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The economics of secession
The classic paper is Buchanan and Faith, AER 1987. Here is a recent extension of this classic work, with a dash of economic determinism:
Secessionist movements present themselves to the global public as analogues of colonial liberation movements: long-established identities are denied rights of self-determination by quasi-imperial authorities. Self-determination is presented as the solution to the challenge of peaceful coexistence between distinct peoples. The global public not only accepts this message but reinforces it: both Hollywood and diasporas relay it back to populations in developing countries. In this paper, we will argue that the discourse of secessionist movements cannot be taken at face value. We will suggest that a more realistic characterization of secessionist movements is that their sense of political identity is typically a recent contrivance designed to support perceived economic advantage, if the secession is successful, and facilitated by popular ignorance.
There are, of course, plenty of successful secessions. Slovakia has been successful nation because of a language and a desire to be free of Czech rule, backed by EU free trade, EU largesse and political precommitment. Or secession can help you break free of an evil empire, such as when Georgia left the former Soviet Union. The most likely American state to make a success out of secession is, I think, Texas (or offer up your pick in the comments). A Texan nation is hardly a good idea, but at least the state is big, has a diversified economy, has an outlet to the water, has a history of independence, and has a border with another nation, namely Mexico.
The least likely American state to make a success of secession is, I think...Alaska. The state takes in lots of federal money, has only a small natural population base, and is not too far from Russia. Here are some data on which states receive the most on net from the federal government. According to these numbers, only the state of New Mexico benefits more in (proportional) fiscal terms. The states which fare the worst from federal transfers are New Jersey, Connecticut, New Hampshire, Minnesota and Illinois.
Posted by Tyler Cowen on September 4, 2008 at 07:22 AM in Political Science | Permalink
Comments
The first thing Alaska would do is start drilling in ANWR, sign a neutrality agreement with Russia, and live like the Kuwait or Dhubai of North America.
Posted by: bjk at Sep 4, 2008 7:49:43 AM
I haven't read the 2nd paper linked above, but I get the sense that Tyler's comments are from the hip and not really dependent on it. :) In any event, be assured that my responses below are from my hip:
Or secession can help you break free of an evil empire, such as when Georgia left the former Soviet Union.
What about the South Ossetians wanting to break free of Georgia? President Bush recently said their independence is not allowed, according to the "international community." What do you guys think? (And where in the Declaration of Independence does it refer to the consensus of the "free world" when discussing self-determination?)
A Texan nation is hardly a good idea, but at least the state is big, has a diversified economy, has an outlet to the water, has a history of independence, and has a border with another nation, namely Mexico.
I must confess that these criteria for what makes a good "nation" (I think "country" or "state" is more appropriate here?) baffle me. Aren't there plenty of successful small countries around the world? If an economy isn't diversified, why can't it just trade with other regions to get the goods it needs? And what does having a border with Mexico have to do with it? Are you saying the Texans understand border security, while people in Florida would be overrun by illegal Alabamian immigrants if they were foolish enough to secede?
The least likely American state to make a success of secession is, I think...Alaska. The state takes in lots of federal money, has only a small natural population base, and is not too far from Russia.
On the other hand, Alaska would be able to drill for its oil without the federal government's restrictions. And are you saying Russia would invade Alaska? If recent history is any guide, you're right, they probably would--after US Army tanks rolled in to prevent their desired independence from the United States.
Finally, how do you folks feel about the colonists' secession from mother England? What about the Confederacy's desired secession from DC? Again, the Declaration of Independence always seemed to apply equally to both cases, in my untrained reading. E.g. both countries had slavery when they broke away. But Abe Lincoln assures us that the Southern secession had to be crushed, lest the experiment in self-government be proven a failure. Hmm...
Posted by: Bob Murphy at Sep 4, 2008 7:56:12 AM
Regarding Texas: I somewhat agree with Tyler, noting that a history of (and desire for) independence seems a very important criteria. However, there are two big caveats about Texas government: first, it would have to change a lot, as currently the legislature meets about 4 months out of every 2 years, and second, it will change a lot regardless, given population shifts (Texas will soon be majority Hispanic).
Why is the answer not Hawaii? Again, I am not saying it is a good idea, but lots of small island nations get away with being their own country. The economy may not be diversified but it already relies on trade for everything anyway.
Posted by: Daniel Hall at Sep 4, 2008 8:06:21 AM
And the case for the opposition to secession is all about preserving the union and patrotism, eh?
