TOWARDS A

BASQUE
STATE

territory and socioeconomics

Ipar Hegoa Foundation / Basque Summer University

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Author: Ipar Hegoa Foundation

With the assistance of the: Basque Summer University

ISBN: 978-84-8438-423-9
Legal deposit: BI-1289-2012
Original title: Euskal Estatuari bidea zabaltzen: lurraldea eta sozioekonomia.

Cover design: Ipar Hegoa Foundation

Translator: Alan R. King

Distributed by:
Ipar Hegoa Fundazioa
Rekalde Zumarkalea, 62 BILBO. Phone: 944706915
E-mail: iparhegoafundazioa@labsindikatua.org
Udako Euskal Unibertsitatea (Basque Summer University).
Erribera 14, 1. D, BILBO. Phone: 946790546 Fax: 944793039
E-mail: argitalpenak@ueu.org / www.ueu.org

By the present licence you may copy, distribute and display the content or produce derivative
works provided the following conditions are met:
– You must cite the author of the original content.
– If you modify the content, or create a derivative work and distribute it, you must do so under
the same conditions as in the present licence.
– You may not use this work for any commercial purpose.
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Contents

FOREWORD
Ipar Hegoa Fundazioa ......................................................................................................................................... 5

The Basque State and territory

INTRODUCTION
Iñaki Antiguedad Auzmendi ............................................................................................................................ 8

1. THE TERRITORIAL DIMENSION OF A STATE´S STRUCTURE

Oskar Arantzabal Iraeta …………………………………….............................................................................. 13

2. TERRITORY AND ECONOMICS. TERRITORY AS A POLITICAL CONCEPT

Jabier Erize De La Rica ..................................................................................................................................... 27

3. TERRITORY, FUNCTION
FUNC TION AND THE COMMUNITY AND/OR STATE
Josu Larrinaga Arza ……..................................................................................................................................... 41

4. HOW HOULD EUSKAL HERRIA RESPOND TO THE PRESENT LACK OF

POLITICAL
PO LITICAL POWER OVER TERRITORIAL ORGANISATION TO ACHIEVE
DEMOCRATIC SOCIOECONOMIC DEVELOPMENT?
Alberto Frias Gil ……............................................................................................................................................ 52
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The Basque State and Socioeconomics

INTRODUCTION
Txomin Lorca Alcalá ........................................................................................................................................... 65

1. EUSKAL HERRIA: A STANDARD

STANDARD NATION IN THE SOUTHWEST OF THE
EUROPEAN COMMUNITY
Xabier Isasi Balantzategi and Asier Otxoa de Retana Simon ...................................................... 72

2. SOME THOUGHTS ABOUT ECONOMICS FOR NATION BUILDING

Nekane Jurado Pérez ….................................................................................................................................... 90

3. TOWARDS A BASQUE STATE: WEAKNESSES, STRENGTHS AND THE

CONSEQUENCES OF THE ECONOMIC CRISIS FOR THE BASQUE ECONOMIC
FABRIC
Antón Borja Alvarez ......................................................................................................................................... 120

4. THE BASQUE ECONOMY AT THE CROSSROADS

Ekai Center ........................................................................................................................................................... 140

5. THE MONDRAGON COOPERATIVE GROUP AND THE PROSPECT OF A

BASQUE STATE
Antxon Mendizabal Etxabe .......................................................................................................................... 156

6. THE NEED FOR A BASQUE STATE IN A LABOUR RELATIONS AND SOCIAL

PROTECTION PERSPECTIVE
Aitor Bengoetxea Alkorta............................................................................................................................... 170

7. BUILDING A (BASQUE) NATION FROM THE WORLD OF WORK

Francisco Letamendia Belunce .................................................................................................................. 188

8. CLASS INTERESTS IN THE BUILDING OF A BASQUE STATE

Iñaki Gil de San Vicente Larrañaga .......................................................................................................... 200
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FOREWORD

Ipar Hegoa Fundazioa

One of the goals of the IPAR HEGOA Foundation is to carry out studies and analyses of
political and social issues of interest for the Basque Country and to encourage discussion of
such subjects. Therefore, at the present time when there is much debate about the viability of
Euskal Herria, IPAR HEGOA Fundazioa wishes to contribute to the discussion by offering
these documents. Some will argue that Euskal Herria is a tiny country, that fragmentation
makes no sense in the present era of globalisation, that what is needed now is for all of us to
work together and achieve a mutual understanding, that demands for independence lead to
discrimination among the members of a community, and so on, and so forth. Many factors
and countless arguments are cited as reasons today for not creating new states; some of
them are coherent arguments that make a certain amount of sense. And yet, be that as it
may, thousands upon thousands of Basque citizens are still insisting that they want a state of
their own. What of their arguments? Are these not also coherent, equally important
arguments?

Whether we like it or not, the fact is that in the world today the state continues to be the
chief expression of comprehensive political decision-making power. Therefore, in the
contemporary Basque Country, in the current political state of affairs, we believe it is both
interesting and necessary to undertake a collective exercise of thinking through the benefits,
options, risks and dangers that the construction of a Basque state in Europe would entail, on
many levels, including the political, institutional, territorial, socio-economic, linguistic, cultural,
and in terms of identity.

The IPAR HEGOA Foundation proposes to take a long look at all the circumstances and
ask how feasible a Basque state is. Thus we have brought together on these pages the
opinions of numerous academics and researchers who are familiar with this range of subjects.
We are well aware that there are many other specialists, besides these, who have often made
extremely interesting contributions to the field. IPAR HEGOA Fundazioa has not set itself the
task of bringing together contributions from every single such expert, or to present in equal
measure current opinions in every discipline, or to represent every single region of our
country to the same degree. Instead, priority has been given to achieving a coherent picture
subscribed to by a respectable number of experts, even at the risk of leaving some
geographical areas, universities or perspectives out of the picture. But this does not mean we
have striven to produce a single, monolithic viewpoint: that was not our purpose. Each author
was free to give their own opinion, provided only that they focus on the overall idea of the
necessity and viability of a Basque state; beyond that, it is recognised that there is room for a
variety of points of view.

After all, the aim of the present study was not to create a constitution for the Basque
state, nor to lay down rules for what a Basque state ought to be like. Ours is a less ambitious
objective, yet quite a crucial one all the same. The question we wish to answer is this: Is a
Basque state viable or not? Would it or would it not be worth the effort to create a Basque
state? Would Basques be willing to embark on such a project? In the event that these
questions find an answer and if that answer is in the affirmative, then, and only then, would it
be time for us to turn to the next set of questions, questions about the direction and purpose
of such a Basque state.

The IPAR HEGOA Foundation believes that the present study addresses this matter of
great interest, and that it is able to play a useful part in bringing Euskal Herria into focus in the
present international situation, by gathering together a range of views now current in a variety
of disciplines; it may also help to establish the absolute and relative place of Euskal Herria
within the domain of present-day states. We believe the interesting theoretical contributions
 6

set down on these pages will contribute to endowing the demand for a Basque state with
substance, while also proving useful in order to lay a sound material and ideological
foundation such as is necessary in order to give form to that endeavour. IPAR HEGOA holds
that this is the best option for everybody who lives and works in Euskal Herria and defends
the premise that at this time the Basque Country possesses the basic potentialities needed to
build a state that can take its place among the states of Europe.

Thus the IPAR HEGOA Fundazioa offers, in Towards a Basque Basque State,
State a qualified
contribution concerning the need for and feasibility of a newly created Basque state. The
study consists of three parts covering different subject areas: Nation-
Nation-building and
Institutions, Citizenship and Culture and Territory and Socioeconomics
Socioeconomics.
ocioeconomics.

This book is about the third of these areas.

In the section on TERRITORY,

TERRITORY Iñaki Antiguedad begins to reflect on building a Basque
state by discussing the justifications for studying the subject of territory from a variety of
viewpoints. First of all he characterises the concept of territory: “Territory is not merely a
geographical concept. it is also political, and social, and economic. It is the foundation of
state building and its dynamic, physical medium. Without territory there is no territoriality.
Territoriality implies territory, and territory implies land.”

In Antiguedad’s opinion, “if Basques wish to take the road and find our way to statehood,
we must aspire to another kind of state addressing a different challenge: to favour world
sustainability by ensuring that of our own house.” Sustainability can be defined in umpteen
ways but his favourite is as “the need to accept limits”. This challenge inevitably entails many
changes of numerous types, and a lot of rethinking too “all the way from concepts about
development itself, sustainability, territorial organisation and management, physical borders,
independence, socialism, factors of production or the economy to the new light of the
growing, multifarious crises of recent years in north and south, east and west, and moving
towards the creation of new paradigms.”

As Txomin Lorca says in the section on SOCIOECONOMICS,

SOCIOECONOMICS economic policy defines
the structuring of a country’s economic system and its survival. Hence the organisation of any
economic system requires an ability to make decisions to organise that system; moreover, it
also requires the existence of institutional instruments making it possible to influence
economic planning effectively. The highest expression of the feasibility of an autonomous
socioeconomic project is the construction of one’s own state.

This is the perspective from which the authors of this book develop their theses, in which
they look at the building of a Basque state from a socioeconomic vantage point. Hence they
also take into consideration the context of the present crisis in their studies, which situate the
options for Euskal Herria to have its own state in the here and now, within the context of
constructing Europe and the present economic crisis.

The chapters of this book are both interesting and necessary contributions which present,
on the basis of socioeconomic policy, the real options facing Euskal Herria for building a state
of its own within the European Union. Furthermore, as Lorca points out, the building of a
Basque state emerges as a project of integration, since it is of interest in objective terms to
transcend political and identity issues to address the needs of everybody who lives and works
in the Basque Country.

Last but not least, the IPAR HEGOA Foundation hopes that this study will serve as a
fruitful starting point for further studies on how to approach the building of the Basque state.
We are extremely grateful for the interest and enthusiasm shown by those who have
participated in this project and for their dedication and input. We sincerely thank the editor of
this section, Iñaki Antiguedad and Txomin Lorcari,
Lorca and all its authors.
 7

The Basque State

and territory
territory
Iñaki Antiguedad Auzmendi
Oskar Arantzabal Iraeta
Jabier Erize De La Rica
Josu Larrinaga Arza
Alberto Frias Gil
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Introduction

I ñ a k i A n t i g u e d a d A u z me n d i, P r o f e s s o r o f H y d ro g e o lo g y, U P V - E H U

Territory is not merely a geographical concept. It is also political, and social, and economic.
It is the foundation of state building and its dynamic, physical medium. Without territory
there is no territoriality. Territoriality implies territory, and territory implies land. In terms of
socioeconomics and the social landscape, the size of Euskal Herria is a good one for a state
and for reaping the benefits of a small state. The territory is amenable to a harmonious
relationship between social groups, for spatial democracy. A territorial culture should
therefore be fostered.

This section about Territory fleshes out the present collection in concepts and content,
helping us to understand the importance of territory in the articulation of a state. At a time
when Euskal Herria is setting its sights on a state of its own, there is a need for those of us
who support sovereignty to retrieve, further develop and connect to more familiar
concepts many ideas that have often been relegated in the past. And one of the concepts
that has tended to be relegated has been that of territory, despite frequent and vehement
references to the notion of territoriality. But what matters is not just to recognise the
importance of territory as an integral concept in building a country, for it is something more
than that: for it must be realised that although, in the last resort, a wide range of areas
(social, political, economic, cultural etc.) have to be developed in the unending process
that turns a society into a people and a state, we must recognise that those areas unfold in
specific physical spaces. And that space is the territory, a physical, dynamic and complex
medium for all kinds of human activity. Thus it must of necessity be acknowledged that
territory has this transversal dimension.

There is another very important point that needs to be clarified, especially in view of
this collection’s perspective. If we were to discuss how viable a new state is, we would
probably talk about its social viability (i.e. the attitude of the majority of the territory’s
population), its political viability (the legal and political instruments for giving expression to
that attitude) and its economic viability (the possession of adequate resources to allow that
society to stand on its own two feet in the present globalising and globalised world —
assessing that potential autonomy in terms of current macro-economic parameters), but we
would not regard the territory itself as a criterion of viability, apart from perhaps remarking
that the society in question which is seeking statehood occupies a particular geographical
space.

In that case, what is the point of our emphasis on the relationship between territory and
state? Well, the present drive for a state is taking place in the midst of a crisis situation in
the regions of Euskal Herria, the states of Spain and France, across Europe and beyond;
and this crisis adopts particular characteristics in each place where it occurs. Moreover, we
are really in the midst of several crises, because the original financial and market crisis has
spread out like an oil slick to accelerate crises in other domains (such as the crises of the
real economy, the welfare state, public power and so on), overshadowing earlier crises (the
energy crisis, food shortages, climate change, etc.). But those crises are all there, either on
or beneath the surface, awaiting an integrated solution; in the last resort all the others may
be considered the branches of one great crisis: the very system itself is in dire straits.

And herein lies the challenge: the route to statehood is already complicated and the
journey time is already long, yet the travellers along this route are furthermore constrained
to make sure that the route we adopt towards a future Basque state will not be a mere
mirror image of the very states that find themselves unable to find a legitimate exit from
 9

their present crisis. Hence while a Basque state may well be viable from the external
perspective of the conventional criteria, we need to make it internally viable also by
pursuing a harmonious and legitimate model of socioeconomic development throughout
our territory, with sustainability as our goal, taking into account the four dimensions of this
concept, one of which is that of territory. We must turn the perils inherent in these crises
into opportunities for Euskal Herria to become the right kind of welfare state all over the
Basque territories. The fundamental question is not how to get out of the crisis but where
to go from here; therein lies the opportunity for change, for as Einstein said, “No problem
can be solved from the same level of consciousness that created it.” Therefore let us
prepare for change on the way towards a Basque state, and the roadmap for those
changes.

Since territory is the key issue in this section, let us begin with the definition in a 2007
report of Gaindegia (the Basque Observatory of Economic and Social Development):

The geographical area that pertains to a being, community, language or some other
kind of physical or imaginary entity is called a territory. It may be the living space of a
given vegetable or animal species, or the traditional or linguistic domain of a particular
group of people. When it corresponds to a complex set of individuals, whether this be
a people, a nation or a society, the territory originates a common project. From those
viewpoints the territory is a medium and the fundamental resource and, at the same
time, a living space, a native landscape and the core of individual and collective
memory. That is, territory is the geographical area where the people live and which
stands at the centre of their life experiences, and which is administered to support all
people’s sustenance and well-being.

The destination
destination is territory, but the challenge is sustainability
For those of us all over the planet who wish and strive for a different kind of world, the
biggest challenge is to move the present, unsustainable society (which, as becomes more
and more obvious all the time, stumbles along from one crisis to the next) towards
sustainability. And through one kind of transition or another, whatever the territory,
whichever the state, this route will necessarily have three main components: a sociopolitical
one (society), a socioeconomic one (the economy) and a socio-territorial one (the
environment). However, although these three are often placed on the same level (as if that
was where they belonged!), we would have to admit that they have really been on different
levels if we ever broke free from the strong inertia of the past!

If the natural hierarchy determined the order, on the contrary, they would not be on the
same level at all: the environment (territory, in its broadest sense) is the foundation (which
offers us its resources and gratifications in fair measure); within that comes society, which
occupies the territory and makes use of it in one way or another; while economy would
come last, a circular economy geared to the ebbs and flows of nature, at the service of
society. On the contrary, nowadays the all-powerful market forces have turned all this on its
head, putting the economy, or an economicistic way of viewing this, at the top of the
pyramid, and treating society and territory as subordinate, fluctuating items of
merchandise. If Basques wish to take the road and find our way to statehood, we must
aspire to another kind of state addressing a different challenge: to favour world
sustainability by ensuring that of our own house. Another concept that would merit a
discussion in its own right is that of development; in this chapter we have left this out of
consideration, and where it does appear it should be understood in the most positive
sense possible.

Sustainability can be defined in many ways, but here I will give one of my favourites,
which is both as simple as could be and as profound; each of us can append our own
 10

annotation to this central idea according to the time and place, but the idea is this:
sustainability is accepting limits. Biophysical limits, fundamentally. Given that those limits
can vary from one territory to another, so will the manner in which we understand and bring
about sustainability: therefore, sustainability should not be viewed from a single
perspective. The goal is for legitimate societies in each place to be sustainable over time.
Sustainability is sometimes said to rest upon three pillars: a bearable environment, an
equitable society and a viable (or healthy) economy; to this it would be well to add a fourth:
a territory, i.e. a spatial domain in which to develop the other three pillars. This might be
called the territorialization of development. To put it another way: as an old Basque adage
says, sutan jartzean probatzen da nolakoa den eltzea, the test of the pot comes when it is
placed on the fire. When the three pillars of sustainability are placed on a particular
geographical territory, we shall test their strength.

When thinking about the organisation and management of a territory, sustainability has
to be plotted along the two axes of time and space. As regards time, some changes need
to be brought about short-term while other more profound, structural transformations will
need a much longer period of time. With respect to space, some things need to change on
a local, regional or national level whereas others need to apply on a much larger scale
(such as Europe). So it is necessary to fit actions on a variety of spatial and temporal scales
together into a roadmap that will lead towards sustainability and then understand each
step in the appropriate context.

Social entities should put together such a road map, region by region and across
Euskal Herria. To do this, the technique of the best Basque bertsolariak that consists of
working from the ending to the beginning may serve as a good guide: the first thing the
bertsolari needs to know is what the last line of the verse is going to say. Similarly, we need
to start visualising a sustainable future today, in general terms at least, and to take that as
our reference point so that our present direction is determined by our goal for tomorrow,
rather than by the inertia of the past. As somebody put it: “A retrospect view from a
sustainable future is better than a forecast from an unsustainable present.”

Sustainability poses a challenge on local and state levels. It necessarily implies many
changes of different kinds and a lot of rethinking, all the way from concepts about
development itself, sustainability, territorial organisation and management, physical
borders, independence, socialism, factors of production or the economy to the new light of
the growing, multifarious crises of recent years in north and south, east and west, and
moving towards the creation of new paradigms.

The studies in this section, Territory, aim to stimulate reflection about these things. The
point is not to conclude the debate but to get it started, for there remain a great many
questions to be answered. Take these contributions as starting points and then make your
own contributions to the development of these ideas!

The territorial dimension of state building

There is a political concept of territory as the space defined by the geographical
borders of a state. What is the ideal size? The economist Oskar Arantzabal offers an
answer to this question by examining the advantages of small states. But what is the ideal
size for something anyway? This is a question that was asked forty years ago, in 1973, by
Schumacher in his famous book Small Is Beautiful. Is size really an issue, he asks? In the
contemporary conventional theories large size was viewed as a virtue in itself, constantly
contrasted with smallness, whether it was a matter of the size of nations, companies or
markets. Whoever wanted to be successful must aim to be big. Schumacher compared
those theories to what was shown by the practical realities of his time, demonstrating that
there is no direct connection between size and effectiveness; he argued that many other
 11

factors also came into play, and reached the conclusion that small is not only efficient and
accessible but also beautiful… and most importantly, possible.

Size involves scale. The question is how to combine independence and

interdependence without involving any form of dependence. I am reminded of the words
of the well-known German sociologist Ulrich Beck (who coined the term “risk society”), to
the effect that peoples and states need a policy of internal globalisation, autonomy to
decide on their own internal affairs and manage them, and this must be combined with
shared autonomy over external affairs. A country like Euskal Herria cannot solve the
globalised world’s (of the globalisers and the globalised) severe global problems, whether
they be socioeconomic ones (such as famines, migratory movements, commercial abuses
or depletion of resources) or their social and ecological consequences, which may include
climate change. A Basque state will have to play its own part from its corner with strength
and skill (not the same things!) to contribute to a lasting solution to such global problems,
but inevitably it will need to do so jointly with other players. That is what is meant by a
policy of internal globalisation. Food autonomy might be the most effective step within this
complicated from-in-to-out framework. The thing is to go for sustainability, at home and
elsewhere.

Territory as land: food sovereignty

Classical political theory considers that there are three components to the state: a) a
territory, b) a population, and c) a sovereign power. Thus territory is a fundamental attribute
of the state, a complete political concept over and above the incomplete perspective of it
in territorial planning. Territory has three aspects: the physical, the legal and the economic.
The third of these is discussed by the lawyer Jabier Erize.
Erize On the economic side, the basis
of territory is land seen as a factor of production. He reminds us that classical economics
distinguishes between three factors of production: land, capital and labour. Although the
term capital can seemingly be taken in a neutral sense, the socioeconomic context should
be taken into account. Thus Erice studies land in the context of the march towards a
Basque state.

