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Independent Wales would be amongst wealthiest nations

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.

Welsh Budget

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

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).

Table 1

Population GDP US $ 2015 GDP US $ 2006 % 2006-15
Denmark 5,733,551 301,307,828,844 282,884,912,894 6.5
Finland 5,523,231 232,361,689,855 216,552,502,823 7.3
Slovak Republic 5,424,000 87,267,593,788 70,596,729,394 23.6
Norway 5,305,383 386,578,443,733 345,424,664,369 11.9
Ireland 4,761,657 283,716,006,698 232,167,519,759 22.2
New Zealand 4,705,818 175,564,427,553 111,606,899,682 57.3
Croatia 4,189,353 48,676,334,689 50,453,577,898 -3.5
Georgia 3,912,061 13,993,546,732 7,745,406,201 80.7
Bosnia and Herzegovina 3,517,000 16,173,806,635 12,866,524,918 25.7
Wales 3,113,200 76,995,760,800 60,665,655,000 26.9
Lithuania 2,890,297 41,402,022,148 30,216,060,233 37.0
Macedonia 2,081,000 10,051,659,161 6,861,222,332 46.5
Slovenia 2,079,976 42,776,716,631 39,587,732,029 8.1
Latvia 1,949,670 27,026,037,600 21,447,021,570 26.0
Estonia 1,309,632 22,460,470,490 16,963,625,016 32.4
Cyprus 1,179,551 19,559,942,331 20,403,713,461 -4.1
Luxembourg 583,455 58,048,242,436 42,414,308,117 36.9
Malta 430,835 10,287,007,021 6,757,119,558 52.2
Iceland 335,025 16,783,714,958 17,043,245,939 -1.5
Monaco 38,695
Lichtenstein 37,922 4,000,239,273
San Marino 33,400 1,469,000,145

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.

Beyond GDP

Wales also provides employment opportunities. When contrasted with some of these other small independent nations, Wales compares favourably.

Table 2

Employment rate (2015)
Iceland 85%
Norway 74.80%
New Zealand 73.70%
Denmark 73.20%
Estonia 73%
Wales 72.40%
Finland 68.60%
Latvia 68%
Luxembourg 66%
Slovenia 66%
Ireland 64%
Slovak Republic 63%

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
Luxembourg $62,580
Norway $54,629
Denmark $51,463
Iceland $51,405
Ireland $50,866
Wales $42,326
Finland $41,952
New Zealand $38,519
Slovenia $34,153
Slovak Republic $22,924
Estonia $22,438
Lithuania $22,224
Latvia $21,113

(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,

Table 3

% Population 65+ (2015)
Finland 20.26
Wales 20.07
Latvia 19.28
Denmark 19.05
Croatia 18.88
Estonia 18.82
Lithuania 18.69
Malta 18.37
Slovenia 18.04
Norway 16.30
Bosnia and Herzegovina 15.72
New Zealand 14.65
Georgia 14.62
Slovak Republic 14.06
Luxembourg 13.99
Iceland 13.71
Ireland 13.23
Cyprus 12.83
Macedonia 12.53

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,

Table 4

Neonatal mortality rate (per 1000)
Georgia 7.2
Latvia 5.2
Malta 4.4
Slovak Republic 4.2
Bosnia and Herzegovina 4
Croatia 2.6
Denmark 2.5
Lithuania 2.5
Ireland 2.3
Wales 2.1
Monaco 1.9
Norway 1.5
Cyprus 1.5
Estonia 1.5
Slovenia 1.4
Finland 1.3
Luxembourg 0.9
Iceland 0.9

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,

Public Infrastructure Expenditure on transport per head in real terms 2015/16

Amount of investment into Research and Development made by businesses in the UK, 2014

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.

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16 Comments on Independent Wales would be amongst wealthiest nations

  1. Glenn Swingler // October 4, 2017 at 11:04 am // Reply

    Very useful information…and a lot of research

    Like

  2. John Davies // October 4, 2017 at 1:44 pm // Reply

    Unfortunately, “Wales would be richer than Kenya, Tanzania and Bosnia & Herzegovina” will not win us a referendum. We need to be able to say “we would be richer as an independent state than we are now as part of the union” and until we can say that, we’ll lose.

    The way to do it is to put Plaid Cymru in power in the Assembly so we can sort our economy out and stop labour’s mismanagement. But to do that, we have to stop talking about independence because nobody will vote for us if we’re talking about something that will turn us into Bosnia.

