Wales is too poor to be independent. Catalonia is too rich to be independent.
Unionists will claim that black is white in order to convince you that stateless nations cannot be free.
We’ve heard the claim put since time forgotten that Wales can’t afford independence.
So let’s look at that claim again.
Yesterday the Welsh Government published its annual budget.
This year, for the first time since devolution began, the title of budget can be applied with some credibility, because for the first time ever the people of Wales, via our Welsh Government, have a modicum of control over a tiny amount of our taxes. This ‘budget’ for the first time in the history of Welsh devolution, will have two sides to the balance sheet – both expenditure and income.
While the budget provides details on how the Government plans to spend £15bn, it also gives us an opportunity to look again at the Welsh economy and will give the doubters a chance to say that Wales cannot afford to be independent again.
We’ve looked at this question a number of times before.
But could it be that we’ve looked at the Welsh economy through the wrong end of the telescope? Instead of enhancing our view, has our view been contracted?
The argument goes that Wales doesn’t have the economic base to pay its own way. Those of us advocating independence have played into this view somewhat by repeating statistics about our relative poverty, poor GDP and GVA and low income levels.
These are all true, if you look at them through one side of the telescope. So let’s flip it around.
GDP, or Gross Domestic Product, is the measure used by all states and economic organisations to measure the relative success of a State’s economy. This is a good little infographic video made by the Treasury about GDP,
But Wales doesn’t do GDP. We do GVA, which is slightly different. But not GDP. Therefore any meaningful comparison with other economies is impossible. Or at least if GDP is your measuring stick.
Plaid’s Jonathan Edwards MP did ask for the Office of National Statistics to measure Welsh GDP,
“Information on how the Welsh economy is performing is crucial to making the right decisions. Without knowing where we are going, we can’t know whether we need to change course for safer waters or to avoid smashing into the rocks.
“At present, we have an annual figure for Gross Value Added for Wales, published nearly a year later, and an Index of Production and Construction and the Welsh Index of Market Services for each quarter, but these are published four months later.
“There is a clear need for a reliable and robust measure of the Welsh economy … so that the Welsh Government can accurately know how well or badly our economy is doing.”
But, alas, the ONS refused, claiming that it was too difficult. And it’s probably true. Because the GDP is measured in several different ways. As the UK Government puts it,
GDP is calculated three ways, adding up:
- all the money spent on goods and services, minus the value of imports (money spent on goods and services produced outside the UK), plus exports (money spent on UK goods and services in other countries)
- the money earned through wages and profits
- the value of goods and services produced
Now with the majority of the people of Wales living so near to the English border, and so many working over the border, or trading over the border, it would be extremely difficult to gather the correct data. Difficult, yes. But not impossible.
They’re just not bothered to go to all the trouble of collecting data on what is such a small percentage of the UK’s GDP and population as a whole. That, in a nutshell, is the relationship between Wales and the UK. It’s nothing malicious or sinister, it’s simply that we’re just not worth it.
However, having said ALL of that, you’ll be glad to know that the EU DOES estimate the GDP of countries and regions within the EU, and publishes them regularly on their Eurostat site. Their most recent estimate is for 2015.
They estimate that the Welsh GDP two years ago stood at €86,352,000,000. Based on the June 2015 exchange rate (roughly €0.712 = £1), this gives us a GDP of roughly £61.5bn.
How does Wales compare?
How does this compare with other countries?
Now we could compare with any number of countries. I’ve settled on some twenty states who are also small. Some have been independent for some time, others became independent relatively recently. Some are within the EU, others are within the EEA, and New Zealand is in neither of these!
Now to complicate matters further the information is derived from the World Development Indicators of the World Bank, which measures GDP in US dollars. Therefore I’ve had to calculate the EU’s Welsh GDP into dollars at both June 2015 exchange rates and June 2006 (averages).
|Population||GDP US $ 2015||GDP US $ 2006||% 2006-15|
|Bosnia and Herzegovina||3,517,000||16,173,806,635||12,866,524,918||25.7|
This table shows the population and GDP of twenty small countries from 2006 to 2015.
In this table Wales is the tenth largest country, by population. Yet by GDP we are seventh, with a GDP greater than that of Bosnia and Herzegovina, Croatia, Cyprus, Estonia, Georgia, Iceland, Latvia, Lithuania, Luxembourg, Macedonia, Malta, and Slovenia.
Indeed in world ranking terms, out of 195 states who have their GDP measured, Wales would have the 66th largest GDP – in the top 3rd, ahead of states such as Kenya, Costa Rica, Uruguay, Bulgaria, Belarus, Tanzania, Tunisia, Serbia, Bolivia, Paraguay, Cameroon and many more. This is as things stand currently, without any real levers to radically improve our economy.