Erice calls for food sovereignty, not merely a formal concept but one with a material
content, and a transforming one at that. Furthermore, it is an expansive concept which can
serve as a model for the development and maturation of other concepts (e.g. energy). That
of food sovereignty is general, more than just a particular expression of political
sovereignty. Therefore he favours local agriculture, arguing that the current productivist
model is not good for Basque farmers. He criticises the application of financial speculation
to the food market… which brings us back to the point about policies of “internal
globalisation”.

Territorial organisation
We often play down the importance of territory when adopting a model of
development. We need to aim at a horizontally integrated, balanced territorial organisation
which recognises the particular role and function of each part of the territory. Therefore the
regions, which for the most part coincide with river valleys, must have a special function in
Euskal Herria; these valley systems are our basic territorial unit from an ecological
perspective. Regions also represent territorial identities which are well suited to local
production-transportation-consumption cycles, and hence constitute the ideal scale
mediating between the municipal unit and the state. They should be accorded more
importance in a state’s legal structure than they currently have (something to be
considered in the debate over the Law of Historical Territories).
 12

A. Frias examines the deficit in democratic socioeconomic development of the current

system of territorial organisation. Taking as his starting point globalisation understood as a
complete ideology that goes beyond the evolution of the economic system, Frias profiles
the present economic system, looking in particular at its impact on territory. The metropolis
is seen as the core territorial model of present-day capitalism; this is the model that
concentrates the activities of the service and financial sectors spatially, although productive
activities are distributed according to their costs across space. It thinks of the rural domain
as subordinate to a system that has been conceptualised and organised from the urban
domain, which is preoccupied with its transportation needs and with energy consumption,
and increasingly so; which helps us to understand better, among the different crises we
face in today’s world, the ecological crisis.

Frias also discusses competences in territorial organisation. Supposedly the Basque

Autonomous Community has full competence over it. However, because no precise
conceptual definition of such organisation appears in the basic regulations, it is doubtful
how full that competence really is, since the Spanish Constitution gives the central state
competence over activities that can take place in and have an impact on the same
territorial space. Consequently, public initiatives have relativised the possibility of really
organising territorial space. What is certain is that there is no true political power to
organise the territory in the present territorial administration of Euskal Herria. There is
therefore work to be done by a Basque state to understand and carry out the organisation
of the territories under its auspices in a different way through political power, moving from
an integrating perspective according to the new paradigm towards a new territorial culture,
with a strengthening of local concerns.

The social aspect of territory

Any proposal for an internal restructuring of a Basque state must inevitably take into
consideration the relations between civil society and governmental bodies. Beyond
economics, then, territory is what leads to the cultural and social cohesion of the
population. Here we are thinking about territory as a social concept. Human beings interact
with their environment and our social relations are in constant flux within those spaces. This
is the subject of the sociologist Josu Larrinaga’s
Larrinaga contribution to this section, and he tables
some very suggestive ideas such as spatial justice, the spatial reflection of the need for
social justice.

Larrinaga points out that a weakness of many theories lies in the problem of how to
bring about public participation in the decision process to make it democratic: who
decides, and where and how? He has some interesting suggestions regarding this, which
are useful for encouraging participation on the way to a Basque state. “Without standing
by and waiting for the wonderful legal and political frameworks that Euskal Herria will need
to acquire in the future, there is plenty that can be improved and much to be fought for
day-by-day through the mechanisms of citizen participation.” There have been many
conflicts in Euskal Herria that were closely linked to all this, and Larrinaga has this to say
about them: “Our political culture in this regard is very belligerent indeed: it is hard to find
a space for consensus building here.” Isn’t the road to a state an excellent opportunity to
start creating that space? He points to “community territory”, in conclusion; the territory on
which a community “lives and works, regulates its coexistence and its relationship with the
territory, and constructs, deconstructs and reconstructs its own culture”. Power is seen as a
political architecture that is built and legitimised from the bottom up. When all is said and
done, “territory is the house that we share”.

For those of us who believe a different world is possible on this planet Earth and work
towards it, the transition to a Basque state is a perfect opportunity, provided our goal really
is to create a different kind of state… at least for as long as there are states in the world!
 13

1. The territorial dimension of a state’s structure.

structure.

O s k a r A r a n t z a b a l I r a e t a, E c o n o m i s t , M a s t e r s i n I n te r n a t i o n a l M a r k e t in g

This chapter reviews the historical development of statistical trends and the effect of the
spread of democracy worldwide, whereby an increase in the number of states results in
smaller states. There are few studies of what the ideal size for a state would be, but it might
be set in the region of five or six million inhabitants. This issue revolves around the trade-off
between population increases and heterogeneity in geographical, cultural, economic and
ideological terms.

The chapter goes on to examine the advantages for small states, both regarding standard
indicators (GNP, HDI, Gini coefficient, unemployment, transparency, solidarity, ratings) and
more recent ones (negative growth, ecological footprint and GNH). The theoretical
concepts used include internal cohesion, openness, competitive specialisation, flexibility,
lower defence expenses, growth, and acting as an “experimental laboratory”.

Several relevant European cases are reviewed: Iceland, Denmark, Norway, Slovenia, and
(viewed as projects currently in progress) Scotland and Catalonia. Conclusions: economic
integration is linked to political disintegration, separatism is in vogue, and
interdependence for smaller states will eventually prevail in the newly emerging paradigm.
 14

1. A LITTLE HISTORY

To put things into perspective, let’s start with a few statistics:

– Population is the most widely used yardstick for measuring the size of states, but
there are big differences: China has over a thousand million inhabitants, while
Tuvalu only has eleven thosand.

– As for the trend over time: in 1900 there were fifty states in the world, in 1945
there were 74, and today there are almost two hundred. In the space of a century
the number has quadrupled.

– Only four of the ten richest states in terms of their gross per capita domestic
product in 2003 had more than a million inhabitants, and as measured on the
Human Developent Index three have populations of under eight million
(Switzerland, Norway and Singapore).

– In 1995, 87 countries had fewer than five million inhabitants, and 58 had fewer
than two and a half million.

Besides being the title of Hobbes’ famous book of political theory, the Leviathan is a
Biblical beast, an authoritarian “eater of souls”. Applied to the economy, it refers to the
“income maximalist”, who may be of many types. Throughout history there has been a
prevalence over the democrats of what we may call the leviathanists, who favour
homogenisation, and prefer the majority vote over equilibrium, though that is not always
economically efficient. It is a known fact that there are countries that have achieved rapid
economic growth even under a dictatorship.

It is also worth mentioning that on occasions the unwieldy size of imperialist

dictatorships has resulted in their downfall, as in the case of the Ottomans.
Democratization leads to a proliferation of states and, in consequence, to smaller size. So
far in the twenty-first century four new states have come in to being — East Timor in 2002,
Montenegro in 2006, Kosovo in 2008 and South Sudan in 2011 — but there are more on
the waiting list including Palestine, Sahara and Kurdistan, to mention but a few of the best
known. There is a need for supranational institutions, and these are often given limits (such
as the international court or control of pollution, related to climate change, cf. the Kyoto
Accord).

If we look back to history, the concept of the city-state or polis (whence the word
politics) evolved in Ancient Greece. There were even wealthy city-states in medieval
Europe such as Venice or Amsterdam with a population of just a hundred thousand or two.
The big Leviathans of sixteenth-century absolutism won the day, and this had a lot to do
with the high cost of war and tax-collecting capacity, as in the case of France. As Tilly puts
it, states are built by the technology of war. Yet in France’s case, excessive expansion hurt
the economy; nor was France the only empire to suffer from this problem.

The late eighteenth century saw the birth of the nation-state in search of large,
homogeneous markets. The German Zollverein or Customs Union of 1834 is one of the
best known examples. States like Belgium or Portugal were a bit on the small side —
meaning that their markets were too small, as explained by Garnier-Pagès’ Dictionnaire
Politque of 1843. Similar issues surface when we delve into the reasons behind the
American Civil War.

Next came the protectionist colonial empires, such as India, until Churchill’s statements
favouring Indian independence — but not until the world war was over. On a theoretical
 15

level Lenin’s observations on autonomy in the USSR were also interesting, in another
period. Then after 1945 came decolonisation, which brought to light the problems in
Africa: too many countries, and too much heterogeneity in them.

In view of the figures for the period 1972-2001 published by the US lobby Freedom
House, the conclusion that is reached is that the more states there are, the more
democratic the world becomes, without even counting decentralisation processes in many
states such as Spain, Italy and the United Kingdom.

The paradox of the European Union is its lack of democracy, being, as Newhouse says,
both “too large and too small” at the same time. Colomer (2006) agrees: “European-type
states are too small for international issues, such as security, commerce and
communications; and for democratic autonomy they are too big. And the federal states
among them are more democratic than the centralised ones” because they diffuse energy.
Furthermore their varying sizes (with a long list of candidates for membership) make them
incompatible with centralisation.

Possibly Belgium, one of the founders of the European Union, personifies its biggest
paradox. Here is a state that has broken all records for going without a government, and it
is divided into two nations, the French-speaking Wallons and Dutch-speaking Flanders. It
has become European nationalism’s laboratory, presenting a serious risk of bringing about
changes in the union’s internal borders.

In the opinions of Drèze and others, Catalonia and Scotland (neither of which perceive
any economic advantage at present in their membership in their respective empires) could
do worse than to constitute a confederation of European regions as “independent
regions”, so to speak, along lines suggested by Krutwig and Ohmae, as we shall see later.
And finally, the dispute between Jefferson and Hamilton at the birth of the United States of
America appears to have been revived: the cost of smallness is being minimised, politically,
through economic integration.

Table 1 presents a picture in numbers of the road to independence around the world.

(1871--2011)
Table 1. World population and number of independent states (1871
Average inhabitants per state
Year World population in millions Number of states
in millions
1871 1.416 64 22.1
1914 1.854 59 31.4
1920 1.946 69 28.2
1946 2.400 74 32.4
1950 2.478 89 27.8
1995 5.457 192 28.4
2011 6.881 196 35.1

2. IN SEARCH OF THE IDEAL SIZE

The meaning of the words nation, state, country and so on have been defined in many
ways, ranging from Max Weber’s “monopoly on the legitimate use of violence” to William
Inge’s “society united by a delusion about its ancestry and by a common hatred of its
neighbours.” In practice, the criterion we use is that of autonomous structure. It would be
unreasonable to expect them all to be the same size, but let us perform the exercise of
attempting to determine what the best size might be. There are not many theoretical
precedents, but we do find a couple in Classical Greece. One comes from Plato, who says
in the Laws that a state’s families should be sufficient in number to defend themselves (a
 16

number which he set at 5,040). Aristotle, on the other hand, argued for the evidence of
experience. From there we come to the period preceding the French Revolution and
Montesquieu, who emphasises the need for proximity to citizens, cf. the dispute in the
United States of America between Madison and the anti-federalists.

More recently and closer to home, Federiko Krutwig, writing under the pen-name
Fernando Sarrailh de Ihartza in 1960, said that “the economic well-being of peoples is
rooted in an animic situation; it is psychological.” Hence freedom is to be unerstood as an
economic factor. He placed the ideal in the vicinity of four or five million inhabitants,
without telling us how he arrived at that number, but in the sixties Scandinavian social
democracy was in fashion and the size of their countries, and the average size of states in
the USA and Germany, built as associative federations, was in the region five or six million.

Krutwig’s German contemporary E.F. Schumacher also wrote about size in 1973. His
suggestive ideas may be summed up as follows: German unity, to work, left out Switzerland
and Austria; small states are free and rich, whereas large ones are regimented and poor;
the ideal size for a city is 500,000 inhabitants, larger sizes leading to social exclusion; social
creativity increases in small groups; balanced regional development is desirable, witness
Switzerland’s pluralistic system of twenty cantons; the bigger the state, the more
decentralised it needs to be; there is no “ideal size”, but small is possible, and usually
better.

In our own time, the Japanese Ohmae (1995) says of the brand development:

The market needs there to be between five and twenty million inhabitants, small
enough for consumers to have shared proximity, but large enough to allow
economies of scale in services.

More recently Ohmae (2005) wrote the following of regional states:

Some old-style nation states are lucky and are small enough to be able to function
as regional states: Ireland, Finland, Denmark, Sweden, Norway and Singapore.

Population size is important but not decisive. It is a flexible variable. In many ways,
size is a mental state. An internal market of a million is desirable… and the upper
limit is located at ten million inhabitants at the most.

Once a region sets itself on the path to development, this may arouse envy in the
centre or in other regions… which may manifest itself in malicious attempts to
sabotage its success in the false guise of a benign policy of equality and national
solidarity.

Finally, an initial analysis by Alesina & Spolaore (2003) of the organisation and
fragmentation of states titled The size of nations (mimicking the classic Wealth of nations
by the father of economics, the Scot Adam Smith), takes it as a basic principle that there is
a trade-off between the benefits of size and the costs of heterogeneity. The state is seen as
poised between good and bad management, in the manner of a giant company. If we look
within the state, it is the goal of any state to achieve the greatest possible well-being;
wherever there is a belief in social justice, this should be as spread out as possible among
its citizens, for policies of redistribution also have a bearing on the level of development.
The organisation of a state is typically a pyramid so that the costs of public welfare (such as
health services, education and so on) can be shared out better and kept cheaper as a
result; it is an economy of scale.
 17

However, the benefits of size must be weighed up against various dimensions of

heterogeneity:

– Geographical. Many states throughout history have had to adopt a centralist

solution to compensate for distances, e.g. Potomac (the first capital of the United
States), Canberra or Braslia. On the other hand, non-democratic states such as
France and Russia tended to opt for larger capital cities (such as Paris and
Moscow, respectively).

– Cultural. Multilingualism can, depending on the situation, turn out to be either

beneficial or an impediment; consider the example of Belgium.

– Income-related. Italy and Bolivia are examples of states illustrating the

consequences of a pronounced imbalance between regions.

– Ideological. Linked to political priorities, whether left- or right-leaning.

There are often hidden transaction costs between larger and smaller areas. Devolution
has taken place frequently, to the point of becoming fashionable, as a halfway house
between dictatorship and democracy. An example is proided by Iraq with its ethnic groups,
particularly the Kurds; and of course by transitional economies such as the USSR and China.
The context may also be a conditioning factor: federalism in America and in Europe takes
different forms, the first being associative, the second dissociative. Priorities for proximity
may also result in fiscal disequilibria: Panizza has performed a correlation analysis between
fiscal devolution and democracy.

3. THE ADVANTAGES OF SMALL STATES: THEORY AND PRACTICE.

SOME ECONOMIC INDICATORS

3.1. What is a small state?

state?

It is of course debatable how to define “small state”, but roughly speaking we may go
by population size as usual and as in the first part of this chapter; in a worldwide
perspective, with some rounding off we may say that a small state is one with fewer than
thirty million inhabitants (see Table 1 but in the context of the European Union (in which
there are now 500 million inhabitants in 27 countries, which gives an average population of
18.5 million), we could adopt a three-way distinction as follows:

– Small states, with a population of less than six million, include eleven states in the EU,
namely Denmark, Slovakia, Finland, Ireland, Lithuania, Latvia, Slovenia, Estonia,
Cyprus, Luxembourg and Malta. Taken together these make up 5% of the Union’s
population. The last six mentioned are states with populations smaller than that of
Euskal Herria, of which there are about sixty worldwide.
– Medium-sized states of between eight and twenty-two million inhabitants each;
there are ten of these in the EU: Romania, Netherlands, Greece, Portugal, Belgium,
Czech Republic, Hungary, Sweden, Austria and Bulgaria. They acount for 25% of the
population of the EU.
– Large states with over forty million inhabitants, of which there are six in the EU:
Germany, France, the United Kingdom, Italy, Spain and Poland. Jointly they make up
70% of the EU’s population.
 18

3.2 Theoretical foundations

But what are the advantages, from our point of view, of being a small state? In normal
economic circumstances, a rough list might include the following positive points:

1. Internal cohesion. More homogeneous societies that are more thoroughly

founded on equality and more deeply rooted in the values of solidarity tend to be more
governable and, consequently, capable of responding to challenges with greater unity. It is
thought to help to have common interests concerning children’s education; on average
they tend to stay at school longer than in large states. Later we will study the case of
Iceland. Collective action is said to be less effective in large states.

2. Openness of markets. The small size of the internal market inevitably encourages
internationalisation. The more open economies are, the broader the opportunities for small
states (openness is calculated by the ratio of imports + exports / gross domestic product).
According to J. Dunning (2001), in 1995 the ratio for small states with under ten million
inhabitants was 111%, with all the benefits of this, while for medium and large ones it was
only 62%. Price & Levinger (2011) find that European states with under fifteen million
inhabitants grew by 50% in exports per capita between 2000 and 2008, large states only by
35%. A few thoughts about the openness and integration of economies are in order. It is
estimated that borders reduce commerce by 30%. Well-being itself is a consequence of
integration with others. In periods of self-sufficiency, market size and the size of the state
are confused; from here we have moved to globalisation. The exporting nationalism of
Japan and Germany, defeated in the World Wars, is summed up in the words of Keynes,
now revived in this era of meltdown, to the effect that men prefer collective animosities to
individual happiness. Small states also have a more proportionally representative electoral
system, and in general their public administrations are larger than those of large states,
which brings stability. Great Britain and Scotland illustrate this. Contrary to what
“functionalist” theories claim, economic integration and political disintegration go hand in
hand. For example:

– Quebec and NAFTA: The North American Free Trade Agreement which the USA and
Canada signed in 1989 (with Mexico becoming a member three years later)
contributed to an increase in the pro-independence vote in Quebec’s second
referendum, which only missed being approved by 54,000 votes.
– Fluctuating local boundaries in the USA. Below the level of the county there are
municipalities, special districts and school districts which are easily altered. Historically
the quest for homogeneity dates back to phenomena such as the Great Migration.
– Statistical correlation analyses are positive in the case of small states, which gain more
when they open up, and negative in the largest states,which are less open.
– The economic weakness of political integration: of 132 hypothetical state fusions, only
seventeen would be beneficial for both sides.

3. Competitivity through specialisation: A prediction of Adam Smith’s theory seems

to be confirmed: working in specific sectors with competitive advantages gives a
competitive edge internationally. An effective strategy makes it more difficult for large
states to vie for niche markets (Becker, 1994), as Basques well know in the case of machine
tools, for example.

4. Flexibility, which permits faster adaptation in periods of continuous change such

as the present. Because small states are more sensitive to crises originating elsewhere, they
handle structural reforms better. This has been discussed by Frenkel (2010) in his study of
small states as global innovators, in science and technology as well. According to the IMF
the world’s most competitive state is Switzerland.
 19

5. Less defence spending, especially in strategic locations. France spends 2.4% of its
GDP on defence; Belgium only 1.4%; Luxembourg a mere 0.8%. Another observation here
concerning the consequence of conflict or peace in the world. Defence spending may be
assigned a place in the organisational pyramid referred to earlier: the larger the state, the
more it will endeavour to achieve better defence at a lower price. It is not then surprising
that federation-republics such as Switzerland and the USA emerged from threats. In the
case of the latter, defence spending represents 6% of the GDP, and in the case of the
European Union 3%. Pacification leads to reduction in size, although changes in borders is
more expensive and produces local conflicts, as has happened in the Soviet Union, and
also in Yugoslavia where it is clear that civil wars are the result of great heterogeneities.
International supranational legislation is needed to handle such situations of conflict as
these.

6. A “laboratory” for experimentation. The present general crisis calls for creative
thinking. Austria has developed the idea of a workers’ salary guarantee fund; Denmark has
come up with a “flexible insurance” fund in relations with companies, and the division of
profits into three parts (for capital gains, distribution among workers and reinvestment). For
Basques the latter is reminiscent of our cooperative phenomenon. A number of small
political innovations could be added to the list, such as inflation objectives (New Zealand,
1990), private pensions (Chile, 1990), pollution taxes (Singapore, 1975), flat taxes (Estonia,
1994), and abolition of compulsory military service (Costa Rica, 1948).

7. Growth. For the past thirty years small size has been linked to economic growth in
Europe. The new French school of geo-economists (led by J.P. Fitoussi under the aegis of
the ANR), after five years of research concluded that small-scale leaders such as Finland or
Ireland have overtaken large economies such as Germany and France. Further examples of
this are to be seen in the early days of European unity: one of the founders of the European
Coal and Steel Community was Luxembourg! Germany’s Saarland decided against
entering the union as a state in 1955. But time has treated those who opted for
independence better than those who decided to remain as a region of another state.

