltic States, were AFAIK the more productive and wealthier parts of their "unions" prior to independence, just as the Basque Country, Catalonia and to a certain extent Scotland are in theirs. Therefore I don't think that the situation in Slovenia is entirely comparable to Wales. It's probably the Republic of Ireland we'll have to compare ourselves to - a poorer part of a union undergoing an economic revolution post-independence, eventually catching up and exceeding the successor state over decades rather than years.

Secondly (and I believe the Flotilla Effect noted this), many of the former Yugoslav and Warsaw Pact nations underwent a similar dramatic market liberalisation post-independence. Although some will argue that Wales is a "command economy" due to excessive state spending, Wales is already a traditional western free-market liberal democracy and can't rely on a massive transformation (though no doubt things can be done) when there's not much left to transform.

Cibwr said...

Great article, and I am slowly drawing up a sample constitution for a Republic of Wales and chose Slovenia as my base... with touches from the Republic of Ireland...

The problem that we face with independence is that initial period where we are currently a net drain on the UK exchequer - clearly we would have to borrow initially unless we have huge cuts in welfare. This is where the road map gets tricky. Some how I don't think we would get a golden handshake from the United Kingdom of Northern Ireland and England when we go.

Anonymous said...

Why did you delete my comments?

MH said...

On this occasion, for idiocy.

Britnot said...

Keep up the good work MH! The irresistible force behind Welsh Independence is inexorably eroding the immovable object of Great British exploitation. There is no coherent critique in favour of the maintenance of this unequal union other than the fear of change.

That fear is rapidly being replaced by the fear of a inept right wing condem government increasingly associated with ineptitude, corruption and inequality. Scotland then us then Kernow, freedom sooner rather than later!

Ioan said...

Fantastic example MH.

Along the European continent there are numerous examples we could look at and political parties in Wales should take note at each one, some with a population as low as 28,000 (San Marino).

We are living in a island next to a continent that has many examples of how nations some of which has similar historical circumstances to Wales, all of which have become successful independent nations.

All we need to do is look and debate.

Arthddu

MH said...

Some good points, as always, Owen.

I think it is fair to say that an element of economic growth in eastern Europe is best described as "catching up". But the pattern of catching up is to make more rapid growth the further you are behind, and for this to gradually ease off as you get closer to the pack.

In the case of the Baltic States, I'd say the main element is one of catching up. They were a long way behind and they are still a good way behind, so it's too early to tell. But what's happened in Slovenia doesn't seem to fit that pattern; the growth doesn't seem to have eased off as they got closer to the pack ... it just seems to keep going up. It's also interesting to note that there was no appreciable change in growth as a result of becoming an EU member. The rate of growth before 2004 seems to be matched by the rate of growth after 2004. So I think there are good reasons for attributing this growth primarily to becoming independent rather than to becoming part of mainstream Europe.

Going back the Flotilla Effect, the explanation for the difference in performance that made most sense to me was that large countries have large domestic economies, and that it is easier to trade within that domestic economy than to trade outside it. The EU has largely broke down those barriers, but there is still some sort of residual mentality of being content to trade within a domestic economy you understand backwards, rather than go out of your way to trade with economies that you are less familiar with.

But small countries do not have the comfort of being able to do most of their trade domestically. They have to develop a more outward looking attitude to survive. Initially they do it with their immediate neighbours, but the attitude they develop in doing this gives them an advantage in dealing with all other countries too, opening up much wider markets. So for those countries that are in a position to make the choice of becoming independent, a steep learning curve to begin with should bring long term results. For Wales in particular, it means that trading with Denmark, Austria, China and Brasil should become as natural to us as trading with England is now. I think it is this transformation of attitude that will make the difference.

MH said...

Good luck with the constitution, Cibwr. I agree that an independent Wales will face problems in the short term, and the question is whether the short term pain is outbalanced by the long term gain.