    Like

    • Thanks for the comment John.
      I disagree with the thrust of what you say.
      If I may start with your final point,
      “…nobody will vote for us if we’re talking about something that will turn us into Bosnia.”
      As the article states, we are already in a far stronger situation, economically, than Bosnia. In fact we are in the top 3rd – and that’s with things as they are now.
      Bosnia, Slovenia, Slovakia, the Baltic States – they’ve benefited from a massive independence dividend, with their GDP increasing over 20% in the last 9 years alone.
      Imagine if Wales saw a similar independence dividend on top of where we are now? That would thrust us into Norwegian territory.

      “…we have to stop talking about independence because nobody will vote for us …”
      Disagree. With due respect Plaid have not been talking about independence over the life time of devolution, so it’s not right nor fair to say we need to “stop talking about independence”, we need to start talking about independence. Will it stop people from voting for Plaid? Well their not exactly voting in their droves now, are they. It didn’t damage the SNP, when they put it front and centre of their 2007 election campaign. Labour tried thought this would damage the SNP and made as much of it as they could. The London papers ran stories nearly every day about the SNP’s plans for independence in the campaign leading up to the Scottish election in 2007. And guess what? They won! They formed a Government, and because of that they got to implement their referendum.

      Finally, “Unfortunately, “Wales would be richer than Kenya, Tanzania and Bosnia & Herzegovina” will not win us a referendum.”, you might have misread the piece. We’re saying that Wales is ALREADY richer than the countries you name. Independence would boost our growth even more 🙂

      Like

  3. Dafydd Thomas // October 4, 2017 at 3:58 pm // Reply

    Also compare Wales to London on GVA and PPP purchasing power parity. You’ll find that London is expensive, housing, transport, anything like eating out. So the standard of living does not equate to GVA per head.

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  4. There’s some good stuff here. I’m fed up of the argument that Wales is “poorer” because of devolution. Especially if Welsh nationalists make it. It isn’t true, and saying devolution has made us poorer is in no way a gateway drug to supporting independence. We’re better off on every single measure, but all the relative stats incorporate the City of London and the frankly insane growth that has occurred there.

    My question regarding GDP is this; isn’t the GDP in this post the GDP of a dependent Wales? That is, how much of it comes from British state spending or British companies and trade?

    I’m not saying this is an obstacle, but we’d probably need a free trade area with England.

    Don’t get me started on asking how much of our GDP is based on trade with Europe…that’s another biggie.

    If you take us out of the English market, and the European market, does our GDP plummet? The prospect of this makes a Wales indyref unwinnable. I hope the answer is no, and that we can stay in both.

    To be upbeat, Wales is not necessarily the basket case it is made out. We have deep problems which have been around for years, but we could be an attractive society and use devolution and independence to grow our economic base. As long as we keep those external ties open. Other independent states have seen rapid growth.

    Like

  5. Great analysis. You rightly point out that we have an abundance of resources, and I think you should link to this article showing the extaordinary potential Wales has with its resources.

    http://www.iwa.wales/click/2015/03/re-energising-wales/

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  6. GDP is not an accurate measure of wealth or a stable economy. GDP figues hides more than it reveals.

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  7. Excellent blog as always and educational if you ever want to share your blogs on the http://www.anyvoice.co.uk site your more than welcome.

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    • Scotland is almost certainly there. Her GDP and GVA is the third highest in the UK (behind London and South East of England).
      Though I didn’t have the figures to hand, and the WorldBank and IMF, who’s data we used, don’t record Scottish data. Sorry.

      Like

  8. Thanks for putting the work in, and well done on your rigour. It wouldn’t increase the readability of your material … but if you gave even more detailed links to sources and calculation formulae that would be an invaluable resource for those anyone seeking to transform the debate about the economics of Welsh independence.

    Like

  9. Interesting blog, thanks for taking the time to write it. I had no idea of the facts of the Welsh economy – it’s better than I’d have thought. I think an important point to make, though it’s separate to the point you wanted to make with this piece, is that whilst the UK has a high GDP, it is hardly equitably spread across the country. In other words, a country can get by without a sky-high GDP quite fine, if the wealth is nicely spread. I’m aware we’re not going to reach a utopia, but then given the UK is so grossly unequal, it’s not hard to make a substantial improvement with fairly simple policy.

    Great post shared by Tegid. If we don’t become independent, the South East of England will just exploit our renewable energy potential for its gain, like it did coal. That’s a strong argument we can make in favour of independence.

    Like

  10. Would it be possible to have autonomy for Wales whilst remaining within the British Union?

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    • I would think that all the nations that inhabit this island will always share in some kind of union or cross-boundary co-operation – the fine details of which should be incorporated into a written constitution. I don’t think this would need to interfere too much with Wales being self-governing. But the economy is key.

      Like

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