3.3. Successful practices of the small in the world

world

We are all familiar with the classical ranking of countries in terms of economic indicators
dating from the 1930s, known as per capita gross domestic product, or GDP. Basically, this
is a measure of the amount of wealth produced in a year divided by the number of people
in the country concerned. Although the theoretical average obtained from this statistical
calculation is very approximate, it has frequently been used as a rough guide, even though
there are many things it fails to measure such as the impact of pollution, for example, or
the value of housework. In any case, the top ten countries according to the figures for 2010
are Qatar, Luxembourg, Singapore, Norway, Brunei, USA, Hong Kong, Switzerland,
Netherlands and Australia. The first five of these are small or very small states. But let us be
critical. Notice that three of them are micro-states, two of which, Qatar and Brunei, are oil-
rich countries with a very uneven distribution of wealth, no doubt, while other states listed
(Luxembourg and Hong Kong) are not quite “real” because they are tax havens.

To achieve a more accurate view, in the 1970s the Human Development Index (HDI)
was created which takes into account more qualitative factors such as education, health
etc. This index yields a different top-ten list (here given with an indication in parentheses of
their present populations): Norway (4.9), Australia (22.5), New Zealand (4.3), USA (310.7),
Ireland (4.4), Liechtenstein (0.03), Netherlands (16.6), Canada (34.3), Sweden (9.4) and
Germany (81.5). There are eight small states on this list and two large federations: the USA
which is made up of fifty states with an average population of 6.21 million each, and
Germany which consists of 16 Länder with an average of 5.09 inhabitants each. Comparing
 20

the two lists, four states are on both, one of which is a small state (Norway), two medium-
sized (Australia and the Netherlands) and one is large (the USA).

At the present time, the most reliable index of balance in the distribution of wealth is
the Gini coefficient, technically a measure of statistical dispersion (on a scale of zero to one;
the lower the score the better). It has received criticisms for not taking absolute values into
account (the same coefficient is assigned to different levels of wealth); it fails to explain
reasons or to take age pyramids into account; and it favours small territories, assigning
higher coefficients to units with large areas. The last point is debatable given Canada’s
score: it is larger than the USA and Mexico yet unlike them its index is in the same range as
European countries (between 0.24 and 0.36), while theirs are over 0.40. This index is useful
for analysing differences in well-being as a basis for compensatory policies. Sociological
studies show that the more trade-union activity there is, the larger the middle class, and the
larger the middle class the more democracy there is. According to the United Nations’
figures for 2008, the top ten countries, with their ratings, are Denmark (24.7), Japan (24.9),
Sweden (25), the Czech Republic (25.8), Norway and Slovakia (both 25.8) Finland and
Hungary (26.9), Germany (28.3), Slovenia (28.4) and Austria (29.1). Japan, which seem to be
a possible exception to the pattern, may be considered the world’s only culturally
homogeneous large state. Only three states are repeated from the previous list, and they
occupy the first positions, except for Denmark.

Looking at unemployment, which is a major concern for western societies, gives

comparable results. Although there are fluctuations, the EU states with the lowest
unemployment indices as a percentage of the active population according to 2010
statistics rank as follows: Netherlands (4.1%), Austria (4.9%), Luxenbourg (5.4%), Slovenia
(6.3%), Cyprus (6.8%), Denmark and Malta (7.0). Six of the sixteen states that fall below the
average of 9.7% for the 27 member states are small states, while eight of them are medium
in size.

Some less well-known economic indicators confirm the successful practices of small
states:

– Transparency. According to Transparency International’s profile of corruption in 178

countries (in their index the closer a country’s score is to ten, the better), the top-
ranking states are New Zealand, Singapore and Denmark (9.3), Finland and Sweden
(9.2), Canada (8.9), Netherlands (8.8), Australia (8.7), Hong Kong (8.4). The first four of
these are small states, the others listed are medium-sized. As the economic historian
Joel Mokyr puts it, corruption is the worst enemy of development.

– Solidarity, measured as aid for development as a percentage of each state’s GDP.

The states that met the accorded rate of 0.7% in 2010 are Sweden, Norway and
Luxembourg (1%), Denmark and Netherlands (0.8%), Belgium and Finland (0.7%).
Thus we see that small and medium-sized states show more solidarity than the large
ones.

We could go on, adding in other variables such as flexibility, solvency, competitivity,

innovation etc. Later we will discuss another index now in vogue, gross national happiness
(GNH). And given their recent presence in the news, perhaps we should note that rating
agencies’ own classifications point in the same direction: the short list of countries with the
highest possible economic score, triple-A, is as follows according to Standard and Poors,
the market leader:

– Tax havens: Isle of Man, Guernsey and Liechtenstein (all three of which are very
small, obviously).
 21

– Members of the eurozone: Austria, Finland, France, Germany, Luxembourg and

the Netherlands. Four of the six are small to medium in size.
– Members of the EU but not in the eurozone: Sweden, United Kingdom, Denmark,
Norway. Three of the four are small or medium.
– Others: Switzerland, Australia, Canada, Hong Kong, New Zealand and Singapore.
No large states in this category.

Although not the most important one, let us take the fourteen states in this last
classification, believed to be the most solvent, which also figure in the previous lists and set
them out in order, as a rough summary of sorts of model states.

2. taula. Adierazle ekonomikoen hurrenkeren

hurrenker en laburpena (2008-
(2008-2011).
Country GDP HDI Gini Unemp. Transp. Solid. GNH Population (m)

Luxembourg 2 3 1 0.5

Singapore 3 1 4.6

Norway 4 1 5 1 4.9

Hong Kong 7 9 7

Switzerland 8 2 7.8

Netherlands 9 7 1 7 16.6

Australia 10 2 8 4 22.5

New Zealand 3 1 4.3

Liechtenshtein 6 0.03

Canada 8 6 10 34.3

Sweden 9 2 6 4 1 7 9.4

Denmark 1 1 4 1 5.5

Austria 2 3 8.3

Finland 4 6 6 5.3

Theoretically, then, we might calculate that the ideal population size is less than ten
million: 9.3 million to be precise. This is an interesting benchmark to take into consideration
when comparing countries.

3.4. Consequences of the crisis:

crisis: updating the metrics

If the bursting of the world property bubble in 2008 and the ensuing economic crisis
have taught us anything, it is to distinguish between the world of finance and the tangible
world of the real economy. So, hit by the ills of globalisation, the importance of qualitative
factors has begun to acquire importance: ecology, for example, asks difficult questions
about many of the earlier quantitative indicators and agrees with the theories of degrowth
(a well-known example of which is given by the slow food movement). The point is that the
planet’s limited resources need to be developed in a sustainable manner. The French
scholars Latouche & Harpagès (2010) define the “bio- or ecoregion” either in a rural or an
urban setting as a coherent spatial entity linked to a geographical, social and historical
reality. They consider that the largest size it admits is a million people.

Of particular interest is the criterion of the ecological footprint, that is, how many
hectares are needed per inhabitant (nine in the case of the United States according to 2006
data). Or to put it another way, how many planets would we need in order to maintain our
present standard of living as consumers? All calculations suggest we would need more
than one, which is not physically feasible. This is closely related to the Happy Planet index,
 22

measured in terms of relations with nature: surprising though it may seem, the leader of
this index is Costa Rica, a small state with 4.6 million inhabitants.

But without a doubt, the most fashionable index in recent years, which is being talked
about everywhere, is the gross national happiness index or GNH. This idea was started by
the micro-state of Bhutan in the 1970s. Defying western materialism, the Bhutanese
monarchy proposed to measure happiness in special conditions, under Buddhist influence
and in a hitherto rather closed society: television only reached the country in 1999. They
had four basic principles: sustainable development, protection and promotion of cultural
values, care for the environment and good government. M. Pennock and other Canadian
experts tried to adapt the same idea to western culture. Recently both the United Kingdom
and France asked the Nobel economics prize-winner J. Stiglitze to provide assessment to
start measuring GNH through surveys in their national statistics institutions. Thus we will
begin measuring “priceless” assets such as income distribution, quality of education,
leisure, culture, housework, inheritance biodiversity and peaceful coexistence, and
individuals’ ability to have a say in local and national political issues: or ability to decide, as
it be called.

4. SOME MODERN EUROPEAN EXAMPLES

4.1. Iceland
If one example is worthy of our attention, that example is perhaps Iceland. Claimed to
be the “happiest country in the world” in spring, 2008, Iceland held first place in the human
development index according to qualitative criteria. It was the prime example of a state of
well-being, with a good balance between work and family. But then came the autumn
crash of the three largest banks in what had been the “happy island” of the North Atlantic,
triggered by the financial excesses of the private banks, particularly overseas expansion
through Icesave, with the UK even applying the anti-terrorist law. The attempt to turn what
had been private debts into public ones of all the country’s citizens led to what has been
called a democratic revolution: the three main banks (Landsbanki, Kaupthing and Glitnir)
were nationalised; the bankers and politicians responsible were arrested, taken to court
and called to account; there was a change of government; and two referendums were held
on whether or not to pay the accumumulated foreign debt (both were rejected, but the
second by a narrower margin, with the two main creditor countries, Netherlands and the
UK, putting on pressure after application to join the European Union); then came the
participatory rewriting of the constitution and a legislative bill, the Icelandic Modern Media
Initiative, which calls for transparent investigative journalism. This country of around three
hundred thousand inhabitants with a small economy based on fishing (40%) and
geothermal energy had been a quiet backwater since it won independence in 1904. Its
legal system, modelled on Denmark’s, had undergone little change since 1945; the people
had traditionally long believed in “natural” democracy. It boasted the oldest parliament in
the world, nestled among its hills: the 930-year-old Althing, until its incorporation into
Norway in 1262. So what had gone wrong? According to Gylfason (2010), many lessons
may be learnt but one in particular: the need for checks and balances. Iceland is self-
governing, notwithstanding aid given by the IMF and Scandinavian countries. Therefore,
unlike Greece, Ireland and Portugal — the other small European countries that have had to
accept bailouts — Iceland remains in a position to make its own decisions without
surrendering control of its economy.

4.2. Denmark, Norway and Slovenia

We have chosen to discuss Denmark, Norway and Slovenia as examples of successful
countries that have achieved independence at different times in European history. We shall
take them in chronological order.
 23

The happiness index mentioned above yielded the following top-ten world ranking in
2008: Denmark (with a population of five million), Switzerland, Austria, Iceland, Bahamas,
Finland, Sweden, Bhutan, Brunei and Canada. Obviously some are micro-states, others
small or, at the most, medium in size; there are no large states on the list. This is something
worth thinking about in connection with Basque independence, since in this case
qualitative and quantitative criteria converge to make the concept itself more plausible. In
1864, in the era of Bismarck, Denmark had an opportunity to fuse with Germany. What
would have been its fate as a part of Germany?

Since there is nothing like immersing oneself in history and learning the lessons of the
past in order to predict the future, Norway is a fine example to look at in this sense, with a
population of almost five million: having been under the Danish and Swedish crowns for
five hundred years, it decided unilaterally at the beginning of the twentieth century to go it
alone as a sovereign state, and a century later it holds first place in the Human
Development Index. So it was worth it — although Denmark and Sweden are admittedly
top-ranking states too.

Now we come to the most recent case, Slovenia, which has just finished celebrating the
twentieth anniversary of its independence, gained in June, 1991. At first everything
appeared to be going against Slovenia: the EU and the United States backed the unity of
Yugoslavia, while Serbia, the main customer for Slovenia’s exports, announced a boycott.
Nevertheless, Slovenia made the unilateral decision to hold a referendum on
independence, and eventually was supported by Germany (Slovenia had close links with
Austria, in terms of land startegy). Today the Slovenians are doing very well for themselves
(ranking 29 among the world’s states on the HDI scale), close to the EU average, and with a
lower unemployment rate (with a higher proportion of industry in its economy). The
Slovene language is official in the EU, Slovenia held the presidency in 2008, and with a
population of two million the Slovenians live with dignity.

4.3. On their way:

way: Scotland and Catalonia
Scotland is a country with a population of just over five million and a homogeneous
territory. Historically its borders have been clearly defined. In the second century (122-124
AD) the Roman Empire built Hadrian’s Wall, 118 kilometres long and 6.5 metres high, as a
defence against the Picts. It was followed by the Antonine Wall in 140. One of modern
Scotland’s 32 council areas is still named Borders.

This is not the place to review the elaborate history of this traditionally poor country (in
1867 the income of Scottish people was less than a third of that of the English), but at the
beginning of 2011 Time magazine listed Scotland in first place in a list of ten candidates for
independence. In the May elections, this was borne out by an absolute majority for the
Scottish Nationalist Party, which was calling for a referendum on independence. 80% of
Scots support such a move. Its leader, Alex Salmond, said in 2010: “We are aware - as we
will always be - of the sovereignty of our people, that the decisions on Scotland’s future lie
ultimately with those living and working in Scotland - and with no-one else.” Back in 1979,
following a defeat orchestrated from London and the inception of its devolution policy, a
Scottish parliament was created with limited powers, unable to collect taxes except for a
limited tax-varying capability, but which has nonetheless made headway. With a
complicated identity situation (the precarious situation of the Gaelic language contrasts
with the strength of Scotland’s sports teams), economics has been given priority. In the
2007 elections a hundred companies started a pro-independence platform. The
government’s modest but effective management has served Scots’ standard of living well,
with improvements in education (university is free and classroom sizes are limited), health
care (with free care for the elderly including house visits and free prescriptions), the burden
of minor taxes was lightened (local tax rates were frozen for a four-year period and toll
 24

charges on bridges abolished), putting an end to civil service redundancies, lowering the
unemployment rate to under 7%, and so on.

In underlying issues pertaining to the as yet undevolved powers over general policies
such as foreign affairs, defence, energy, social security etc., policies differentiating Scotland
from the United Kingdom are being made the subject of public debate. The
independence party opposed the war in Iraq, supported the Kyoto Protocol on reducing
emissions of greenhouse gases, opposes nuclear power and supports renewables (note
the relations between Iberdrola and Scottish Power). It adheres to a social-democratic
model; the prevalent Presbyterian religion is egalitarian in contrast to classist Anglicanism.
Overall, public spending is 16-20% higher per capita than in England and it aspires to enter
into an “axis of wealth” which includes Ireland, Iceland, Norway and Denmark. The first two
of these have had problems in the present economic crisis (from which they are now
recovering), but the others have fared better. Let us recall that management of the North
Sea oil and gas reserves and of taxes continues to be controlled by London; to some
extent, “black gold” may be covering up the black holes of an economy based on finance
and property. The metropolis covered up a 1974 economic report making a very good
argument for the viability of Scottish independence.

By way of contrast, Catalonia has a more heterogeneous territorial situation. Culturally it

forms part of the Països Catalans; politically, it is divided between two highly centralist
states, Spain and France. It is therefore more difficult to arrive at a single solution. The
sociological rise in pro-indepence feelings in recent years is unsurprising, given the failure
of political efforts over the preceding thirty. Because of taxation issues, Catalonia is
estimated to have an all-round deficit in favour of Spain representing 10% of its GDP. This
circumstance has resulted in the Soberania i progrés platform and the pro-independence
business group Cercle Catalá de Negocis.

Aside from the issue of an unofficial referendum on sovereignty, unlike Scotland, the
main worry is about the threat of a boycott. Let us recall that sales of cava (the Catalan
“champagne”) dropped by 6% during negotiations for a new Estatut for Catalonia and
faced closed doors subsequently. However, studies have shown that any possible
commercial losses would be more than made up for by the gains from an independent tax
regime.

Thus while questions about economic viability cannot be denied, the real issues
surrounding an independent state for Catalonia are political, mostly having to do with the
attitudes of the two states on either side of it.

5. CONCLUSIONS

– World peace, democratisation and open economies are favourable to small states.
– Economic integration is linked to political disintegration. The number of states
worldwide has tripled since 1945.
– Remaining questions which call for further study include civil wars, Kosovo’s unilateral
decision for discretional change by referendum, mobility, minorities, military and
economic blocs, practical examples and history itself. Then there are matters relating to
viability and living standards or instances of boycotts such as were imposed on Slovenia,
Lithuania and others.
– Separatist tendencies will become stronger in the immediate future. It is getting cheaper
to achieve political freedom. According to a 2006 report in The Economist, considered
the bible of liberalism, “the fashion for statehood will be a force to be reckoned with in
the next 20 years, as it has been in the past two decades.”
 25

– The time has come for a leap from localism to supranationalism; the former is based on
political legitimisation, the latter on avoiding “tiling”.
– We need to move towards a flexible system of political domains. Swiss cantons are an
example, but so is the Maastricht Treaty itself which acknowledges the right of states to
leave the union.
– Both old and new economic indicators seem to suggest that small states are better than
big ones, and this can also be argued for on theoretical grounds.
– We are said to be on the threshold of a fourth wave of independent state creation.
Scotland may be the first country to set this going, having fared better in the economic
crisis and timed the referendum well, but above all owing to its northern European
culture and democratic maturity. Other places to keep an eye on are Northern Ireland,
Greenland and Flanders.
– In the new world economic paradigm, the interdependence between small and
medium-sized states will hold the key.
 26

REFERENCES

Alesina, A. & Spolaore, E. (2003):The size of nations, Massachusetts Institute of Technology (MIT).
Alesina, A., Spolaore, E. & Wacziarg, R. (1997): “Economic integration and political
disintegration”, NBER Working Paper.
Bel, G. (2011): “Independencia y boicot”, La Vanguardia.
Colomer, J. M. (2006): Grandes imperios, pequeñas naciones, Anagrama.
Gylfason, T. (2009): “Is Iceland too small?”, Vox.
––––––––––, (2010): “Eleven lessons from Iceland”, Vox.
Latouche, S. & Harpagès, D. (2010): Le temps de la décroissance, Thierry Magnier.
López, J. (2011): “Europako estatu berrien sorrera”, Berria, 2011-02-04.
Ohmae, K. (1995): The end of the nation state, The Free Press.
––––––––––, (2005): El próximo escenario global, Granica.
Partal, V. (2011): “La lección que los eslovenos nos dieron hace veinte años”, Vilaweb.
Price, A. (2011): “Small is cute, sexy and succesful”, Harvard Kennedy School.
Quadras, X. & Guinjoan, M. (2011): “Cataluña y Escocia: no es exactamente lo mismo”, Avui-El
Punt.
Regoyos, J. de (2011): Belgistán. El laboratorio nacionalista, Ariel.
Sarrailh de Ihartza, F. (1979): La nueva Vasconia, Ediciones Vascas.
Schumacher, E. F. (2011): Lo pequeño es hermoso, Akal.
Smiley, X. (2005): “Any new countries on the horizon?”, The world in 2006 (The Economist).
Solano, X. (2011): “Escocia: mucho más que un referéndum”, Avui-El Punt.
 27

2. Territory and economics. Territory as a political

concept.
concept.

Jabi er Er iz e d e la Ri ca, D e gr ee in L aw

This chapter looks at the economic facet of the political concept of territory. Land is the
most basic of the three economic factors. The availability, control, distribution and
management of natural resources is a long-term, historical matter. In our globalized world
the unregulated or under-regulated markets act as de facto managers of our natural
resources. The notion of “food sovereignty”, which emerged to address the wrongs arising
from this, is an innovative, universal (i.e. valid for both North and South), expansive and
empowering idea.

Food sovereignty is viewed as a right of peoples. The big question is how countries are to
avail themselves of this right, and the answer is: via the state. Notwithstanding the crisis of
the nation-state, no other institution besides it has emerged that is capable of challenging
the hegemony of the markets. It is therefore time for Basques, already involved in building
their nation, to start to address the construction of statehood.
 28

INTRODUCTION

Territory is not only a geographical concept, it is a political concept too. According to

classical political theory, the state is made up of three things: a) a territory, b) a population,
and c) sovereignty (or sovereign power). Thus territory is one of the three fundamental
attributes or component parts of a state. That is the political concept of territory.

Concerning the state

Let us then consider the essential link between the political concept of territory and the
state. It is true that the term territory is also used, in a political sense, of political entities that
are not states (indeed, present-day legislation stipulates, for example, that a territory is one
of the components of a town or municipality). But in such cases we are using an incomplete
political concept of territory, so to speak. A complete political concept of territory might be
said to be necessarily linked or associated with a state. That link need not be an effective
one: for the purpose of analysis, a hypothetical or imaginary link is enough, and so we are
able to talk of the territory of Kurdistan or Euskal Herria in the full political sense of territory
even though no Basque or Kurdish state exists at the time of writing. It is important to
understand that in such cases we are implicitly assuming such a state.