Welfare is one of the big problems we will need to address, and I am all in favour of us starting to deal with it now rather than waiting until we are independent. As I mentioned before in this post, there is already a substantial majority in Wales (59.5%) who think that decisions on welfare and benefits should be made in Wales rather than in Westminster (22.7%) or by local authorities (16.8%).

We now have a situation where the Westminster government is passing on responsibility for getting the unemployed back to work to private companies on the basis that they will have a profit motive for doing it more effectively than the UK government can do it now. Why on earth aren't we pressing for Wales to be given that responsibility for those not in work in Wales?

One of the other explanations given in the Flotilla Effect for the better performance of smaller countries is that they have greater social cohesion. This factor should make us in Wales much more effective at dealing with the problem of lack of work than any UK government could be. Put bluntly, it is easier to accept difficult measures put in place by those who actually know and understand the situation in Wales than by a government in Westminster that has virtually no conception of what the reality is in some parts of Wales. Home grown ways of tackling these problems are always going to be more likely to succeed than measures imposed from outside.

But welfare is more than just about those on benefits, it has to do with things like pensions too. In this sense, we may well find that we get some sort of assistance from the RUK with, for example, people who have retired and come to Wales to live ... and not just with pensions, but with health and care services too. So some sort of transitional "golden handshake" arrangement might well be appropriate, or it could be horse-traded for, say, a lower percentage of the UK's massive debt. This is just one example of the sort of detail that will have to be negotiated when Scotland votes to become independent, so we in Wales might well find that this has already been addressed when we become independent.

MH said...

Just a small note. On page 6 of one of the documents I linked to is a graphic (figure 4.1) showing the extent of inequality between the richest and poorest regions of EU member states (and a few other potential members).

I've already noted that the inequality in the UK is twice as great as in other countries, but the graphic illustrates this in a particularly striking way.

Anonymous said...

MH 01:34

That graphic makes an excellent point. The UK is land of the have's and have not's in Europe.

'We're all in it together' is an outright lie, especially as far as most of the people of Wales are concerned.

The BBC commentator said that 2012 is going to be a tough year...yeah, but not for the Tory toff millionaires, the economic power elite and royalty!

It's going to be tough for those on low incomes, pensioners, and miserly state benefits.

Gwalchmei said...

Whilst Slovenia might be a suitable model for comparison, and maybe governance, I am not sure that we can put its progress down to its independent status alone. It has for a long time been the most industrialised part of Yugoslavia. As far back as 1919 its industrial production was four times that of Serbia and over twenty times that of Yugoslav Macedonia. After the Second World War domestic production was 2.5 times that of the rest of Yugoslavia with the economy rapidly developing through the fifties under ‘workers’ self management’.
We should remember that the move towards independence started in 1987, before the revolutions of 1989 in the rest of the communist world and much of this could be attributed to a feeling that Slovenia was disproportionately supporting an inefficient federal state.
Okay, at the end of 1990 88% of voters in Slovenia supported independence (83% of the population being ethnic Slovenes) and after a short war the Yugoslav military left in October 1991. But this was the very richest part of the former Yugoslavia and in this way does not compare to our situation in Wales in terms of motivation and determination to become independent.
There was clear evidence of an inflow of foreign capital when I visited in the late 1990s. Apart from the ubiquitous Holiday Inn there was construction going everywhere around the Ljubljana Basin, with firms such as IBM setting up and a focus developing on mid to high-tech industries. The story was different in other parts...and I was reminded of the South Wales Valleys with even Lake Bled seeming a bit like Roath Park Lake (with mountains). Other areas were even far less developed and had an air of poverty and deprivation.
The point is though that whilst Slovenia may be similar to Wales in terms of its size, population, and natural resources, Slovenia has been targeted for development by inward foreign investment due to its relative prosperity (particularly around Ljubljana), its established industrial base and its well educated workforce. Wales wouldn’t get that treatment.
If we look at the most recent developments, the emergence of the ‘Positive Slovenia Party’ this month says something about one of the four axioms of the Flotilla Effect i.e. social cohesion. It seems that a group of mayors representing the poorer parts of Slovenia are considering splitting off because their perception is that this new governing party takes a ‘Ljubljana –centric’ stance. Maybe a case for spreading resources around the country rather than developing rich industrial base around urban areas (stats indicate that probably over 70% of Slovenes live in urban areas.)
As far as I can see, there could be plenty to learn from the Slovenian example but things are not as simple as initial comparisons may lead one to believe. The Irish model is probably relates more closely to Wales. Can we do it without embracing capitalism quite as much whilst still reserving enough of a command economy preserve the basics of a decent social security system for all? I think so, but, as an earlier comment notes, it might be tough going at the start.