It’s also worth noting that Wales’ GDP growth has performed well. In the last 10 years it has grown significantly more than that of Denmark, Finland, Norway and Ireland. These of course were hit badly by the economic downturn of 2008, which stalled their growth. However their growth pales into insignificance compared to the GDP growth in those States that won their independence relatively recently. The economies of Georgia, Macedonia, and the Baltic states have grown considerably. Could it be that they are enjoying an Independence dividend? If Wales became independent could we expect to see similar growth within twenty years of our independence?
But GDP shouldn’t be the only measuring stick. In fact it could be argued that it’s not a very good stick to measure a State’s economic success. While GDP might be growing, it might be concentrated in one region; those who are already wealthy are likely to become wealthier as the GDP grows, and wealth inequality widens, as we’ve seen in the UK over the last ten years. A growing or strong GDP doesn’t necessarily mean that everybody benefits from that growth. Far from it. Is this the kind of Wales we want to build? That’s another question for another time, but as we’ve already seen, wealth inequality is far less prevalent in Wales than it is throughout the UK as a whole.
Wales also provides employment opportunities. When contrasted with some of these other small independent nations, Wales compares favourably.
|Employment rate (2015)|
Of course, some will point out that wages here are low and that much of that work is part time. All of which is correct. But again, when compared to other countries, Wales doesn’t fair that badly,
|Average Wages, US$ 2015|
(Welsh Average wages is based on £492 a week. £550 a week, the figures that the ONS provides for 2015 would give Wales an average annual wage of around $43,500).
Wales does have a relatively large percentage of older people. 20.07% of Wales’ population are aged 65 or over. This is significantly more than many of the other small independent States, except for Finland, Latvia and Denmark, who are in a similar situation to ours,
|% Population 65+ (2015)|
|Bosnia and Herzegovina||15.72|
However, you’ll recall that Latvia and Finland both have less of their working age people in employment, and on average earn less than people in Wales.
More than money
All of this assumes that the only measure of success is economic. But of course that’s silly. There’s far more to life than money.
So how does Wales compare on other factors?
Life expectancy at birth in Wales, for both sexes, is around 80.2 yrs (Men, 78.4, women 82.3).
How does this compare?
Well according to the World Health Organisation, that would place us 32nd out of 184, with a greater life expectancy than people in the United States, Poland, Argentina, China, Turkey, Saudi Arabia and a long list of other countries.
Wales has half the neonatal mortality rates of Malta, and our neonatal mortality rates are better than those of Ireland and Denmark,
|Neonatal mortality rate (per 1000)|
|Bosnia and Herzegovina||4|
There are any number of other factors which could, and should be used, to measure a countries ability to look after its own people. Education (pupil – teacher ratio for instance), other health factors such as mal-nourishment or obesity; poverty etc
The point is that on whichever of these you might wish to choose Wales performs well. We are in the upper third of any global ranking, if not the top quartile.
Our performance relative to other small independent nations is good.
We have an educated workforce; we have innovative industries; we have an abundance of resources.
The Welsh problem(s)
Our problem is twofold.
While, compared to other similarly sized nations, we perform well, unfortunately we’re situated right next to one of the most bloated economies in the world – London. London skews everything.
London with its $1/2tr GDP and the City with its average weekly income of £1,034.
Next to this behemoth Wales’ economic performance looks pitiful.
London sucks in wealth from across the UK. It’s not a problem unique to Wales.
Take this chart from Jonathan Price, the Welsh Government’s Chief Economist’s report into the Welsh Budget,
Yes, Wales is the worst performer for GVA per head. But take London out of the equation and it’s far more balanced.
Note that the real problem in Wales is our productivity (the blue part). This poor productivity is a direct consequence of a chronic lack of investment in our infrastructure. All (major) roads lead to London.
London, as we’ve noted numerous times already, gets the lion’s share of infrastructure spending. Take transport or Research and Development for example,
London, and its overheated economy is our chief problem. The larger it gets the more the politicians think they need to feed it, at the expense of elsewhere.
But our second problem is ourselves. Our own self-confidence. Belief – or the lack of it – in our own ability.
Yes, our GDP and GVA is low relative to the rest of the UK. Yes, productivity is low. But these things are a consequence of us not having the economic levers to tackle the problem ourselves, and the money that should be available to us instead flowing directly to London. Compared with other relatively wealthy nations we’re not performing badly. In fact, we’re performing well enough to survive as an independent State, as we’ve seen.
So just imagine what we could achieve if we had the tools required to improve things further!
Our economy is robust enough, mixed enough, and mature enough to sustain an independent State.
The question is, do we believe this.
Faith trumps facts.
People need to believe, and by repeating negative stories about our economy all of the time, are we actually damaging our own ambitions of winning people over to believe in an independent Wales?
It may maybe time for us to change tack.