The political concept of territory (which has just been referred to as a complete political
concept) is a conjunction of three different aspects: a physical aspect, an economic aspect
and a legal aspect.

a) Physical aspect: the location, the material ground or area where the population is
established.

b) Legal aspect: the territory is the particular area where the law holds and sovereign
power applies.

c) Economic aspect: the land as a factor of production or an economic factor. Recall

that classical economics recognises three factors of production: land, capital and labour.
Nowadays the broader term natural resources is used in place of “land”, however.

1. LAND AS A FACTOR OF PRODUCTION

Leaving aside the physical and legal aspects of the political concept of territory for now, let
us consider the economic aspect.

1.1. What are the factors of production?

We have seen that land, capital and work are the three factors of production according
to classical economic theory. This three-way division has basically been accepted in
economics until now. However, it has been found indequate for the analysis of economic
development and there have been suggestions that this view needs to be filled out
(Cameron,1998: 31).

At least two other factors, it has been claimed, need to be added: technology and
institutions. Some writers emphasise the former, considering that technological progress
has been one of the most significant features of modern economic growth (Maddison,
1991: 55; Cameron, 1998: 32). But the institutional factor is also an important variable, i.e.
such things as the kind of state, the political regime, a variety of particular organisations
and associations, the education system, and even the ideologies and social values.
 29

Both technology and the so-called instutional matrix have been very influential in the
history of economic development. We are often reminded of the importance of technology
when new energy resources are found and tapped, and of course the creation of new
institutions (such as an organised market) can have far-reaching consequences.

But these proposals (and others) to correct or expand the classical classification of the
three economic factors are neither absolute nor permanent. Sometimes new factors that
have not yet been mentioned are brought into the analysis. Other times, some of the newly
proposed factors seem to disappear or dissolve into one of the three original ones; for
example, some think that technological progress is “realized” as capital (Maddison, 1991:
25). Simplification can be taken to an extreme, intimating either deliberately or
unintentionally that the single umbrella of “capital” is sufficient to cover all the other terms.
Thereby land or natural resources are often turned into “natural capital”, while work is
replaced by “human capital”.

Before turning to our next subject, a little note here: what has been said up to here is in
line with a fairly orthodox view of economics. In Marxist analysis, the factors of production
are not all analysed on the same plane; the central concept is capital, which is the product
of accumulated surplus value, once labour has been converted into a perfectly
differentiated merchandise. Likewise, in historical materialism insititutional elements are
never considered factors of production but are seen instead as a superstructure above the
structure of production.

1.2. Land or natural resources

But for the purposes of the present chapter, the foregoing discussion of economic
factors is of very little relevance. For our purposes, the consideration of land as a factor of
production provides a good, useful and valuable analytical distinction. What we are
interested in, fundamentally, is the following: the political concept of territory has an
economic aspect, which we can talk about as land, in the sense of classical economics, and
can also use natural resources as its effective synonym.

What are natural resources? They are the materials or elements provided by nature
herself, prior to human intervention, for production (that is, to meet people’s needs). So we
are talking about the raw materials as they present themselves to us, without regard for the
improvements made to them by human labour, capital or technology.

Without trying too hard to be rigorously systematic, let us attempt to say what things
are included within natural resources. In the first place, we should say that there are four
parts: a) the land surface, b) whatever is is underground, c) the air space, and d) the sea. All
the components of each of these parts need to be taken into account. First of all, land
surface includes not just agricultural land but also forests, water bodies, flora and fauna.
Besides these things, other components should also be listed such as opportunities or
capacities, so for example, a certain kind of topology may favour certain sorts of
communications; a certain geographical location may provide a potential source of solar
power or some other kind of energy resource, and so on. The same applies to other parts
of the territory. Underground, for instance, there might be fossil fuels and other
(geothermic) energy sources; then there will be mines and underground water deposits.
Besides fish stocks, the sea can also offer many other kinds of resources.

The range of resources is not a closed list; at each point in history it varies. Something
that is not considered a natural resource at one time may become a fundamentally
important resource at another. Take coal, which it became essential when the Industrial
 30

Revolution came along (Cameron, 1998: 232). The technology of each period is often the
key that opens the door to new natural resources.

Although resources can be classified in many ways, one particular distinction is of

special importance: that between renewal and non-renewal resources. These terms are well
known, yet it may not be a bad idea to spell out what they mean: renewable does not
mean inexhaustible. Exploitation at an excessive pace can lead to the impoverishment of a
renewable resource, the reduction of its quantity, and if taken to extremes, its complete
disappearance.

2. THE IMPORTANCE OF NATURAL RESOURCES

2.1. The land as a determining factor for population and sovereignty

The most developed and contemporary form of political organisation of a community

known today is the state. The world is made up of states, and the planet earth is divided
up into different parts each of which is the territory of a state. Thus every state has its own
bit of land surface, its own underground, its own air space and, in some cases, its own
section of ocean.

At this point we can establish a link between two ends of the thread: on the one hand,
a) the economic aspect of the political concept of territory, namely the land or natural
resources, and b) the state’s other two components besides territory, namely population
and sovereignty.

The land (aka natural resources) is a decisive factor in determining population and
sovereignty, because:

a) In the first instance at least, the maintenance of the state’s population has to come
from its natural resources. In this sense, the land is the factor determining the population’s
existence.

b) The sovereign power of the state serves (or should serve) to control precisely those
resources, deciding how they are to be exploited, the distribution of wealth etc. In this
sense, the land is a condition for the exercise of sovereignty given that it is its essential
object.

2.2. Historical reality

What has been said refers to the theoretical importance of natural resources in a world
divided into states of the kind we currently have. But in reality things are not quite so
simple. To start with, natural resources are not naturally divided equally among states, since
states are themselves historically artificial creations. What is more, historically there is no
peaceful coexistence among states where, for instance, benevolent and fair exchange
prevails. The distribution, availability and consumption of resources has not been, and is
not, distributed according to principles of equality and fairness, either between states or
within individual states.

No one can deny the tragic significance natural resources have had in political history.
Clearly they have been at the origin and the heart of many a contention, conflict or bloody
war. Possession of land, control over mines, access to water or the extraction of precious
metals have, together with similar issues, stood at the centre of human catastrophes from
 31

the earliest days of humankind until today, whether they took the form of fights between
warring states or civil wars.

There is a curious way in which orthodox economic history accounts for this. It is
acknowledged, on the one hand, that at certain points in history a particular natural
resource has been the key factor in a state’s economic development (Foreman-Peck, 1985:
67; Maddison, 1991: 47; Cameron, 1998: 232). Yet at the same time it is claimed that the
wealth of present-day states has practically nothing to do with the their provisions of
natural resources (Maddison, 1991: 48). It is as if there were an attempt to make us forget
that the entirety of political history has been built upon the quest for plunder and booty.
But we must not forget that fact, just as we should not forget the greatest injustice of all,
ever: the fact that over one quarter of the world’s population is, quite literally, starving to
death.

And if that is the way things have been until now, there is good reason to believe that in
the future it is only going to get worse. Of the different factors responsible for that
worsening of the situation, two deserve to be singled out: a) the depletion of resources,
and b) changes in the network of resources brought about by climate change. Let us
consider each in turn.

2.3. Resource depletion

This is not a new subject. Long ago, Malthus became famous for his dire forecast of
catastrophe if the world’s population continued to grow and the world’s resources got
used up. Much more recently, in 1972, the Massachussetts Institute of Technology
published its well-known report The limits to growth, and other reports along similar lines
have also been commissioned by the Club of Rome.

Nevertheless, the rich countries still maintain a level of consumption that is frankly
alarming and which just seems to carry on growing and growing. Even official entities admit
that to maintain in a balanced way the consumption of the developed countries would take
more than one whole planet. The trouble is that the world population keeps increasing,
and more and more countries are trying to follow our own terrible example in the way and
amount they consume, at the same time as many others in the world are starving. What will
happen if this carries on unabated?

As if that were not enough, we also need to do something about the fact that energy
sources are running out. Everyone knows and recognises that the energy system based on
fossil fuels has its days numbered, for its sources are near depletion just at the time when
energy consumption is sky-rocketing (Roberts, 2010).

The irresponsible response of mainstream economic historians is to laugh this off; they
quip that we have exhausted other energy sources before now and we are none the worse
for it. New technologies, they say, will surely come up with something and provide a way to
exploit new sources of energy. What is more, they argue, this is actually the motor and
stimulus that has historically driven economic growth forward (Cameron, 1998: 460;
Maddison, 1991: 49).

Such optimism seems to be unfounded. Perhaps the downfall of the economic system
will not come about, thanks to its mechanisms of regeneration, but surely the passage from
one phase to the next will not be smooth sailing. Even in the best of scenarios there will be
a traumatic rupture which will result in increased conflicts and suffering, especially for those
who always get it worst. Even some of those who proclaim themselves optimists are giving
 32

strident warnings of the need to transform the present energy system radically, and to start
doing so immediately (Roberts, 2010).

2.4. Climate change

Although we are still being told otherwise in some quarters, two things seem certain: a)
the earth’s climate system is getting warmer; b) human activity is the main cause of this
warming, in the shape of gas emissions (Dessler & Parson, 2009).

The exact repercussions to be expected from warming, the extent of those

repercussions and when this is all going to happen may remain unknown, of course, but
the Intergovernmental Panel on Climate Change (IPCC) has carried out estimates, and it is
talking about things like the melting of the ice caps and glaciers, a rise in the sea level,
doughts, widespread species extinctions, poor harvests and the shortage of drinking water
(Sinaï, 2009).

We do not yet know what will come of attempts to reduce gas emissions or how
climate change will develop in the future. But there is good reason for concern, and in any
case one thing is clear: its present and future effects will have a direct impact on the
availability of natural resources. We can expect changes in the distribution, quality,
frequency, form and equilibrium of basic resources as a result. Everything suggests that,
once more, the poorest parts of the world’s population will be the hardest hit. Some
specialists have gone so far as to predict “climate wars” unless urgent measures are taken
(Ramonet, 2011a).

2.5. Two problems that lie ahead:

ahead: energy and food

Thus it is not hard to see that if there have been upheavals centred around natural
resources throughout history, there may be even greater upheavals in coming years. As
much can be taken for granted, even if we accept the most optimistic estimates being
made.

Two resources of special concern are of course food and energy. First, a word about
energy. Practically everybody agrees that there is an energy crisis, but not everybody sees it
in the same way. While for some this is just a matter of some sources running out and
being replaced by new sources (which they fully trust scientists to discover), other people
are convinced that the fundamental issue here is not about science: for the answers that
new technologies may give will in any case certainly be partial and belated (Dessus, 2011).
The real problem is the exponential growth of energy consumption that is part and parcel
of the current system, to such a degree that some experts refer to the logic of capitalism as
energivorous (Harribey, 2009). So the real issue is not about new sources of energy, it is
about questioning the model of energy use itself (Barcena, 2004: 120); and that surely raises
doubts about the kind of society we want to have, lifestyles and patterns of consumption.

We now turn to the other big problem: food.

3. FOOD SOVEREIGNTY.
SOVEREIGNTY. A NEW ANSWER ON AN OLD ISSUE

3.1. Food and hunger

They say that Marx used to say that the stomach is the first lamp that needs to be oiled.
That is true. We can survive without telephones or cars, but not without eating. Hence the
 33

importance of natural resources that can be used to produce food; hence also the special
status of food-producing activity, which cannot be equated to or put on the same level as
any other kind of human activity.

If energy issues are such as to force us to focus on the structural problems in the
present system, that is at the very least equally true of food and the food industry. To start
with, the facts and figures about hunger in the world are atrocious and appalling. Thirty
million people die of hunger each year; according to the Food and Agriculture
Organisation (FAO), the number of undernourished people in the world has become
higher and higher since 1995, reaching 1,023 million in 2009, for example. That time-frame
coincides with the period of greatest growth around the world of neo-liberalism (Ordoñez,
2011). Yet the problem is not, principally, that there is not enough food in the world to go
round. In fact the food products that exist in the world would be sufficient to give every
inhabitant on the planet the 2,000 calories a day they need (Ramonet, 2011b). So the
inevitable questions must be asked: How is it that natural resources for the production of
food are unavailable to so many? How is the system of international relations organised
with regard to food? What is the role in this of the market? Is food just another
merchandise? Or is it a necessary means of fulfilling a fundamental human right?

3.2. The origin of the concept of food sovereignty

The term food sovereignty was coined by Via Campesina, an international peasant-
based organisation, and first used in a public debate in 1996 on the occasion of the World
Food Summit. The concept has subsequently appeared repeatedly in NGO fora held in
parallel with such FAO summits. Basically, in its initial formulation, it is a very simple
concept which refers to the right of peoples to define and develop their own farming and
food policies without being subject to dumping from other countries or states (La Via
Campesina, 2003).

In its origin, chiefly the concept was a bid to address a particular problem faced by
developing countries. Foodstuffs and farm products from rich countries are sent to
developing countries at prices below their production costs (a practice known as dumping)
on account of export subsidies provided by affluent states. The low prices destroy the poor
countries’ productive capacity: cultivation of their farmlands to produce food for the local
population ceases (a tragic irony) and instead the land is devoted to single-crop agriculture
aimed at selling some product or other on the international market while, all too often, the
local population is starving.

It is possible for this to happen because the system of the international food industry is
market-driven. The goal of agricultural and food policies is not to feed people, but
international trade, profit, with food as a mere merchandise.

The injustice of this is self-evident. So the main idea associated with the concept of
food sovereignty is that people have a right to defend themselves through the necessary
protectionist measures against all kinds of dumping where food imports are concerned (La
Via Campesina, 2003).

3.3. Extension of the concept. Relevance to both the South and the North

As we have seen, the concept of food sovereignty was originally closely linked to a
response to an urgent need of developing countries, but in fact from the very beginning it
had a vocation to achieve broader and more far-reaching applications.
 34

As the debates unfolded and documents were written, more sophisticated ideas and
additional elements were brought in: in connection with the idea of a right to take
protectionist measures against dumping, it was pointed out that farmers’ real problem was
the inaccessibility of local markets and that the priority for agriculture should not be to
produce for the international market but to feed the local population (La Via Campesina,
2003). Thus the concept of food sovereignty places the farmer and the consumer at the
heart of the debate. And it did something even more important: it made the concept
relevant to both the South and the North. For whether in the South or the North, it spelt
out the preference for local small-scale agriculture over industrial farming (La Via
Campesina, 2003). In this way food sovereignty became a flag that could be flown by both
poor and rich countries. To put it another way, the call for food sovereignty is not merely a
position we should adopt out of humanism and solidarity because we reject the damage
done to developing countries by the system of the worldwide food industry (which would
be a good enough reason), but because we also refuse to accept the harm it does directly
to us.

3.4. Small farm agriculture versus industrial farming

But why do we say that the system of the food industry is harmful to us? Why ought we
give preference in our own country to local family-run small farms over industrial farming
geared to the international market? Let us list the reasons:

a) Industrial farming not only uses up a lot of energy in production, but once produced,
the products will enter the worldwide market. That implies a massive need for (and
dependency on) transportation. Everyone knows that transportation is one of the biggest
culprits for global energy consumption; it is also the chief source of CO2 emissions
(Harribey, 2009). Local production linked to traditional farming methods requires less
energy, and because the place of consumption is closer to the place of production, the
issues relating to transportation are avoided by giving priority to local markets and short
distribution circuits.

b) Besides consuming energy, industrial farming is also wasteful of other resources

(such as water) and seriously damages other basic resources. Massive use of pesticides and
other chemicals causes pollution of the water and the land, which even reaches the sea.
Furthermore, intensive production and the focus on big profits leads to drastic
impoverishment of the land. Half of all cultivated land in the world today has been
degraded (Rap, 2008). In the opinion of some experts, the main ecological issue facing the
Spanish state is land loss due to erosion because of an insufficient content of organic
matter (Del Val, 2011). Traditional small farms do not use chemicals (or if they do, much less
of them); they do not engage in single-crop farming over huge areas, but usually raise a
variety of crops and work cyclically, for example by combining vegetable farming with
cattle raising and using organic fertilizers, thereby minimising the problem of land erosion.

c) Industrial farming is socially harmful, for it takes away jobs. We only need to look
around us to see how drastic the loss of traditional agricultural employment has been in
recent years; this is so obvious that we don’t even need to provide statistics. This is one of
the best-known consequences of the now-prevalent farming practices. The effect has been
so extreme that some have gone as far as to say that this newly imposed model amounts to
farming without farmers. And so it is. This new, modern kind of farming has no need for
farmers. Most manual labour is replaced by robots and machines, and the part that remains
is performed by farmworkers in conditions of dependency which come close to slavery, or
in the best of cases, brings about the proletarization of the traditional self-employed
farmer. This means in reality that the apparently self-employed farmers themselves no
longer make decisions concerning production: now it is the industry, buying the produce
 35

before it is made, which determines what will be produced, how, using what chemicals,
what will be fed to the animals and so on. Here at home this kind of cattle raising set in
long ago (Langreo, 1988), through a phenomenon that was called integration. Today the
severest form of integration has completely penetrated virtually every sector of farming.
Self-standing, small-scale farming is, in that sense, one of the key, central objectives of the
present farm union movement (Berhokoirigoin, 2010). This proletarization of farmers is a
phenomenon that has spread all over the world (Ordoñez, 2011).

d) The prevalent system of industrial agriculture does not feed people. As we have
already observed, it is a direct cause of hunger in many countries, besides which, in the so-
called developed world, it is responsible for another grave health-related issue. First of all
there is obesity and overweight, which affects 10% of the world’s population and is turning
into a pandemic linked to diabetes and heart disease (Ordoñez, 2011). Contrary to what is
widely believed, obesity is not a rich people’s problem since it comes from eating fattening
foods. The problem lies elsewhere: it has to do with the kind of diet promoted by the
present-day system of industrial farming, in which processed foods and animal derivatives
predominate which are full of all sorts of additives; actually it is not really about the food
but more about facilitating conservation, storage and transportation (Ordoñez, 2011). The
foods that make up this diet have a higher and higher percentage of animal products, less
and less fruit, vegetables or cereals. The animal source of the protein component has been
increased greatly by the industrial farming system, which apart from being a cause of
health issues in its own right is the source of other worrying consequences, since a much
larger area of land is needed to produce a given amount of animal protein than to create a
similar quantity of protein of vegetable origin (Aubert, 2008).

The health issues do not end at obesity. The next problem is pollution. The food
industry has filled the things we eat with chemicals and antibiotics, leading to worrisome
consequences for health (Brea, 2011), not to mention its use of some technologies in ways
that may be dangerous (e.g. genetic modification).

e) Lastly, the present system of industrial farming leaves us unprotected. It increases our
dependency on markets, thereby diminishing the authority of public institutions and
eroding the autonomy of developed countries. Since the fabric of the food-producing
capacity of first-world countries is also hit, the question may be asked: who are we being
fed by? By the markets that are controlled by the transnational companies?

3.5. Rising food prices

Food prices are determined by the international markets. Prices rose enormously
between 2005 and 2008, and in 2008 there were uprisings and protests over high food
prices in nearly forty countries. They have been called “the hunger revolts” (Ramonet,
2011c). More recently, far from improving, the situation has got even worse. In 2011, prices
broke a new world record (Ordoñez, 2011). The World Bank (which shares at least part of
the responsibility for this) has admitted that rising food prices drove about seventy million
people to extreme poverty between 2010 and 2011 alone (FAO, 2011). Quite a record!
Traditionally the food market has been a stable one, but according to the FAO’s own
forecast, fluctuations in that market will be permanent from now on (FAO, 2011).