Their population is small, but I think Alaska would have a better chance than average because the folks up there are probably used to fending for themselves. They have resources that they aren't being allowed to develop. Tourism could still be big. There are other benefits other than receiving fed funds. Maybe "we" give them money to compensate for "our" position of weakness in the relationship. What happens if a political trend against pork spending shuts off the spigot?
As for the fed fund ratio, it's been remarked before about how the red states receive more fed funds that blue states. This makes some sense if the blue states think they are buying something for their money. But, it boils down to where the rich people live. You could also do the same analysis at the neighborhood level. There has to be some identity on the state level to rationalize "independence" as a state. There was some passing mention of California a while back, but Texas, Alaska, and New Hampshire come to mind as places where people might think of themselves as a citizen of the state first. Is independence and conservatism a correlate? Are liberal states paying to be part of something "bigger than themselves" or like banks to the bank robber, is that just where the money is?
Posted by: Andrew at Sep 4, 2008 8:08:21 AM
Would it be necessary to bring Texas into NAFTA, or could they be grandfathered in? If so, would there be protests about American jobs going to Texas?
Posted by: Joseph Logan at Sep 4, 2008 8:12:09 AM
How about Hawaii over Texas? Texas seems as likely as California (i.e., still in he top 5 and much more likely than South Dakota or Kentucky, but still not more than a state which used to be an actual kingdom, is distant from the mainland, etc.).
Posted by: Cisco at Sep 4, 2008 8:18:08 AM
It's worth noting that the Feds also own most of Alaskan land. Secession would open that land up for whatever Alaskans wanted to do with it, which presumably would not be nothing. Alaska also has huge energy supplies...Also, Canada shows that a high latitude need not discourage immigration.
Posted by: at Sep 4, 2008 8:22:58 AM
I once did a study of what would an independent Quebec look like.
I concluded that there was no inherent reason that an independent Quebec could not be a viable, prosperous country. But it would depend on how they managed the break up and how it was governed.
I also concluded that the real victims of an independent Quebec would be the Maritime Provinces.
Posted by: spencer at Sep 4, 2008 9:05:52 AM
California looks more secession-worthy than Texas. Its economy is larger and more diversified, plus its politics and social norms are the most out of step with the rest of the country when compared with just about any other state.
Posted by: meter at Sep 4, 2008 9:14:43 AM
In both the examples of Georgia and Slovakia, it should be noted that both sides to some extent supported independence. Many Czechs considered the Slovaks as poor people living on their money, and the break-up of the Soviet_Union was just as much about the independence of Jeltsin's Russia as about the independence of Georgia and the Baltics.
Posted by: Zamfir at Sep 4, 2008 9:15:00 AM
This finding is quite the commentary on Israeli/Palestinian relations.
Posted by: michael at Sep 4, 2008 9:18:17 AM
Some very small countries do very well so why not give anarchy a chance?
Posted by: floccina at Sep 4, 2008 9:21:01 AM
It's interesting that overall "red states" and their citizens are net recipients of federal subsidies, transfer payments and other types of welfare programs, while "blue states", which are more productive on average, are overwhelmingly the ones that subsidize them.
You'd never guess that from the GOP rhetoric or the stereotypes that they and the press perpetuate.
Posted by: a student of economics at Sep 4, 2008 9:21:17 AM
Hawaii would be my nominee.
(1) Could still keep big US naval base, supporting economy
(2) Tourists would still come
(3) Lots of smaller nations in the Pacific already
Restore the kingdom!
Posted by: ZBicyclist at Sep 4, 2008 9:32:34 AM
a student of economics:
Yes, this is well known and primarily explained by the fact that blue states are much richer; limousine liberals...
From the linked article:
"Thanks to a steeply progressive federal income tax, states with higher incomes pay vastly higher federal taxes, payments that are unlikely ever to be matched by federal spending directed to those states. Ironically, most of these high-paying states are the so-called blue states that have generally elected politicians who support a more steeply progressive tax system even though their own constituents bear a greater share of the burden as the code gets more progressive."
Posted by: liberty at Sep 4, 2008 9:55:49 AM
If they keep electing Democrats, those blue states are only getting what they asked for. I lieve in NJ and cannot fathom why the voters don't wake up. We've got high property taxes and high state income taxes to boot.
Posted by: Rich Berger at Sep 4, 2008 9:57:00 AM
I generally consider Texas to be another country anyway...
...although some of the people here in Salt Lake seriously would support Utah breaking off from the Union.
Posted by: KP at Sep 4, 2008 10:15:00 AM
Looking simply at net transfers without considering the details of each situation is misleading.