MH said...

Thanks, Gwalchmei. Somehow it never occurred to me to think of Lake Bled (that's the lake shown in the picture, for those who didn't know) as even "a bit" like Roath Park Lake. Admit it, it's because you like racing in the rowing boats, isn't it?

I won't disagree with what you've said, except to raise this point. You said that "Slovenia has been targeted for development by inward foreign investment due to its relative prosperity", but if foreign firms were primarily drawn by the prosperity, surely they would have gone to areas just across the border that were more prosperous such as in Italy or Austria. So I think it's better to say that prosperity didn't have that much to do with Slovenia's economic growth, and that it had more to do with what Slovenia did as an independent country to make itself a better place to do business. The same is true for Wales: England is right next door to us, and if relative prosperity were in fact the key then similar investment would naturally go to England rather than Wales. So it had better be true that the attitude of a newly independent small country is more important than its current relative prosperity, otherwise Wales is doomed to stay at the bottom for ever.

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I would also be wary of overstressing the importance of inward investment. We had a few decades of that in Wales with the WDA, and did very well compared with other parts of the UK. But did it make a lasting difference? Obviously no-one will turn away foreign investment from Wales, but isn't our own attitude to business a more important factor in turning round the Welsh economy? I think we would do better to concentrate on growing our own businesses rather than relying on inward investment.

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Finally, I definitely agree about the dangers of over-centralizing wealth around the capital. Our government is doing precious little to spread wealth and opportunity across Wales because it's easier to let Cardiff overheat. If we're not careful we will just replicate the over-centralization of London in Cardiff. Transport and communications infrastructure linking together all parts of Wales is essential to counteract this.

Gwalchmei said...

Firstly, let me deal with the issue of Lake Bled in comparison to Roath Park Lake. I was expecting a rugged landscape overlooking an island monastery. What did I get?...little rowing boats, ice cream vendors and pretty dour faced people trying, in a moderate fashion, to get as many tollars out of you as they could. Mind you, the rowing was fun I must admit.
It seems to me that the main reason foreign investment targeting Slovenia was because it was cheaper than any of their neighbours. Added to that, they could capitalise on the relatively well educated workforce. Their universities struck me as being of a far higher standard of other European ones that I had visited. It is basically a case of cherry picking and creaming off the most talented for international big business. We need to keep our talented people to enrich our country. I totally agree with you that reliance on inward investment is not the answer. The devil is in the detail. How do we propose an appropriate mixture of command and free market economy engineered so that that it is acceptable to the EU and the wider world?
Give me the correct answer and I will reward you with a 5 tollar note....sorry, I’ve run out of tollars but I’ve got a 2 zlote coin here which I will mail to anyone who comes up with a suitable answer.

gilbey666 said...

Agreed this is fascinating glimpse of what might be but the adjustment for cost of living instantly distorted the result. Statistics apart the huge differences between us and the small Baltic and other Eastern European states is that they have an industrial based GDP whilst Wales has a paper pushing service economy. The social welfare standards and wages are so far below those enjoyed here have to be seen to be believed. Five weeks paid holidays, sick pay, paternity, maternity leave, no wonder foreign companies invest in this lower overhead country. Does anyone really think we can sell a drop in these 'rights' we have got used too, because to cut them is the only choice as to seek to maintain them will dump us in a Greeko Italian mess such as they enjoy today trying to emulate the benefits of larger industrial economies.

Gwalchmei said...