So what are the reasons for the rises in food prices? To put it briefly four reasons can be
singled out (Ramonet, 2011c) and all four of them are clearly related to the model of the
present industrial agriculture system. Is that a coincidence? Here are the four reasons:
a) The standard of living in some countries (China, India, Brazil) has improved and their
eating habits are changing, leading to a considerable rise in the consumption of meat; thus
more cattle needs to be raised which means that more cereals need to be grown.
 36

b) Rising oil prices lead to rising transportation costs. Given that the present system of the
food industry has the whole world as its market, it is largely dependent on transportation.

c) A part of the entire production of foodstuffs (sugarcane, sunflower, rapeseed, wheat,

beets) is being produced to provide biofuels. This is a fairly new development. It is not true, as
has sometimes been suggested, that this is the only thing to blame for rising food prices, for
there are other more important reasons. However, this factor is not negligible. Many
developed countries are deciding that a substantial proportion of the hydrocarbons they
consume in the future will have to be biofuels. As a result of this, some countries that are short
of food have decided to produce biofuels instead of edible cereals (Ramonet, 2011c). This is
inadmissible. It is disgraceful that biofuel production should have to compete with food
production. Moreover, biofuels are a false alternative. Even by the best of estimates, they will
only ever satisfy a small fraction of the demand of present-day energy consumption. What is
more, the only way to cover the world demand for energy and food at the same time is
through deforestation. And last but not least, a system for producing biofuels on a large scale
(as is being done) requires the use of a great deal of energy in the process (i.e. oil), which
means continuing to emit greenhouse gases. That is why some people have said that as far as
biofuels are concerned the cure is worse than the sickness (Vilain, 2008). However, on the
other side of the coin, it needs to be said that on a small scale, for the individual small farm,
biofuels can provide a valid way to increase the energy autonomy of agricultural enterprises
(Berhokoirigoin, 2010; La Via Campesina, 2010).

d) Following the 2007 subprime mortgage crisis, financial speculation turned to raw
materials and foodstuffs including rice, maize, wheat and other products considered to be
“safe investments”. So speculators buy up financial derivatives from foods. A rather large
proportion of the rise in food prices is the direct result of such speculative trends (Ramonet,
2011c).

3.6. Land grabbing

Special mention must be made here of certain forms of speculation which consist of
buying up land, since speculators — some of them perfectly well known — view agricultural
lands all over the world as safe investments (Ramonet, 2011d; Liberti 2011). Not that they
are worried about being woken by a goat’s cough in the middle of the night! We are
talking here about pension funds in farm lands making investments worth thousands of
millions of dollars, many of them in poor countries. According to accusations by GRAIN
and other entities, such operations are acts of daylight robbery which hurt poor rural
communities in direct, tangible ways (Zubiria, 2011).

Purchases of agricultural land have escalated tremendously all over the world in recent
years. This goes beyond simple financial speculation; something is emerging that looks like
a new expression of the age-old warring over natural resources. The major actors in the
macabre story of this new phenomenon of taking over the lands of small farm holdings, or
land grabbing as it is called, are not limited to speculators and pension funds: they are
actual states. Which are the states who are buying up foreign lands? On the one hand, we
find some rich countries that lack productive land and water resources or their own such as
the Gulf states (Kuwait, Qatar and Saudi Arabia); then there are states with an excess of
currency such as South Korea, and particularly China, which needs to find a way to feed its
1,400 million inhabitants with only 7% of its own territory fertile land.

It is hardly surprising, then, that some people have started talking about agricultural
neocolonialism (Ramonet, 2011d; Liberti, 2011). The new context for the historical
contention for access to natural resources is extremely worrying. It leaves us in little doubt
that the fight for food will be one of the major battles of the twenty-first century.
 37

3.7. Espousing the demand for food sovereignty

Let us now go back to the initial meaning of food sovereignty. Every country should
have the right to defend itself against the dumping of imported food. But it is more than a
right, it is a duty. No country must be given the right to hurt the agricultural and food
economy of another country. This does not amount to a call for self-sufficiency or the
closing of borders. Each country has its special products which it may sell; but food security
is too high a stake to put it at risk by becoming dependent on imports.

Besides, it is high time the whole truth about protectionism were told and its fallacies
exposed. A serious examination of economic history shows that it is a myth and an outright
lie, an idea that is repeated to us again and again, which claims that periods of economic
success are linked to free trade, and that failure is associated with protectionism. The real
story demonstrates that practically the exact opposite is the case (Halami, 2009; Samary,
2005).

In the second place, the ability to have access to its natural resources should be
understood as one of a country’s rights. Land grabbing and comparable practices must be
resisted. Land, water, seeds, animal species, forests and the like belong to everyone;
access to these things should not be subject to markets or capitalist interests.

But as we mentioned above, the idea of food sovereignty and the fight for it is directly
valid for the countries of the North too. An important episode of that fight recently
occurred, in August 2011, in the Austrian town of Krems at the first European Forum for
Food Sovereignty, which brought together some four hundred representatives from 34
European states. The title of the Forum’s final declaration is eloquent enough: Food
Sovereignty in Europe Now (La Vía Campesina, 2011). Here are some of the relevant ideas
put forward in this declaration and in the forum’s proceedings:

– We call for food sovereignty in Europe.

– European production must be controlled.
– The basis of the European food system should be European agricultural production
through small-scale farming; Europe needs more small farms.
– The present food system must change: local products should be the basis of the
food system; seasonal products should be prioritised and fewer animal-derived
products should be consumed.
– Food processing and distribution structures should be decentralised, giving
preference to short, local circuits; health regulations should be gearerd to these local
structures.
– Social and working conditions throughout the food industry must be reappraised
and improved.
– There should be community control over common resources such as land, water,
seeds etc.
– Changes are needed in public policies that structure and regulate the food system
on local, national, European and global levels, de-legitimizing corporate control.
– The European Biofuels Directive should be abolished.
 38

4. LAST THOUGHTS:
THOUGHTS: THE MARKET, THE STATE AND US

In these lines we have tried to show the importance of the economic aspect of territory,
emphasising some of the so-called “natural resources” (namely, those associated with food
production); we have also attempted to piece together a criticism of the current system
taking food sovereignty as our central, guiding concept.

We have seen that this is not merely a formal notion but is full of material content; it is a
transforming, revolutionary idea. Furthermore, it is a concept with broad appeal, which may
serve as a model for the development of other ideas (we are thinking particularly of energy
sovereignty). Food sovereignty sees itself as a right of peoples. And those of us who think
of the issue of our collective identity in terms of Basque citizenship hold that we too are a
people.

In any case, it is not hard to see that food sovereignty, in the last resort, boils down to
general or political sovereignty, though it is no doubt something more than just a plain
expression of political sovereignty. It is taken for granted that sovereignty is an attribute of
a state. So the question is: is it possible to avail oneself of sovereignty outside the structure
or institution of the state? To begin to answer that, notice where the crux of the matter lies:
it is all about the rivalry and choice between economic power and political power; we take
the stand that there are some things that should not be subject to the dictatorship of the
markets.

That granted, perhaps we can all agree about one thing: the best chance we have
today to resist the omnipotence of the market and bring down its rule is to do so through
the state. For all its faults, it is hard to see what other tool could be stronger or more
effective.

Volumes have been spoken and written about the present crisis of the national state,
but for now at least there doesn’t seem to be any replacement for it on its way, anything
else that is able to wield true political power, either below the level of the state or above it.

Some highly respected contemporary thinkers have reminded us of the need for a
state. Pierre Bourdieu described the state as the primary collective institution capable of
counteracting the effects of the infernal machine that is the embodiment of the neoliberal
utopia; for the state is the “repository of all of the universal values associated with the idea
of the public realm” (Bourdieu, 2011). He goes on to observe with irony that if we are to
have any reasonable hope at all of resisting the new order that has been set up, it is only
because of the continued existence of state institutions. Bourdieu wrote these things in
1998. More recently, the renowned philosopher Slavoj Žižek has expressed similar views,
describing the state as a large-scale coordinating mechanism and reaffirming the necessity
of the state and its functionality (Žižek, 2011). Perhaps the time has come for Basques to
talk not only of nation-building but of state-building, and to get started on this construction
work which will serve a double purpose.

In his most recent essay, Joseba Sarrionandia tells us that, from one point of view, it is a
privilege for the Basques not to have a state. He reminds us of the negative side of the
state: it holds the monopoly over violence. He suggests that we should carry on building a
community while free from these bad things: an army, laws. police, borders and the rest of
it: we should build a Basque nation as a way to organise Basques’ freedom (Sarrionandia,
2010).

This proposal is not incompatible with the state-building defended here. Let us build
the good things that a state has, creating a political institution that serves as a
counterbalance in order to rein in the market and put a stop to its excesses. We can
 39

emulate or play-act a state. We are not quite strangers to this path: we already have
experience setting up para-state institutions, parallel institutions; we have some examples
to follow. Think of the short but fruitful process of Udalbiltza; or think of the fine example of
the Iparralde chamber of commerce. And then, we can create social networks, and they will
be the foundation for para-institutions and provide them with legitimization.

When we do these things, perhaps we will be building the Basque state, or perhaps we
shall be building something else. Maybe that won’t be terribly important. But one thing is
for sure: we will be taking steps towards our collective emancipation, steps towards a fairer
world for all. And that will have been worth the effort.
 40

REFERENCES

Aubert, C. (2008): “Hacia un cambio radical del modelo alimentario”, in Atlas Mediomabiental, Le
Monde Diplomatique en español, Valencia, 92-93.
Bárcena, I. (2004): “Energía, mercado y sostenibilidad: respuestas locales a responsabilidades
globales”, in I. Bárcena (ed.), Euskal Herria nora zoaz, Ekologistak Martxan, Bilbo, 119-141.
Berhokoirigoin, M. (2010): “Lurralde-antolaketa Ipar Euskal Herrian: Laborantza-ereduaren garrantzia”,
in J. Arbaiza & P. Lozano (eds.), Lurralde-antolamendua Euskal Herrian: gaur egungo egoera,
gatazkak eta erronkak, UEU, Bilbo, 191-200.
Bourdieu, P. (2011): “La esencia del neoliberalismo”, El Punto de Vista, 7, 11-15.
Brea, U. (2011): “Jatearen arriskua”, Argia, 2.286.
Cameron, R. (1998): Historia económica mundial, desde el paleolítico hasta el presente, Alianza
Universidad Textos, Madrid.
Del Val, A. (2011): “Elkarrizketa”, in Larrun, 155.
Dessler, A. E. & Parson, E. A. (2009): Klima-aldaketa globalaren zientzia eta politika. Eztabaidarako gida,
EHUpress, Bilbo.
Dessus, B. (2011): “La solución de la crisis energética no es tecnológica”, El Punto de Vista, 7, 34-37.
FAO (2011): Precios de los alimentos. De la crisis a la estabilidad, in FAO (<www.fao.org>, 2011-10-16).
Foreman-Peck, J. (1985): Historia económica mundial, Ariel, Barcelona.
Halami, S. et al. (2009): “Dossier: ¿Hay que temerle al proteccionismo?”, Le Monde Diplomatique en
español, 161.
Harribey, J-M. (2009): “Acabar con la lógica energívora del capitalismo”, El Atlas geopolítico 2010,
Akal/Fundación mondiplo, Valencia, 90-91.
Langreo, A. (1998): La situación del sector agrario en el sistema agroalimentario español. La agricultura
contractual, COAG-Informa, Madrid.
La Vía Campesina (2003): Qué es la soberanía alimentaria, in La Vía Campesina
(<www.viacampesina.org>, 2003-09-17).
––––––––––, (2010): Por una política agrícola y alimentaria común 2013 en el marco de la soberanía
alimentaria, in La Vía Campesina (<www.viacampesina.org>, 2010-02-18).
––––––––––, (2011): Declaración Nyéléni Europa: Por la soberanía alimentaria en Europa YA!, in La Vía
Campesina (<www.viacampesina.org>, 2011-08-22).
Liberti, S. (2011): “Elkarrizketa”, in Rebelion (<www.rebelion.org>, 2011-08-31).
Maddison, A. (1991): Historia del desarrollo capitalista. Sus fuerzas dinámicas, Ariel, Barcelona.
Ordóñez, F. (2011) El sistema agroalimentario capitalista no alimenta, in Rebelión (<www.rebelion.org>,
2011-05-08).
Ramonet, I. (2011a): “Ultimátum a la tierra”, in Quince años de resistencia y de ira, Le Monde
Diplomatique en español, Valencia, 191.
––––––––––, (2011b) “Estrategias sobre el hambre”, in Quince años de resistencia y de ira, Le Monde
Diplomatique en español, Valencia, 40.
––––––––––, (2011c): “Motines del hambre”, in Quince años de resistencia y de ira, Le Monde
Diplomatique en español, Valencia, 170.
––––––––––, (2011d): “Neocolonialismo agrario”, in Quince años de resistencia y de ira, Le Monde
Diplomatique en español, Valencia 179.
Rap, C. (2008): “Está degradada la mitad de los suelos cultivables”, in Atlas medioambiental, Le monde
diplomatique en español, Valencia, 16-17.
Roberts, P. (2010): El fin del petroleo, Diario Público.
Samary, C. (2005): “Detrás de los mitos del libre comercio”, in El Atlas, Le monde diplomatique en
español, Valencia, 90-91.
Sarrionandia, J. (2010): Moroak gara behelaino artean?, Pamiela, Iruñea.
Sinaï, A. (2009): “El momento crucial del antropoceno”, in El Atlas geopolítico 2010, Akal/Fundación
Mondiplo, Valencia, 88-89.
Vilain, L. (2008): “Agrocombustibles: ¿peor el remedio que la enfermedad?”, in Atlas medioambiental,
Le monde diplomatique en español, Valencia, 76-77.
Žižek, S. (2011): “Elkarrizketa”, in Berria, 2011-04-08.
Zubiria, P. (2011): “Zure pentsioa afrikarrei ostutako lurrek paga lezakete”, Argia, 2.285.
 41

3. Territory, function and the community and/or state.

state.

Jo s u L arri nag a Arz a, So ci o lo gis t, Univ ers ity o f th e B as que C o untry

Just like other living species, humans relate to their surroundings, and in so doing, classify
space into an area with which we are familiar and others areas that are unknown to us, or
where we may feel uncomfortable or awkward, or even think of them as places of the
enemy, and themselves our enemies. Whether a cave or an ‘intelligent building’, a palace
or a shelter under a bridge, there are spaces that we call ‘home’ and spaces we view as
‘foreign’. As members of a society we make great efforts to build our society and transform
our surroundings, adapting and reshaping nature to our needs. In that ongoing process,
countless cultures and civilizations throughout the history of humankind have succeeded at
times in creating structures that are sustainable and compatible with our fellow species and
with the land itself; in other cases, people have instead developed relationships of plunder
and destruction.
 42

INTRODUCTION

Like any other species, human beings relate to our surroundings; in so doing, we classify
spaces, distinguishing between the familiar and the unfamiliar where we may feel uneasy or
timid; whether a cave or an ‘intelligent building’, a palace or a shelter under a bridge, there
are spaces that we call ‘home’ and spaces we view as ‘foreign’. What humans do with
spaces, we also do with people: as social beings, we relate to them and classy them into
close family or distant family, friends and neighbours, people from our town or resident in
our area, and so on and so forth, with plenty of subtle subtypes in each of these categories.

All the classifications are relative: distinctions may or may not be made, and they can be
changed — in fact, we change them often; subcategories may be reclassified and the
categories themselves are not rigid but variable.

In our constant activity creating and recreating our society, human beings, who are
never happy with what we have done and are forever working, carrying on or starting all
over again in an unending quest for the elusive Good Life, transform our surroundings,
adapt or dominate nature (or tell ourselves that that is what we are doing), and build, tear
down and rebuild spaces. And we ceaselessly articulate, question and modify our social
relations in those spaces (often convincing ourselves that there are structures that
dominate us, in order to make ourselves feel more comfortable or else to perceive more
clearly and resist more easily the realities that we objectify). And because we do these
things, as the social beings that we are, out of “us-ness”, i.e. understanding the building of
our spatial world as a collective task, so we tend to try to define our land or our territory.
We have managed (and this we is extremely symbolic, we the human species throughout
history) to establish (more or less) harmonious or tolerable relations with other species that
inhabit a given territory, and with the land itself, in many cultures and civilisations which we
have known during human history in the course of this constant endeavour, and have
developed (more or less) rapacious and destructive relations in other cultures and
civilisations. Similarly, in organising relations among ourselves, our sense of hierarchy and
competition has driven us to establish authoritarian, indirect and even genocidal political,
economic and cultural forms of organisation, while our cooperative, mutually supportive
instinct has led us to set up democratic, direct and free forms of organisation (the reader
will notice that in this sentence there are a few more or lesses missing, which I might have
placed here and there between parenthesis as in the previous sentence).

In this article, I have immodestly taken it upon myself to attempt to discover the ideal
intersection between these two types of relation, asking how we Basques can organise a
democratic, direct and free social model on the territory we consider ours and call Euskal
Herria, and how we can articulate here a harmonious, bearable relationship with other
species and with the land itself. The more or lesses mentioned here are absolutely
necessary, and the concepts of Basques and Euskal Herria are contingent and arbitrary, as
arbitrary and contingent as any other ethnic identity, people, nation or state whose name
might have figured in their place. But that is what we are and that is the way we think of our
identity and our territory. True, it must be admitted that the boundaries of the land are
defined by us — arbitrarily and contingently — but since we cannot define and dominate
the land itself, we shall attempt to delve into the concept of Mother Earth — a slippery yet
prolific concept invented by the Basques of old.

And given that this is my goal, let it be said before I begin that I accept defeat: all the
attentive reader can hope to find in the lines that follow, if he or she is lucky, will be a few
modest thoughts on the subject. Beyond that it will be everybody’s job to grope our way
forward, by trial and error, hoping that we can manage to hand over to successive
generations a map that is at least as good as the one we received from those who came
before us.
 43

1. TERRITORY VERSUS FUNCTION

People often talk nowadays about participatory democracy, the need to improve
democracy or the shortcomings of democracy, and these questions have acquired special
significance in Euskal Herria on account of the particular situation it has been subjected to
in recent years. As anyone who lived through the period will recall, this issue started to be
discussed here in the eighties and nineties of the past century, and particularly in
connection with one very important affair: the strong opposition aroused, by a plan to build
a motorway connecting Irurtzun and Andoain, in the villages and the countryside it was
going to cut across. The protests grew into a broad movement with two fronts: for one
thing there was the negative aspect of the damages that would be suffered by the
inhabiatants in the area while obtaining no benefit from it (the building of the road, with the
ensuing noise, visual and physical pollution); but also, many were angry about the fact that
it meant destroying the Leitzaran valley, the last remaining, almost completely
unpopulated nature reserve in Gipuzkoa and Navarre. Many people voiced concern about
the native animal and plant species, even though it was not quite true to say that Leitzaran
was virgin land; but there was a wish to preserve the natural values and keep them alive for
the benefit and enjoyment of the local population.

Opposition to the project was articulatetd through different groups with diverse
feelings on the matter, and the eventual outcome of the struggle was bittersweet: bitter,
because from the very start the institutional response to this resistance was to reject and
deal heavy-handedly with the project’s opponents, through democratic authoritarianism
(arguing that the project had been decided on by parliament and declared of public
interest), and because eventually the armed organisation ETA decided to get involved in
the fight and this resulted in people dying, getting hurt and going to prison; and somewhat
sweet, because at last an agreement was struck between some of the institutions involved
and certain social movements, and in the end Leitzaran was left untouched. The motorway
was built, and for some ecologist groups this meant that they had lost their fight. The shock
waves from this story travelled far; but for our present purposes, the point is this: the
project in question was a “global” one (it made sense in a market that was becoming more
and more global, and was backed by all the institutions, on state, autonomous community
and local levels, who stood to benefit within logic of that market); whereas the opposition
was local: the people and their closest political representatives stood outside that logic and
defended their own right to discuss and decide on their own account something that
would have a big impact on the territory that they inhabited. But they also argued that
there are some values that benefit all human beings, such as the protection of nature,
biodiversity and respect for local cultures, and that they were also fighting to defend those
values against a project which, when all was said and done, would only benefit certain
individuals. Of the different groups that made up that opposition movement, the most
notable one was a grouping called Lurraldea [= “Territory”]. We are not here to pass
judgment on this organisation’s strategy and path of action, but only to point out that its
name reflected its nature in the clearest way possible. So here we have two kinds of
argument, two perspectives, in mutual confronatation:

– One of these viewpoints has been considered pro-development, but could also be
called modernist or globalist: this is the logic that loves progress and views history as an
advancing line that is only able either to move backwards (or stand still) or forwards;
thinks that the rate of progress has accelerated greatly and that any country should be
in touch with it, and that a town or a region can be left behind if it misses its chances;
believes that technology is more and more perfect and should be taken advantage of;
measures well-being chiefly in terms of economic growth and thinks that by generating
wealth, there will be more for everyone. For people who think and feel this way, space
is global and time, which moves faster and faster, must not be wasted. According to
Friedmann & Weaver (1981: 309), from the perspective of territorial organisation this
 44

logic would require planning of functional and spatial development which “emphasizes
localization of economic activities… From the perspective of the local economy,
decisions are made exogenously, by business companies which seek the best
localization, or else the state pursuing it own interests.”