Alaska in fact would be an excellent candidate for secession. Most of the federal inflows are to sustain the army of bureaucrats that administers federal ownership over most of the state, and to provide extensive welfare benefits for Alaska Natives, including free health care for all Natives. (In my view the dependence this has brought, together with federal suppression of any economic activity in rural Alaska, has been catastrophic for the Native community.) These payments, and the controls over property that go with them, in fact are destructive of the Alaska economy.
Geographically, Alaska has natural ties to the Western Pacific that are limited by federal controls such as the Jones Act. Tariffs make Alaska's imports more expensive. Much of Alaska's vast natural resources (not just oil and gas, but metals, coal, timber) are locked up due to federal ownership or other federal controls. Alaska would be much wealthier as an independent nation than it currently is.
Prof. Cowan's claim that a diversified economy is a precondition for independence is puzzling. Norway is a resource-dependent, undiversified economy that is hugely successful, and wealthier per capita than the United States. Conversely, Singapore is a country utterly lacking in resources which is also hugely successful.
I think that the reality is that Texas is so tied in geographically to the adjacent U.S. that it would be enormously disruptive for it to become independent. Alaska, by contrast, is geographically remote and would benefit from being freed to seek closer ties to Asia and even Canada.
Posted by: Ak Mike at Sep 4, 2008 10:17:05 AM
The claim that Slovakia has freed herself from the Czech rule is inaccurate. In fact, many leading Czechoslovak politicians were Slovaks, including the long-serving conservative communist president Gustav Husak. Czechs were freed, too, from the Slovak rule. No insult intended. Both nations now have what they deserved: both Czech and Slovak Republic is run by Czech and Slovak villains, respectively.
Posted by: Pavel from Prague at Sep 4, 2008 10:25:24 AM
Student,
You might guess it if you viewed it from the perspective of a payoff. At work, it is the person most willing to leave and the most indispensible that has the highest salary. There are also other benefits of union other than cash payouts - interstate trade without restrictions for example. Perhaps the blue states are willing to pay for these in cash.
Or, it just says that the dynamics aren't at the somewhat arbitrary subdivision of the state. You could do it block by block if desired. The county or precinct red/blue map suggests such. High productivity comes from cities. The rich in inner cities tend to be liberal, perhaps because they know they have to keep lower-income workers happy.
Tyler says that a state is unlikely to secede because it's getting cash payoffs. I say that the cash payoff roughly correlates with the likelihood to secede, all else being equal. But, I think the biggest variable is a state identification, which Texas has by a mile.
Posted by: Andrew at Sep 4, 2008 10:40:55 AM
I think Mississippi would have the worst time of any seceding state. It'd become like another Haiti in about 10 years.
After spending a fair bit of time in Vermont I discovered that there is a pretty strong secessin movement in northern New England. I could see VT, NH and ME splitting of en masse to form another country.
If the US broke up to some degree, with CA, TX, AK, the south, the Pacific Northwest, and so on, forming independent nations, the rest of the world would probably be a net winner, given that the relentless American drive to acquire complete global hegemony would be blunted.
Posted by: bartman at Sep 4, 2008 10:42:53 AM
If an Alaskan secession were to be amicable, rather than an indepence war break, then why would the new Alaska get rich off of the federal lands and its oil? A a citizen of the USA, I would want Alaska to pay fair market value for the federal lands, perhaps discounted by their .2% per capita claim on all federal lands.
Posted by: liberalarts at Sep 4, 2008 10:55:29 AM
Student,
The red states tend to have military bases, retirees ect because they are low cost of living states. This study includes govt workers, social security, and other like payments that make this look worse. A person who works in NY all his life, then retires to Florida really skews the data.
Same with govt workers. These sites are often located in the south. Acreage need for military bases, as well as the work force available is much cheaper. I guess the fed could put an Air Force base in NJ, at ten times the cost, just to make NJ feel more even.
Posted by: Tom at Sep 4, 2008 10:57:26 AM
Oh, plus we would want to give them .2% of the federal debt to pay back.
Posted by: liberalarts at Sep 4, 2008 10:57:44 AM
It's also interesting to note, from the pdf, that Clinton's last three years were more expensive than Bushes last three (only shows data to 2004).
Federal Tax Burden Per Capita (Current $2004)
Clinton 7182 + 7686 + 7319 = 22187
Bush 6632 + 6229 + 6369 = 19230
Posted by: Tom at Sep 4, 2008 11:06:39 AM