There is a solution, but it might seem radical to some. If we make our major aim to go for a primarily ‘socialist state’ we could have a winning programme, and maybe, in the long run, be able to form a socialist federation with other similarly placed small nations and devolved entities nearby. Such a socialist federation would perhaps be better placed to trade with some of the BRIC countries or Venezuela rather than focusing simply on the EU and being put in the position of having to implement more stringent economic solutions.
When I say ‘socialist’ I am not talking about the Labour Party. Labour was set up to be the political arm of the trade union movement before it was hijacked by the right wing and will never deliver because it relies purely on market and capitalist solutions.
A socialist independent Wales would need to have some sort of transitional strategy in common with other similarly placed small states.
Such a proposition would have to be clear about the form of governance we would ultimately need to employ to avoid elitism and ‘nest feathering’ by those we elect. Perhaps we need to propose a form of democracy that the people of Wales could trust because of inbuilt safeguards. For example, the right to recall our elected representatives to be accountable to their constituents and a sensible wage paid to our politicians.
The protection of our social services and health and education services would also need to be a major priority, along with, of course the protection and continuing development of our language.
Beth ydych chi’n meddwl?

MH said...

Gilbey, if the figures weren't adjusted to PPS, they would have been more distorted.

I don't think you you know what you're talking about. For example, Slovenia doesn't have "an industrial based GDP", nearly 58% of employment is in services.
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Gwalchmei, I think we need to be careful to distinguish between becoming an independent country and what sort of country we are when we become independent. So Wales could and should only be a "socialist state" to the extent that we elect future governments who will implement socialist policies. We might well decide to elect a right of centre government (though I hope we won't do that very often) so I don't think we should ever constitutionally define ourselves in a particular way with regard to political policies.

But we should set ourselves up as a country that has the sort of "inbuilt safeguards" you mention in the form of a constitution. This will be a very difficult thing to get right, but essential because I see the major purpose of a constitution as defining and what the state can do and limiting the power of the state.

In terms of the sort of country I'd like to see Wales become, my first priority would be not only to rebuild our economy but to narrow the disparity between rich and poor, to create a fairer and more equal society. This would probably mean higher and more progressive personal taxation but with more services provided from that taxation and for those services to be seen as being worth paying for, i.e. the sort of model usually associated with Scandinavian countries. It's interesting to see that the SNP seem to be looking to this model for Scotland.

As an aside, it's also interesting to note that Slovenia elected a left of centre government last month. This is very much against the current trend in most other EU countries, which have tended to swing to the right in this financial crisis. Denmark also bucked that trend by electing a centre-left government in September last year.

There's nothing to stop special deals with seemingly unlikely countries. You mention Venezuela, and the Mayor of London, Ken Livingstone, did a deal for cheap fuel for public transport in 2007. This was scrapped by the Tories (who obviously thought it was wrong to pay less for fuel that could be bought more expensively from less left-wing sources; and public transport shouldn't be given an unfair advantage, should it?) but might be brought back after the election in May.

Gwalchmei said...

MH, we’ve probably spent enough examining the Slovenian situation. The research into a whole range of models of governance is an excellent idea and something we must do, but, in the immediate future I reckon there are other more pressing things to address.
On the point of proposed constitution verses a set of policies, as you quite rightly point out, they are two different animals. Blend them together completely and we end up with a revolutionary programme, which I believe would not go down well in Wales, in spite of our natural inclination to the left. My view is that, the inclusion of some constitutional elements, such as an agreed set of ‘checks and balances’ should be included as part of a political platform identified with the party.
I think that were such proposals to be adopted this would attract more voters, especially from those who have become disaffected through the blatant excesses of careerist politicians.
My priorities for Wales are close those you express. Whilst my instinct tells me that higher taxation is political suicide, I guess that if the tax rises were to be aimed at the more prosperous individuals, whilst leaving the bulk of the population and small businesses unharmed, it would be a vote winner. Also some of the prosperous might chose to relocate across the border.... maybe killing two birds with one stone.
In the long run we could be free to trade as we wish, and tell people like Boris to do their own thing.

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