– The other way of thinking has been called that of the ecologists, but also localist, and it
may be linked to nationalism, and recently to the alter-globalisation movement, while
some have labelled it as conservativism or anti-modernism. This current has been
belittled or dismissed in the West in modern history (which is naturally a modernist
history), and is therefore very much associated with terms beginning with anti- and
contra-. This point of view holds that people know what is best for themselves, what
lifestyle they want, and local identities play a large part in defining that. No impositions
from outside are acceptable and the speed of change is to be determined by the
people, locally. What is good in one place is good in another (provided the people in
each place agree), and the decisions of each place are to be respected. A connection
to nature is valued more than subordination to technology. The space of people who
adopt this perspective is local; time is glacial, i.e. moving extremely slowly whether
looking backwards (because it extols the achievements of one’s forefathers) or forwards
(because it thinks that the good of future generations should be taken into
consideration). To quote Friedmann & Weaver again, this is “territorial planning that
takes into account historically defined populations that live in specific places…
Therefore territorial planning is an endogenous activity. It seeks historical continuity and
aspires to a better life for all the inhabitants of a region… Its method is holistic,
complex, interdisciplinary” (1991: 328).

Here I have tried to profile two ideal types, and probably there is an ideal position
somewhere in between the two extremes at a point of balance (but balanced in which
direction?). We should recognise, however, that many a conflict that we have seen in our
country has consisted of a clash between those two viewpoints, where an argument has
arisen over how to articulate the relationship between people’s lifestyle and the land. To
mention a few cases that have had broad repercussions, there was the fight over the
nuclear power plant at Lemoiz; the Itoiz reservoir project; waste dumping in the River Ebro;
waste incinerator plants and large-scale port complexes in Bizkaia and Gipuzkoa; or the
high-speed rail project (the so-called Basque Y, the Navarre corridor and the Lapurdi
section). On the local level the list can be greatly lengthened with disputes over stone
quarries, refineries, power plants, factories that pollute the environment, and so on and so
forth. Wherever a project is announced, one can count on the emergence of an X Bizirik!
[“Keep (name-of-place-here) Alive!”] movement. This has become a habitual thing all over
our territory. On the positive side, it shows that the Basque population is active, involved
and alert, with an eye on public and collective concerns, and strongly committed to the
land and territory. On the negative side of the coin, it implies constant political
confrontation, a dynamic of imposition versus opposition, and zero-sum situations in which,
in order for us to win, they need to lose outright. Recent years have witnessed numerous
examples of taking this tendency to extreme consequences. Rather than consensus
building, a warring mentality has predominated: you win or you lose, with no
contemplation of a halfway outcome. If we ask whose fault this is, there will no doubt be
many competing assessments, but suffice it to say that our political culture in this sense is
very belligerent indeed. It is hard to find a space for consensus building here.

In many cases projects are eventually imposed but are always improved when there is
public opposition; sometimes they are stopped because the objectors carry the day; and
quite often there ensue public debates, referendums and compromise agreements. Some
outcomes are traumatic for many people, mostly when the imposition of a project is
successful and results in a degradation of democracy and peaceful coexistence. Pacted
solutions always result in someone’s interests being hurt, but most people tend to think
 45

that since there are concessions all rounds, the benefits for (almost) everybody are more
significant. The very act of seeking agreeent often serves to soften differences and re-
evaluate possible solutions.

I am not going to deny my own preference for the territorial perspective; I situate
myself within the parameters of the small is beautiful notion, so popular in the ecologist
camp; because I truly believe that on a small scale, in face-to-face situations, it is much
easier to achieve democracy and mutual agreement, and also because it is in practice
harder, within this scope, for those with hidden interests and ambitions of grandeur to
force their will on others. Democracy and justic coalesce in small-scale situations, where
discussion can take place and a synthesis achieved between equals. But this must then be
carried over to higher levels, building that democracy and that justice on a larger scale, and
there are theories and practical guidelines for achieving that. That is what I am going to talk
about here.

2. IN SEARCH OF SPATIAL JUSTICE

We owe the concept of spatial justice to the American urban planner Edward Soja (2008:
559-570). This idea links social justice with space: social justice needs to have a spatial
dimension built into it; spaces cannot be created in isolation; harmful infrastructures and
equipment cannot be accumulated in a specific space while other spaces lack these
completely. But although Soja’s proposal is somewhat modern, the same concern of
territorial planning has always been present, and the discipline flourished and evolved most
in the United States.

Interest in this subject goes back to the work of Lewis Munford, the anti-urban writer
who produced the best analysis of the phenomenon of the city and who was interested in
the development of rural spaces, which provides the link between his work with the
proposals of the sociologist Odum who, starting out from the perspective of the
economically backwards, underdeveloped situation of the American South, encouraged
regional planning. These ideas held sway in local and international debates throughout the
first five or six decades of the twentieth century, giving birth to the theoretical movement
or school known as regionalism. Following the Great Depression of 1929, Roosevelt’s
global policy initiative known as the New Deal aimed to reboot the American economy and
democracy from an quasi-social-democratic perspective. It was a goldern opportunity for
the regionalists to set up the Tennessee Valley Authority, an autonomous entity that
covering the rural district after which it is named, whose comprehensive, harmonious
development was its objective (Friedmann & Weaver, 1981: 33-131).

The regionalists’ hopes were swept away by the tide of capitalist economic growth, and
the fate of most of the water in the Tennessee River was eventually gathered in large-scale
reservoirs, or used to produce electric power and irrigate fields in single-crop farms.
Function was put first; the interests of the territory and its inhabitants, last. Nevertheless,
regionalism has survived as a theory and has even been born again, relabelled this time as
bioregionalism. The concepts of habitat and ecosystem are now emphasised, and the
bottom line is no longer development but nature conservation. Today, the perspective of
bioregionalism has a high profile, and not just in North America. It is being developed in
South America, principally these days in countries with left-wing governments; this is
unsurprising, considering the important place of indigenous people’s interests and social
movements for the protection of local natural resources in the makeup of many such
governments (Gudynas, 2002 eta McGinnis, 1999).1

1
The river valley concept continues to play an important role in the approach of bioregionalists to defining geographical limits with regard to
exploitation and political debate. This makes sense from a biological angle, but politically there has been a substantial change or
perspective: for instance, in our own case a large part of the Basque population, including the inhabitants of the metropolitan area of Bilbao
 46

The phenomenon of national liberation movements has been around since the sixties
of the last century and has had a particularly strong impact in the Basque Country. But at
that time there was a big debate going on in the Third (or Underdeveloped) World world
over endogenous growth. Some theorists, chiefly South Americans, developed the idea
that development and underdevelopment are two sides of the same coin; then certain
politicians, in Africa in particular, such as Julius Nyerere in Tanzania, endeavoured to show
that newly decolonised countries could achieve their own alternative road to development.
In all those projects popular participation was considered of fundamental importance but
the ideological perspective of the national liberation movements was excessively tied to
classical Marxism (which is by nature modernistic, pro-development and authoritarian), and
in practice those movements were very dependent on the Soviet Union. Those aspirations
came to grief on account of the international situation and the global success of capitalism,
but nonetheless they have left behind vestiges in the form of a number of experiences and
institutions of the alter-globalisation movement, particularly among those who opt for local
responses to capitalist globalisation. At present there are also dependencies and other
considerations brought about by economistic ideas about development and growth which
run counter to theories of degrowth, and a new model of the Good Life is emerging (see
Rist, 2002 or Silence Group, 2006).

But it is probable that in all these theories and initiatives, ranging from regionalism to
degrowth and everything in between, the main weakness lies in trying to work out precisely
how to incorporate people’s participation: when the leader grows tired, weak or corrupt, or
passes away, they evolve into authoritatian ideologies. Murray Bookchin’s (1998) libertarian
municipalism offers a fairly well-rounded proposal to overcome this chalenge. This
American anarchist developed a very elaborate model for how to make way from the
municipal level up through a system of participatory confederations involving provisional,
revokable representation. Other interesting and potentially realizable theories include
David Harvey’s utopian pradash (2003: 293-319) or Fotopoulos’ (2007) inclusive democracy,
which barely differ from each other.

Turning to practical experiments, in recent times there is the strategy of the Zapatistas
in Mexico. Having attempted somehow to revolutionize the classical revolutionary model
(having appeared to carry out an almost bloodless revolution the fame of which spread
beyond Chipas, they went on to try to spread their mass movement to the rest of Mexico
— and that is where things started to go wrong), they have remained strong on their own
native territory and appear to be making good progress with their own alternative silent
political organisation. Councils of Good Government, called caracols, are based on
discussion, and their discussions, in accordance with indigenous customs, often involve
sitting in silent reflection.

There was also an initiative worthy of mention here in the Basque Country a few years
ago, although it attracted little attention at the time. Occasionally ideas of this kind attain
influence or political power at the local level, as occurred in this case in the early 1990s in
the Navarrese valley of Aezkoa where, in a period when motions for self-determination
were being tabled in town councils throughout Euskal Herria, the Council of Orbaitze
issued the following statement of particular interest, although it is written in somewhat
radical and unpolished terms (Estebaranz, 2000: 40):

1. We, as free people, favour a configuration of free peoples, within an independent

Euskal Herria out of the reach of oppression from the Spanish and French states.
2. In addition to political independence for the Basque peoples, we call for
economic, social and individual independence, that is, complete independence.

and Gasteiz, get their drinking water from the Ebro river valley system; yet the Ebro river flows through territories of Castile, Euskal Herria,
Aragon and Catalonia.
 47

3. We oppose any kind of state, and declare the Assembly the single sovereign
organ of government; we opt for a Confederation of individuals, towns, valleys,
districts and regions over reunification; not centralization but self-government; not
a state but autonomy; not productivism but radical ecologism; no bureaucratic
elite, but an assembly.
4. We call on the people of the Basque Peoples in particular and to all towns and
peoples on the Earth in general to defend their autonomy and stand up for
complete independence.

In the present-day context of global economic crisis, the concept of communal work is
gaining a new impetus in Euskal Herria as it emerges in villages and neighbourhoods as a
power to improve reality; it is essential to have people’s participation or approval of the
idea before undertaking work (Gorostidi, 2011; Mitxeltorena, 2011). In a slightly more
technical sense this strategy is referred to as community development, and as such it is
reminiscent of communitarian proposals that have spread in academic circles in the United
States (Putnam, 2002; Etzioni, 1999). According to this perspective there is a need to aim
for, and win back, the structure of small communities; only in such a context can people
make sense of life and achieve full political participation (and it is a curious thing that while
the proposal of developing the community work model is today mainly defended in circles
of the Basque nationalist Left, it is nonetheless often considered a conservative trend by
theorists in political science).

The declaration of the Council of Aezkoa gave a central place to the figure of the
assembly, and it is well-known that such assemblies of neighbours played an important part
in local tradition; they have also acquired something of a mystical aura. In the towns and
valleys of Euskal Herria, as in any traditional European society, local assemblies,
committees or councils, depending on geographical scope, were formed to resolve issues
of local concern (Martínez Montoya, 1999: 79-84). But in the southern Basque Country, from
the sixteenth to the nineteenth centuries, through the operation of the legal regimes of the
fueros, regional assemblies and authorities represented a rival power of sorts, albeit a very
ambiguous one, to the governments of Castile or Spain with their imperial, centralist
aspirations. Today the fuero authorities (in the guise of provincial governments) play an
important part in our lives, with a powerful and highly autonomous system of financing
resulting from legislative pacts. The parliamentary structure underpinning this power is
extremely flimsy, especially in the case of the General Assemblies of Araba, Bizkaia and
Gipuzkoa: it is based on an inherently rather flawed form of representative democracy (for
example, the electoral districts reflect very poorly the present-day geographical
distribution of the population) and there are hardly any mechanisms in place for debate
and popular participation. Without standing by and waiting for the wonderful legal and
political frameworks that Euskal Herria will need to acquire in the future, there is plenty that
can be improved and much to be fought for day-by-day through the mechanisms of citizen
participation.

3. THE STATE AS A BRAND NEW SOCIAL MOVEMENT

But since the real purpose of this article is to explore ways for a hypothetical Basque state
to set up and maintain democratic and participatory procedures to deal with the questions
raised here, let us now address this question. First of all let it be said that the word state
itself suggests territory and precise territorial borders. Yet at the same time, when we
mention territoriality we are in a way already painting a picture of a periphery and a centre
(geopraphic or geopolitical) of that territory: is a state without a capital possible? Here the
ideas from confederalism, not to mention libertarian municipal trends, are all pertinent to
the issue, but we are unlikely to get away with sidestepping the core question: is it possible
to have a political power without devising, discussing, deciding, planning and
 48

implementing policies from a specific territory, and will not that place, or rather that
position, have a say in how territory is viewed, from the centre to the periphery, giving
territorial policies a particular twist? Is this not what always happens?

Every state has — indeed, must have, for what would it otherwise be? — the power to
define the good of its citizens. A democratic state must define that good in a horizontal,
participatory manner that does not entail oppressing minorities, but once defined, it must
be distributed with equality throughout the territory. That is the way general interest and
public interest are defined. And here is the rub. In developing territorial policies, in
particular when implementing infrastructures — especially lines of communication such as
railways, motorways, canals etc. but also others such as electrical energy production plants,
or waste and residue management centres — the general or public interest and local
interests can, and often will, come to loggerheads. The only position we can take on this is
the idea that such conflicts should be handled creatively and that the problem, even if not
solved, can be mitigated. The true general interest will appear when it conflicts with local
interests, it will arise from discussion and the exchange of ideas, and nobody will be
completely satisfied. We will have to return to this subject.

Recently there has been a worldwide tendency to reduce the domain of the state and
limit it to specific parameters on account of neoliberalism’s doctrine of globalisation: the
modern state is to be one that performs a policing function, does not stand in the way of
the free circulation of financial capital, and uses taxation and public works to channel
resources away from ordinary citizens into the hands of those with big economic interests.
The counter-current has come from the alter-globalisation movement, strongly influenced
by the writings of the Portuguese sociologist Boaventura de Sousa Santos, someone
closely connected to Brazilian social movements and the World Social Forum, whose
theses include one that is particularly pertinent to this discussion: that we must turn the
state into a brand-new2 social movement (2005: 311-338). Unfortunately he does not
develop the idea at length in his work (or we have not found or understood where he does
so), but he clearly has in mind, for example, the participation of open assemblies in
decisions on the town’s budget in Porto Alegre (Brazil) and in general the various political
intiatives set going there in areas governed by the Partido dos Trabalhadores. At the
present time when neoliberalism is endeavouring to reduce the structure of the state while
there are many people working in state bureaucracies who are affiliated to trade unions
and linked to left-wing ideologies, it is fairly easy to see how, when left-wing movements
take over, it would be easy for the state itself to become a motor for change, i.e. a brand
new social movement. This trend can be seen above all in some of the political processes
developing in various places in South America. The South American continent is one of the
areas where neoliberalism has managed to impose its political agenda in its crudest form,
and the state’s welfare and redistributive functions were relegated completely.

But citizen participation has become a great challenge today for anyone concerned
about the quality of democracy, and has often even become fashionable for many
politicians who wish to maintain or improve their political support, and technocrats seeking
to facilitate their administrative results. Likewise in the Basque Country there are a variety of
examples ranging from good pracices to the not so good, as well as some that are little
more than cosmetic (Blas & Martinez, 2008; Barcena & Encina, 2004).

But we also see examples in Euskal Herria of the state, or parts of the public
administration at least, using it as a social movement, such as in the creation (and truncated
life) of Udalbiltza. In that process one or more areas of the administration, those closest to the
public, were placed at the service of a movement to create a new political framework, taking
advantage of the legitimacy obtained through elections. A ruling of the Spanish Supreme
Court banning the Udalbiltza movement did not allow much time for this brand new social

2
The Spanish translators of Santos’ work, Diego Palacio and Javier Eraso, retain the term novísimo.
 49

movement to bear fruits, but even so we may observe, for our present purposes, some grave
design flaws in its short lifespan: an assembly of municipalities was created and from this there
was a leap to the appointment of a national council to which all the functions of
representation, work and responsibility were delegated. Thenceforth it was this cupula which
decided what was best for Euskal Herria and for any place in Euskal Herria, whether it be
Zuberoa or anywhere else. It may have been a beautiful dream squashed by the verdict of
Audiencia Nacional judge Baltasar Garzón; it was also, hoewever, a lost opportunity to learn
from our own mistakes.

4. THE TERRITORY OF COMMUNITIES

The time has come for us to sketch some tentative conclusions concerning the questions we
have discussed. In this period of all-round crisis, there exists in Euskal Herria a sound social
movement which views a Basque nation-state as the key to a way out from the crisis. Time will
tell whether there is going to be such an opportunity, and if so, whether or not the call for a
state is really part of the solution, but let us suggest what might be some ideas for building
direct relationships between people, territory and political power based upon equality in that
hypothetical new structure, or along the path leading towards it:

Community first.
first. Community means a group of people historically bound to a particular
territory which lives and works, regulates its coexistence and its relationship with the territory,
and constructs, deconstructs and reconstructs its own culture, and we might as well admit
straight away that it seems easer to visualise something fitting this description happening in
rural areas than in a city. The communitarian approach discussed above makes a political
offer and demand to find the characteristics of a community in any habitat. In the
economically uncertain future facing us today, it will be increasingly necessary to live in a
community, and that model may sprout up in any setting, urban or rural; is not the
cooperative system, after all, in some sense an application of the community concept to the
domain of a capitalist undertaking, whereby it is to be transformed in the process? Is it to be
all power to the community, then? It is more precise to say that all power receives its
legitimisation from the community, in a political architecture that is built, and legitimised,
from the bottom up. And decisions about the territory are always for the community of
people who live on that particular territory to make, including the power of veto. We have
seen that there are problems with this in some political areas, such as equipment that is
detrimental yet necessary, lines of communication and so on. As the opposite of veto, but in a
complementary sense, we have consensus. The big challenge is to achieve a consensus in a
direct, deliberative democracy, over and above voting and playing the majorities game. Time
tends to be the main enemy for such processes: from the viewpoint of modernity, history
marches on and whoever misses the train is lost — a metaphor often quoted in the face of
such difficult decisions. In our model there is all the time in the world to achieve a consensus;
if it isn’t possible today, there is always tomorrow. The key is not just to hold referendums or
give people a chance to make themselves heard. A cultural change is needed in the logic of
administration, that is, the dichotomic logic between the administrator (whether a politician or
a technocrat) and the administered. Most important of all is the tempo, the interplay of
rhythms and deadlines. Administration normally situates itself at the speed dictated by
economic considerations, whereas people who mean to resist follow a more relaxed pace
and may often get lost in administrative deadlines for objections, the more so, of course, if
they try to appeal through the law. The easygoing pace of the Zapatistas’ caracol may be
preferable to the high speed of capitalism. Here there is much to be learnt from the notions
of communal property that evolved in the past and are still maintained today. I am not
referring to property in public ownership, which actually means nowadays that the mayor and
 50

members of the council, or of the fuero authority, can use such property in practically any way
they see fit. But in many places in Euskal Herria, the communal management of forests is still
practised today, and that model is defended, for instance, for the exploitation of cultural
property (the term commons refers to material or immaterial community property) in the case
of social movements that have sprung up in connection with intellectual property. This does
not mean that private property is to be ruled out completely. In our tradition, land, house,
sibling and identity were closely linked concepts, which may be considered something
positive inasmuch as it has been useful, and will be again, for protection and maintenance of
the territory. And a number of concepts incorporated into our ancient legal frameworks (such
as retracto, which always gives prioritiy to the owner of an adjacent property when lands are
bought and sold) may play a positive, protective part favouring community ownership: as in
Zuberoa today, for instance, where lands and homes are placed on the international market
for the benefit of the wealthy.

Territory is the house that we share.

share. And we are tenants in it, and not the only ones.
The community is a group of people who have made their home on a specific territory, but
that doesn’t make the land ours. We are tenants in the house of Mother Earth, sharing our
habitat with other species. Therefore there are some decisions that are not ours to make,
because they do not affect us alone but also the generations who will come after us, not to
mention other living communities that are here at present or will be here in the future. So we
need to change our way of seeing things from an anthropocentric perspective to a biocentric
one. This is not easy, but it is a goal towards which we need to work today, and we must learn
to think in such terms. This is not just an idea for a handful of hard-core “deep ecologists”.
There is an interesting experiment going on in Bizkaia at present, inspired by UNESCO, that
is attempting to explore this avenue: it is called the Urdaibai Biosphere Reserve. The Urdaibai
Valley is a biosphere reserve on account of its ecological value, despite the fact that it is a
densely populated area, and should be exploited in accordance with criteria of sustainability,
under the supervision of a board of trustees in charge of the territory which includes local
municipal bodies, the provincial government and the Basque Government, but also active
members of the community such as trade unions and ecologist groups. This is an
arrangement that has often led to frustration and failure in the past given that the dark forces
of property speculation will not give up their grasp on such a lucrative territory without a fight,
but nobody denies that this is the way to go.

Saying no = a future for people.

people. In recent times, movements of resistance are
resurfacing in strength not only in Euskal Herria but all over the world, and fitting in quite
naturally in the renewed system of “anti-globalisation” movements. Time will tell whether this
amounts to a new political subject that is at the same time a subject of resistance and of
creation, both fighting and building as it designs a new world. One thing is certain: the effect
of such movements will be a new questioning of our concepts of “progress” and
“development” in the years to come.

And as other avenues are closed, so the strength of these subjects will be measured in
their capacity for resistance, perhaps for a long time to come. If the procedures for
deepening democracy discussed above are not implemented, people’s power will take the
form of saying no. But today, what is expressed in that resistance is the choice of global
democracy, the call for a juster world and the project to build it. People’s future will be
created by the accumulation of local losses, frustrations and victories. And in Euskal Herria, as
elsewhere, any political power that is created will often have to confront the power of saying
no. And if it knows how to feed of that, it will acquire legitimacy and strength.
 51

REFERENCES

Barcena, I. & Encina, J. (eds.) (2004): Democrácia ecológica: Formas y experiencias de participación en la
crísis ambiental, Unilco, Sevilla.
Blas, A. & Martínez, Z. (eds.) (2008): Poder político y participación, Eusko Jaurlaritza, Gasteiz.
Bookchin, M. & Biehl, J. (1998): Las políticas de la ecología social. Municipalismo libertario, Virus,
Barcelona.
Estebarantz, J. (ed.) (2000): El hilo negro de los noventa. Encuentros con la autonomía, Likiniano Elkartea,
Bilbo.
Etzioni, A. (1999): La nueva regla de oro: comunidad y moralidad en una sociedad democrática, Paidós,
Barcelona.
Fotopoulos, T. (2007): “¿Qué es la democracia incluyente?”, Archipiélago, 77- 77-78, 160-171.
Friedmann, J. & Weaver, C. (1981): Territorio y función, Instituto de Estudios de Administración Local,
Madrid.
Gorostidi, I. (2010): “Sormen nazionala: auzolana”, Berria, 2011-IX-20
(<http://paperekoa.berria.info/iritzia/2011-09-20/004/001/sormen_nazionala_auzolana.htm>).
Gudynas, E. (ed.) (2002): Regionalismo en el Cono Sur, Coscoroba Ediciones, Montevideo.
Harvey, D. (2003): Espacios de esperanza, Akal, Madrid.
McGinnis, M. V. (ed.) (1999): Bioregionalism, Routledge, London.
Martínez Montoya, J. (1999) “Estudios de Antropología sobre el medio rural”, Inguruak, 25, 67-90.
Mitxeltorena, J. (2011): Auzolanaren cultura, Txalaparta, Tafalla.
Putnam, R. D. (2002): Solo en la bolera: colapso y resurgimiento de la comunidad norteamericana, Galaxia
Gutenberg. Círculo de Lectores, Barcelona.
Rist, G. (2002): El desarrollo: historia de una creencia occidental, Los libros de la Catarata, Madrid.
Santos, B. de Sousa (2005): El milenio huérfano: ensayos para una nueva cultura política, Trotta, Madrid.
Soja, E. (2008): Post-metrópolis. Estudios críticos sobre las ciudades y las regiones, Traficantes de Sueños.
Madrid.
Silence, Colectivo (ed.) (2006): Objetivo Decrecimiento, Leqtor, Barcelona.
 52

4. How should Euskal Herria respond to the present

lack of political
political power over territorial organisation to
achieve democratic socioeconomic development?.
development?.

Alber t o Fr ias G i l, Me mber o f t he EG UZKI eco lo gis t gr o up

With globalisation and the removal of impediments to the mobility of capital, governments
are being left with fewer options for developing policies of income redistribution. Labour,
which is a less mobile productive factor, is the great loser and now bears the main fiscal
burden in order to maintain public spending on the creation of material conditions which,
in turn, accelerate the process.

The territorial model corresponding to this phase of capitalism is the metropolitan region.
In the present context, territorial organisation has been turned into an instrument
facilitating the decisions of international capital at the local level, at whose service it places
transport and telecommunications infrastructure and huge amounts of land at bargain
prices. This is an unsustainable model entailing vast increases in transportation needs and
energy consumption.

In the Basque Country, on account of the lack of decision-making power, the new ways of
handling territory are being blindly copied in blatant contradiction to the drive to achieve
democratic management of the country’s ecosystem.
 53

1. GLOBALISATION AND THE MOBILITY OF FACTORS

The term globalisation has become so popular, not just in economics but in every part of
life, that we find quaint uses of it, such as when the 2002 World Cup was described as el
mundial de la globalización because the four teams that reached the finals were all from
different continents. The way the term has been bandied about in the mass media is no
product of chance; the media are here fulfilling their mission of “fabricating a virtual reality
as a means of artificially constructing social reality” (Baudrillard, 1993).

Globalisation is not a term with a precise meaning: the same word may refer to an
objective reality, a direction of development in the economic system, and above all, a
certain ideology. Lest we turn economic policy into a self-sustaining mirage that invades
everything everywhere, or fall into the trap of adopting a reductionist interpretation of
economics that overlooks the social dimension or ignores the interaction between ecology
and politics, before entering into specific issues such as the function and size of a state or
the spatial repercussions of restructuring it will be advisable to establish a set of indicators
providing data about the integration of the economy into the international domain. The
indicators chosen for this purpose will be transport and communication, migration,
finances, trade and production.

– Transport and communication: one of the basic components of the globalisation

process is the fact that the world is shrinking in time and space as a result of the
development of physical infrastructure and communicative power, which allow the
flow of material goods and information at rates, intensities, volumes and low costs
unheard of in all the history of mankind, giving rise to a world that is not only more
global but smaller.

– Migration: unlike other periods of history when there were great migrations of work
forces, at the present time labour is the least mobile of the factors of production.
Between the sixteenth and the nineteenth centuries there was a slave trade between
Africa and the Americas; this was followed by a flow of workers from India and China
as seasonal labourers, while between 1815 and 1914 sixty million Europeans moved
to America or Australia. In the second half of the twentieth century migration
changed directions and the flow was now from the periphery to the centre,
whereupon laws started to be passed to block movement from impoverished
countries to those that had acquired wealth.

– Finance: what really drives globalisation forward is money; the growth of foreign
portfolio investments is greater than the growth of trade, direct foreign investment
and production. International money comes out of national currencies, their
convertibility and exchange rates. More than ever before, the relative prices of
currencies (i.e. exchange rates) are determined by financial factors more than by
elements originating from the real economy. Neither the profitability of money (i.e.
interest rates) nor the price of financial products show complete uniformity in the
world economy. Real interest rate parity is far from being ensured. What cannot be
denied is the spectacular growth of the international financial flow and the
diminishing regulatory capacity of governments and central banks.

– Trade: the relative proportion of foreign trade to domestic production may be lower
today than in the embryonic capitalism of the city-states (Lipietz, 1997). Analysis at
present should focus on obstacles to trade, the openness of markets and the
structure and types of business transactions. Customs duties are being lowered
today, but let us recall that the United States built its industry with help from ever
greater customs barriers, and that the open markets of the main developed
countries did not reach the level they had had in 1913 until the nineteen-seventies.
 54

– Production: Indeed, foreign investment did not reach the 1913 level until the
nineteen-nineties, and it is ceasing to be a necessary condition for transnational
business, as a result of the rise of strategic alliances or fusions and takeovers which
do not involve productive investment. Despite the high profile of transnational
companies in this domain, with a complex integration strategy combining
relationships within, and between, firms and complex networks, we should not forget
that these businesses only provide jobs for a small proportion of the world labour
market.

According to Ángel Martínez González-Tablas, most of the elements that make the
economic system work have their own globalisation story; the lack of uniformity is their
dominant characteristic. The present stage presents qualitative differences from earlier
ones, with new markets, new participants, new instruments, a less automatic regulatory
framework in a multipolar context and a spectacular growth of gross money flow.

As globalisation proceeds and mobility of capital, companies and workers grows, it will
become increasingly difficult for governments to implement a policy of income
redistribution. The winners in the globalisation race will be those who are the most mobile.

Mobility is thus becoming a basic factor in companies’ efficiency and competitivity, and
that of the richest and best qualified individuals who, thanks to globalisation, are able to
move their production to wherever the costs are lowest, who can place their capital in
places where the after-tax profits are highest, and sell their work in places where the
salaries after tax are best. Although most support a tax rise to compensate losers, the
“market”, i.e. the companies and financial institutions themselves, can evade these on
account of their mobility.
Since a government’s ability to pay for investments, consumption or devolution
depends on its ability to charge and collect taxes, the mobility of the factors of production,
which are basically what generates most of the public money collected, will make it more
and more difficult for states to sustain their spending.

“Manpower” is the factor of production that is least mobile on account of family ties,
culture and language, and it is consequently easier to tax. Thus governments have
managed to continue to increase their public spending but they have done this by moving
the centre of gravity of taxation from capital income to work income. The varying mobility
of these factors of production will determine the amount of tax paid.

Taxation will move progressively towards income from less mobile factors and assets,
semi-skilled and non-skilled human resources, real estate, medium and small businesses,
and towards spending rather than income, until such a time as either there is fiscal
harmonisation or a sharp reduction in taxation, hence in the ability of states and
governments to develop economic and social policy.

Meanwhile, there are increasing calls for greater protection and the public income of
states is falling; the growing tendency is for citizens to take responsibility for their own
finances, with the privatisation of the things covered by social security.

The scenario just described poses a contridiction between the need for more social
protection for globalisation’s losers and the fact that it is hard for states to come by the
resources needed to satisfy that need. The upshot of that contradiction, unless a solution is
found not only in economic but also in social terms, could turn out to be public rejection
for the current globalisation trend, with popular sentiment turning towards self-contained
economies.
 55

2. THE SPATIAL REPERCUSSIONS OF GLOBALISATION

The territorial model corresponding to advanced capitalism is the metropolitan region

(Harvey, 1977), the limits of which are nebulous. The metropolitan region implies a spatial
spreading-out so that it becomes harder and harder to establish a clear boundary between
rural and urban areas, with an ever greater dispersion of activities within the metropolitan
and regional area.

This spatial form seems to correspond to production characterised by greater

decentralisation of productive activity in space and a parallel concentration of the tertiary
sector, particularly with regard to advanced services and the financial sector, and by new
modalities of reproduction of the work force and daily life. This territorial model is marked by
a radical increase in transportation needs and energy consumption (Fernández Durán, 1993).

The vastness of present-day transportation networks has made it possible to organise

production transnationally in a process comparable to the development of information
systems whereby it is possible to control production from the centre of the system
practically in real time (Hobsbawm, 2000).

According to Ramón Fernández Durán, transport, telecommunications and energy are

the key elements of the present production and territorial model, as a result of changes in
the sphere of production and transformations in the domain of reproduction and daily life.

The exponential growth of the demand for vehicle mobility in relation to production is
driven by the decentralisation of certain industrial sectors or specific phases of production
which are farmed out to countries on the periphery, while the market for finished products
is in the centre. The “diffuse factory” and new production techniques based on the just in
time method seek to reduce stocks through knowledge of demand in order to reduce
storage costs and immobilised capital. Thus transport is converted into a key element in
the actual chain of production which extends beyond the factory, merging into transport as
just one more means of production (Kanzow, 1990).

Again, in reproducing the workforce and daily life, the breakup of the nuclear family
and the ensuing rise in the demand for housing and expansion of the urban belt, together
with an increase in buying power for self-standing houses, favour a greater suburbanisation
of growth. The separation between place of residence and workplace increases by virtue of
the dispersion of industrial employment in the periphery of metropolitan areas and the
growing concentration of the advanced tertiary sector in central areas, pushing residential
homes away from such districts.

Special relevance is also being acquired by new forms of commercial distribution,

hypermarkets in the outskirts of metropolitan areas that alter consumer patterns and
encourage the use of cars, as well as increasing commercialisation of leisure activities,
again linked to the use of motor vehicles for free-time mobility.

The metropolitan region has an increasingly diffuse, spatially segregated structure

which causes transportation to focus on the private vehicle since collective transport is
unable to handle the dispersity of this new expansion. This increase of motorised road
mobility in metropolitan regions is reflected on the spatial plane by the growing amount of
space dedicated to transport, which makes an impact on lifestyles and personal relations in
the post-Fordian metropolis.
 56

Alfonso Sanz (1990)3 says that 10% of medieval cities was taken up by thoroughfares,
which made it possible to pursue urban life through a multitude of functions and activities
that took place in the streets. With the development of nineteenth-century ensanches
[when old town centres were widened by building up new adjacent districts to accomodate
a growing population and new industrial activities - Translator’s Note], roads came to
occupy between 15% and 20% of urban space with a differentiation between carriageways
and sidewalks, such that vehicles now had a space of their own. In present-day
metropolitan regions, roads may take up as much as two-thirds of cities such as Los
Angeles, the area for vehicular traffic is absolutely specialised, no other activities or urban
functions are being allowed there, and it has turned into a single-function space: thereby
urban life becomes starker, losing its diversity and minimizing opportunities for contact
between people.

Advanced capitalism is defined by its hypermobility, with no questioning about the

difference between mobility and accessibility and without considering the external (social
and environmental) effects of continued expansion. The accelerating speed of life that
permits maximum fluidity and turnover of capital has become “the dark side of wealth”
(Benko, 1985).

Other key elements of the present model of production and territory, besides
transport, are telecommunications and information technology. These new technologies
permit the decentralisation of production and the centralisation of decision-making,
management and control, without which it would not be feasible to take advantage of the
relative benefits of the state of the employment market in the periphery, which can bring
about a very substantial cheapening of production costs together with centralising the
processes of capital accumulation.

According to Borja & Castells (1997)4, humankind is moving towards a world of

generalised urbanisation where even rural areas will form part of a system organised from
urban conglomerations. Two phenomena are thought to be responsible for the possible
disappearance of cities as a territorial form of social organisation: the IT revolution and the
globalisation of the economy and of communication.

The spatial repercussions of globalisation entail new forms of territorial management

based on flexible planning to adapt to changing economic conditions and making it
possible to respond to private interests focusing on particular parts of the city, within which
the specific project can influence the long-term plan which defines a city’s exact image.
Thus the legal framework of city planning is modified towards one that is less
interventionist and more flexible. However, this does not imply more participation in city
planning for a wide range of groups and social classes. Quite on the contrary, more pride
of place is given to technicalities, bureaucracy and increasingly hierarchical decision
structures, where there is no room for democratic mechanisms, while on the other hand,
the decision-making process over those spaces is becoming more and more open to
capital interests.

Certain areas of global cities undergo a profound restructuring, with planning able to
change at the drop of a penny in order to accommodate the project, normally for the
advanced tertiary sector but also sometimes for other proposals such as exhibition centres
or technology parks which require to be located in parts of the metropolitan region in
order to exercise their “command function”.

3
The EU transport sector accounts for 7% of the GDP, 7% of jobs, 40% of public investment and nearly a third of the total energy
consumption. The external socioeconomical “costs” of transport represent close to 5% of the GDP.

4
Borja & Castells (1997: 11-12) provide statistics that suggest widespread urbanisatio of the whole territory, but go further than that, implying
a radical change in the social function of the city as a result of the opportunities for the dissemination of information through telematics.
 57

These surgical operations on the urban fabric involve substantial investments that
cannot be covered by private capital alone because of the lack of profitability. New
instruments of management are created, and new means of controlling territory, in the
shape of half-public half-private bodies and corporations, in such a way that ultimately
these spaces can be managed by private interests. This is business management of urban
areas clothed in a discourse of ensuring the international competitivity of the metropolitan
region in order to attract investment.

To quote Keil & Leiser (1989): “Urban development is an instrument that is used in the
mediation between global and local structures. Its main task (that of the Corporation)
consists of facilitating the decisions of international capital at the local level.” It is not only
planning activity and metropolitan management that changes, but also the use that will be
made of public resources, by investing in transport and telecommunication systems. This
triggers off a crisis in local finance because of the increased functioning costs of all kinds on
account of the metropolitan regions.

3. THE METROPOLISATION OF TERRITORY: EUSKAL HIRIA

This is all being imitated in Euskal Herria, with the introduction of new forms of control over
territory. In Navarre, Iruñerria is taking shape as a metropolitan space centred around the
capital Pamplona (Iruñea in Basque), and spreading out from there clear across the whole
city valley, swallowing up former neighbourhoods or villages like Mendillorri, Etxabakoitz,
Barañain, Zizur, Villava, Burlada, Berriozar, Arre, Noain, Aizoain, Huarte, etc. as well as rural
districts with land of high agricultural value, generating high costs and a new need for
roads to handle traffic around the urban area (Alli, 2001). With different intensity but similar
results, the population of the northern Basque Country and practically all of its tertiary
sector are already concentrated along a coastal strip of Lapurdi, the so-called BAB cluster
which encompasses the towns of Bayonne, Anglet and Biarritz. In the meantime, there is an
attempt in Gipuzkoa to articulate a critical mass of 600,000 inhabitants to make up a
Basque Eurocity along a Bayonne-Donostia axis, seeking to achieve “the multiplying effect
of the eurocity as a mid-range European city.”5

Meanwhile, metropolitan Bilbao is being called on to play a central role in the

“Polynuclear Basque System of Capitals”, to which end there are projects underway such
as the “Basque Y” high speel rail network and the Guggenheim Museum, destined to
excercise command functions. Special mention should be made here, given the special
administrative nature of the Basque Autonomous Community with regard to the
diputaciones forales or provincial governments, the cut-throat rivalry in the race for
competitivity between the so-called historical territories (giving rise to such anomalies as
five airports within a short distance of each other and several convention centres without
any specialisation in what they offer, the Kursaal, Europa and Euskalduna). The risks of this
policy are obvious: “a poorly-understood particularism can generate excessive and
destructive competition between towns and regions.”6

Others, such as José Allende (2000), warn of the dangers of mimicking on the local level
this centralising process, on the false premise of the “power of cities”, by promoting
megacities, great metropolitan areas, in an attempt to replace nation-states with city-
states, which would tend to favour abandonment of the countryside and concentration of
the population and, particularly, of power in the great cities. Returning to the polarised
territorial model, city-states could mimic the centralist nation-state but from a position

5
Libro Blanco de la Eurociudad Bayonne-San Sebastián, June 2000. Synthesis document of debate. Interreg, European Commission.

6
Borja & Castells (1997: 19) trust that rather than sterile competition there will arise networks of constructive cooperation between cities and
regions.
 58

which, unlike the diffuse territorial model, would favour uniformity and de-ideologisation of
citizens, and in consequence would serve the purposes of the de facto economic and
financial powers-that-be following globalisation.

Paradoxically the future expectations for all this are the very factors that contribute
most to its unsustainability. This is especially so in a scenario where, after the crisis of
Fordism and Fordist city planning, the market and its mechanisms have been reintroduced
as the determining factor that decides how land should be used and in consequence
loosening up the rules of city planning. The instruments of formal planning opt for flexible
coordination rather than strict planning, offering general guidelines but not binding
regulations which might at least attenuate the effects of supply and demand, thus limiting
the role of public functions to setting up a framework where private initiative can proceed
as it pleases.

It would seem that the basic characteristics of the new city planning are as follows:
flexible planning to adapt to changing economic conditions, a planning crisis with the
long-term plan being replaced by the specific project, advanced tertiary sector projects
with a command function (including exhibition halls, technology parks, showcase museums
and so on), a non-interventionist legal framework giving free play to trends towards de-
regulation, abundant investments of public capital managed by mixed companies with
commercial management of urban spaces, and the crisis of local finance because of the
increase in the functioning costs of these metropolitan areas.

The general idea is to convert city development into an instrument facilitating the
decisions of international capital on the local level, putting transportation infrastructure,
telecommunications and vast amounts of land at its disposal at bargain prices.

As a result of its uncritical approval of the metropolisation of territory, Euskal Herria is

presenting itself in the twenty-first century as a country in open contradiction to many of
the underlying principles of the European Union’s Green Paper on the Urban Environment.
The picture that emerges from the abandoning the notion of a compact city, upheld until
now, and opting instead for dispersed expansion of low-density residential areas together
with a proliferation of large shopping centres and leisure areas, is a recipe for growing
urban unsustainability.

The model of extensive city development being espoused at present is unsustainable

because it implies a rapid increase in absolute and relative surface area (the space
occupied per inhabitant) without a corresponding population increase of similar intensity,
the expansion of arterial metropolitan and inter-city networks, the increase in the distance
between places of residence and places of work, diminishing use of public transport on
account of its loss of efficiency in rural suburbs, replacement of the town centre or the
marketplace as a meeting place by scatterred, large-scale shopping centres, the
emergence of peripheral commuter towns, the disappearance of goodneighbourly
relations and the degradation of social cohesion, and the increased consumption of
resources and generation of waste.

4. THE ECOLOGICAL FOOTPRINT OF CITIES

The ecological footprint is an environmental indicator that integrates the impact on its
surroundings of a given human community (a country, region or city), taking into
consideration both the resources needed and the waste generated, on the premise of
maintenance of the community’s present level of production and consumption.
 59

The creators of this concept, William Rees and Mathis Wackernagel, defined it as:7
The area of ecologically productive land (cropland, grazing land, forests or
aquatic ecosystem) required to produce the resources used, and to assimilate
the wastes produced, by a defined population at a specified material
standard of living indefinitely, wherever that land may be located.

The approach to calculating ecological footprint takes the following things into
consideration:

– To produce anything, regardless of the type of technology used, we need a flow of

materials and energy which is ultimately produced by ecological systems.
– We need ecological systems to absorb the waste generated in the production
process and use of the final product.
– We occupy space with infrastructure, living space, equipment etc., thereby reducing
the surface available for productive ecosystems.

The process of progressively concentrating the population in urban systems and

globalisation of the flow of materials and energy makes it increasingly difficult for the
population to associate its consumption of goods and energy with their impact on the
environment. The ecological footprint allows us to define and visualise the dependence of
human societies on the functioning of the planet’s ecosystems based on appropriate
surface areas to satisfy a given level of consumption. It thus allows us to establish the real
productive area that a given human community is appropriating ecologically, whether
located inside or outside its own territory, thus also distinguishing between the different
ecological functions of ecosystems.

“The battle for sustainability will be won or lost in the cities,” said Maurice Strong,
secretary general of the Earth Summit in Rio, in 1992. Cities house 45% of the human
population but their ecological weight comes not just from geographical proportions but
also from ever higher standards of consumption by people in cities. The ecological
footprints of industrial cities are a hundred or two hundred times those city’s surface areas,
and this leads to the liquidation of natural capital.

A United Nations report called Our Common Future8 broached the subject of shared
responsibility (1987:27): “The Earth is one but the world is not. We all depend on one
biosphere for sustaining our lives. Yet each community, each country, strives for survival
and prosperity with little regard for its impact on others. Some consume the Earth's
resources at a rate that would leave little for future generations. Others, many more in
number, consume far too little and live with the prospect of hunger, squalor, disease, and
early death.”

The Aalborg Charter makes a similar point: “We have learnt that present levels of
resource consumption in the industrialised countries cannot be achieved by all people
currently living, much less by future generations, without destroying the natural capital.”
Economic activity depends on that natural capital: the idea of sustainability arises from
recognition of the inequitable, undemocratic nature of current development models.

According to Mathis Wackernagel (1996), most cities are increasingly incapable of

responding satisfactorily to population growth and the resulting needs. “Local symptoms
are traffic congestion, pollution, poor quality housing in short supply, social fragmentation,
noise, rising crime rates, violence and inadequate public services.”

7
Ecological footprint is calculated in a way based fundamentally on the writings of the creators of this index, Willilam Rees and Mathis
Wackernagel, using both their initial theoretical definition as given in Our ecological Footprint (1996), and their subsequent applications of
this at the level of the state in Ecological Footprints of Nations (1997), the municipality in The Ecological Footprint of Santiago de Chile
(1998), and the region in Evaluating the use of natural capital with the Ecological footprint. Applications in Sweden and subregions (1999).

8
Our Common Future, 1987 report of the World Commission on Environment and Development (WCED) of the United Nations.
 60

The increase in cities’ ecological needs correlates with the planet’s falling ecological
productivity. The challenge is to achieve people’s welfare within the limits of the
ecologically feasible. The European Union’s 1994 report European Sustainable Citites
proposes five basic strategies:

– sustainable city planning which favours high-density nuclei with access to public
transport
– implementation of an integrated transport strategy favouring public transport and non-
motorised forms of transportation, with safety improvements for cyclists and
pedestrians
– efficient management of the flow of energy and material, including waste, water,
infrastructure etc.
– the setting of environmental and social objectives and standards
– the dissemination of environmental information.

Sustainable city planning can only begin when the main actors are motivated, and the
fact that a good part of the urban population lead lives that are isolated from ecological
productivity is a serious obstacle to this. The only way we will be able to make progress
towards sustainability is through a sense of the loss of ecological productivity as a
degradation of human well-being.9

Motorised ultra-mobility tends to break down people’s affection for the natural and
social surroundings in which they live and to wear down the democratic sense of
community, with the result that one’s living space becomes less and less identified with the
place where one actually lives (i.e. spends the night). This situation leads to a growing
polarisation of the community between those who have more of an opportunity to choose
their place of residence and work, who have no trouble moving around by car or plane;
and those others, whether they be classes, genders or age groups, whose means of
transport is basically their feet or public transport, whose daily activities are situated near
where they live.

People only share space with their equals.10 They no longer tend to identify much with
the place where they are and the people they are with, and this reveals the close
connection between the breakdown of social cohesion and a deteriorating environment in
the context of the segregating tendencies of people and metropolitan space brought
about by dispersed conurbations.

The unsustainability of processes of metropolisation and their economic, social and

environmental consequences need to be addressed from several side; among them, one is
emerging called Local Agenda 21, a vigorous movement of cities and towns defending
sustainability. The point of departure for this movement is Chapter 28 of the document of
Agenda 21, a programme for the twenty-first century approved by the Rio Earth Summit in
1992 (M. Keating, 1996):
Many of the problems and solutions listed in Agenda 21 have their roots in local activities, so local
authorities have a key role to play in making sustainable development happen. Local authorities,
such as municipal governments, build and maintain such structures as drinking water systems and
roads. They oversee the planning of housing and industrial development, set local environmental
policies and help to implement national environmental policies. (Agenda 21, chapter 28.1, “Local
Authorities”, 1992).

9
Also known as the boiling frog effect, according to the belief that frogs placed in a pot of water over a small flame will be unaware of the
gradual yet eventually fatal rise in the water’s temperature (Ornstein & Ehrlich, 1989).

10
In La ciudad caleidoscópica, Pedro Abramo carries out a study of Rio de Janeiro, famous for its shanty towns or favelas, while also
discussing other examples of social fragmentation and stratification in cities, such as Paris and the regeneration of the La Bastille district.
 61

Similarly, the Aalborg Charter notes that 80% of the European population live in urban
areas, and goes on to observe:
“Local government is close to where environmental problems are perceived and closest to the
citizens and shares responsibility with governments at all levels for the well-being of humankind
and nature. Therefore, cities and towns are key players in the process of changing lifestyles,
production, consumption and spatial patterns.” (Carta de Aalborg, Chapter I.1, “The role of
European cities”, 1994)

Unfortunately, the proliferation of international charters and treaties concerning the

environment has not so far served to improve the situation; the metropolitan explosion of
our cities pushes on, and in so doing pushes us further and further towards the brink of
unsustainability; if our cities today are ecologically unsustainable, the suburban stretches
arising from the process of dispersed conurbation are much worse even. The residential
wave of the last twenty years has greatly increased the consumption of all kinds of
resources, from energy and water to groundspace and materials, generating waste and
polluting both the local environment and the world’s atmosphere. The model that has
been established in metropolitan areas is much more inefficient in its use of natural
resources, and is far less fair socially, than the model of the compact city.

5. THE DISTRIBUTION OF POWERS IN TERRITORIAL PLANNING IN EUSKAL HERRIA

Article 148.1.3 of Spain’s 1978 constitution states that the autonomous communities “may
assume competences over… town and country planning and housing”.

Given that Article 149, which lists competences attributed exclusive to the State, does
not include territorial planning in the list, and given that the Statute of Autonomy of the
Basque Country says, in Article 10.31, that “the Autonomous Community of the Basque
Country has sole jurisdiction [over] planning of inland territory and coastline, town planning
and housing”, one might be forgiven for assuming that the upshot of these clauses would
be that the Autonomous Community has power over this. The same might also be said of
the Autonomous Community of Navarre.

Both of these legal texts allude to exclusive powers (or “competences”), which seems
to mean that the autonomous communities in question are competent in all functions,
whether legislative or executive, relating to territorial planning. However, it turns out that
there are other exclusive competences of the Spanish state that relate to the same physical
space, and this gives rise to conflicting claims which can limit the exclusivity of the powers
initially referred to.

Another shortcoming of these provisions is that neither of the constitutional documents

concerned provides any indication of how territorial planning is to be defined or delimited
conceptually; they merely list items, while leaving plenty of room for uncertainty about the
actual content to be attributed to the constitutional expression territorial planning, and
hence also about what any such powers really consist of.

Take for instance Article 148 of the Spanish Constitution, from which we have already
quoted. The article presents an itemized list, item 3 of which is “town and country planning
and housing”, while item 4 is “public works of interest to the Autonomous Community,
within its own territory”, item 5 covers “railways and roads whose routes lie exclusively
within the territory of the Autonomous Community”, item 6 is “ports of haven, recreational
ports and airports and, in general, those which are not engaged in commercial activities”,
item 7 is “agriculture and livestock raising, in accordance with general economic planning”,
 62

item 8 is “woodlands and forestry”, item 9 is “management of environmental protection”,

item 10 includes “planning, construction and exploitation of hydraulic projects, canals and
irrigation of interest to the Autonomous Community”, item 13 is “promotion of economic
development of the Autonomous Community within the objectives set by national
economic policy”, item 16 is “the Autonomous Community’s monuments of interest”,
while item 18 is “the promotion and planning of tourism within its territorial area.”

Now it is important to note that the constitution has nothing at all to say about any
possible state-level territorial planning, and that silence led, in the period following the
passing of the constitution, to legislation in different areas, such as water, coasts, nature
conservation, railways, historical and artistic heritage, and so on and so forth, resulting in a
dispersal of the laws and regulations covering a subject which, by definition, should be
encompassed as a single area and which affects policy in the Autonomous Communities
given that they are obliged to incorporate the Spanish legal specifications into their own
planning policies.

This being the case, Spain’s constitutional court and legal doctrine have made it
abundantly clear that the supposed “exclusive competence” of the Autonomous
Communities is in realisty a fiction, and there is really no such thing: at the very best,
territorial planning is a shared competence, in spite of the fact that a superficial reading of
the legal texts appears to suggest otherwise.

A ruling of the constitutional court on the 13th of May, 1986 established categorically
the capacity of the state administration to impose its projects upon an autonomous
community’s territory in any matter that comes under its jurisdiction. What is more, even
though it is established that there must exist exceptional reasons justifying this, the
exceptional character of such cases is normally turned into a general rule, as we have seen
to be the case in the sectorialisation of territorial planning.

Even in instances where, in principle, there is no conflict over jurisdiction, and therefore
no reason to invoke arguments of exceptionality, there exist numerous sectorial policies
that have been decided at the state level which, according to a range of legal provisions
and supported in some cases, as we have seen, by court rulings, override formal
instruments of territorial planning. Cases in point include the General Road Plan (Plan
General de Carreteras), which according to the Fourth Additional Provision of Law 4/1990
on Territorial Planning in the Basque Country simply overrides territorial planning policies;
the Water Plan which states, in Article 41, that Hydrological Plans may reserve areas of land
for action that is foreseen, making it very clear that this has to be respected by any and all
organs of territorial planning; and the Law of Protected Natural Spaces which says that
plans for natural resource planning take precedence over any other plans.

These facts serve to drive home our point in this chapter, which is to question the
effectiveness of the framework for territorial planning within the current administrative
arrangement in Euskal Herria in terms of how much power the Basque administration really
has to administer its own territory in practice, not just in theory, and to make its own
decisions when these conflict with the wishes of organs of the Spanish state or economic
interests.

One thing is clear: Basques do not have political power of their own over the planning
of their territory in any of the administrative areas into which Euskal Herria is divided at
present, and that fact has direct consequences regarding the ability to decide our own
future.
 63

REFERENCES

Allende, J. (1995): “El Desarrollo Sostenible desde la Ordenación del Territorio“, Economía y Sociedad,
12, Madrid.
––––––––––, (2000): Medio ambiente, ordenación del territorio y sostenibilidad, Unión Iberoamericana
de Municipalistas and the University of the Basque Country’s Publications Service.
Alli Turrillas, J.C. (2001): ”El dilema de Pamplona: reurbanizar su casco urbano o urbanizar su cuenca”,
Trabajos sobre ordenación y gestión del territorio de Euskal Herria I, Eusko Ikaskuntza,
Cuadernos de ciencias sociales y económicas, Azkoaga, 8.
Borja, J. & Castells, M. (1997): Local y global. La gestión de las ciudades en la era de la información,
Editorial Taurus, Madrid.
Castells, M. (1997): La era de la información, vols. I, II and III, Alianza Editorial, Madrid.
European Union: Green paper on the urban environment. Communication from the European
Commission in July, 1990 (COM(90)218final: 30).
Fernández Buey, F. & Riechmann, J. (1996): Ni tribunos. Ideas y materiales para un programa
ecosocialista, Siglo XXI de España editores, Madrid.
Fernández Durán, R. (1993): La explosión del desorden, Editorial Fundamentos, Madrid.
Hobsbawm, Eric J. (2000): “Pequeño mundo global”, Hika, November 2000.
Lasagabaster, I. & Lazcano, I. (1999): Régimen Jurídico de la Ordenación del Territorio en Euskalherria,
Instituto Vasco de Administración Pública, Oñati.
Martínez González-Tablas, A. (2000): Economía política de la globalización, Editorial Ariel, Barcelona.
Mendizabal, A. (1998): La globalización. Perspectivas desde Euskal Herria, HIRU, Hondarribia.
Todd, E. (1998): L'illusion économique. Essai sur la stagnation des sociétés développées, Éditions
Gallimard, Paris.
Vázquez Barquero, A. (1999): “Globalización, dinámica económica y desarrollo urbano“, Papeles de
Economía Española, 80.
Wackernagel, M. (1996): “¿Ciudades sostenibles?”, Ecología Política, 12.
Zurbano, M. & Zabalo, P. (1998): “Globalización, estado-nación y soberanía económica“, in Soberanía
económica y globalización en Euskal Herria, Manu Robles-Arangiz Fundazioa, Bilbo.
 64

The Basque State

and Socioeconomics
Txomin Lorca Alcala
Xabier Isasi Balantzategi
Asier Otxoa de Retana Simon
Nekane Jurado Pérez
Antón Borja Alvarez
Ekai Center
Antxon Mendizabal Etxabe
Aitor Bengoetxea Alkorta
Francisco Letamendia Belzunce
Iñaki Gil de San Vicente Larrañaga
 65

Introduction

Txo min L o rc a Al cal a, M e mber o f th e L AB trad e u ni o n

Without a doubt, the area of economics and labour relations is fundamental in the building
of a state. From this perspective it needs to be borne in mind that the economy cannot be
understood without comprehending the relations of power that are created in the
organisation of collective production. Also, it is essential to understand the consequences
of those power relations in the area of production and in the political-institutional area that
gives support to that area.

Thus when we talk about what is produced, who produces it and how, we are not just
talking about economics but rather economic policy. The only people who attempt to
distinguish between economy and policy are those with special interests lurking behind the
economy. They try to present economics to us as if it were an objective science, without
any mention of the conflicts resulting from the ownership of the means of production.

Economic policy determines both the organisation and the perpetuation of a country's
economic system. Hence the organisation of any economic system requires an ability to
make decisions to organise it; it therefore also requires that institutional instruments be
acquired that make it possible to influence economic planning effectively. The highest
expression of viability of a self-governing socioeconomic project is the building of one's
own state.

The authors of the chapters that follow develop this viewpoint by discussing the
construction of a Basque state from a socioeconomic perspective.

They also take into account the present context of economic crisis in their discussion;
this crisis is creating ever greater contradictions and tensions between the production of
surplus value and the owenership and management of that surplus, and at the same time
also between the concentration of political power and the management of social needs.
Thus the study aims to place the possibility of Euskal Herria getting its own state in the here
and now: that is, in the context of the construction of Europe (the here) and of the present
economic crisis (the now).

When talking about the present economic crisis there is a generally shared opinion that
this crisis is no ordinary crisis, because it transcends economic bounds and directly impacts
on politics, the economy and society. We are confronted with a crisis with a systemic
character, one which without any doubt is shaking the very pillars of the present
developmental model.

As Nekane Jurado says, this crisis has been surrounded by a fuzzy thing called "the
market", whose real purpose is to conceal the interests at play behind it all while providing
a perfect excuse for institutions to sidestep their responsibility to manage the crisis
adequately.

It would not be difficult to show today that a measure of the crisis facing the Spanish
state is the drastic, unfortunate way in which it is forcing its effects on the Basque economy,
precisely on account of our subordination to Spanish economic policy; for it is clear that our
businesses, our production and social networks and our institutions are being hurt by the
world standing of the Spanish economy, and by decisions forced upon us in matters of
economy and employment by the Spanish and French states.
 66

However, it is not our intention to make of the "failed state" argument our main
grounds as a facile disqualification to justify the need for a Basque state — i.e. that Spain is
a state that has "failed" because it was based on the negation of the national identity of its
component peoples. As Xabier Isasi says, with or without the economic crisis, Euskal Herria
could, without any difficulty, be a member state of the EU given that it is both as
developed and as competitive economically as any other state of a similar size. No: the
impediments to Euskal Herria becoming the 28th state of the EU are historical and, above
all, political.

The argument appealing to the out-of-date nature of present-day states in the

international context — for they present themselves as political structures of a kind that is
already outmoded, and the argument based on the economical viability of countries that
wish to be European states today, are arguments hurled at us out of self-interest, in the
manner of grenades, by states which have a stake of their own in stopping other oppressed
national groups from achieving statehood.

In this regard Iñaki Gil de San Vicente says that it is a strategic error for the Left to
accept, with hardly any theoretical resistance, the thesis that states have stopped being
necessary for peoples and that cosmopolitan ideas about "world citizenship" should be
preferred, presenting world democratic "governance" as an alternative; such a supposed
alternative translates, in fact, into global imposition of the economic superpowers. Also
interesting is Francisco Letamendia's study of post-Fordism, which suggests that the
present situation presents an opportunity to open up a social "nation building" process
growing out of a hegemonic alliance on equal terms of popular classes, workers, trade
unions, social movements and left-wing parties.

THE VIABILITY
VIABILITY OF A BASQUE STATE, IN FIGURES

Xabier Isasi looks at the characteristics of other European states and points out that there
are sixteen states in the EU with either smaller territories or smaller populations than ours.

The per capita GDP of Euskal Herria is higher than that of states such as France, Spain
or Italy, and its total GDP ranks 36 out of Europe's 266 regions. We also rate better than
many other regions and states in Europe in productivity, training etc.

According to data on economic flow provided in this volume by Nekane Jurado:

The southern Basque Country's trade balance between exports and imports is positive,
with an increasingly large trade surplus: in 2010 the surplus was €5,227.8m. Two-thirds of
our exports are to the EU.

As regards the inter-institutional financial flow with the Spanish state, according to
Jurado in the period 2004-2009 more than €11,700m were transferred from the southern
Basque Country to Madrid in cash, whereas the Spanish state's investments in the southern
Basque Country in the same period amounted to €3,520m, and were mainly in areas of
undevolved powers such as the seaports of Adif, Bilbao and Pasaia, the airports (AENA),
etc.

In the period 2000-2009 a net amount of €12,438.27m was transferred to the state
coffers for Social Security.

To all this must be added costs generated by the interests on the sovereign debt of the
Spanish state, plus the debts run up by the autonomous communities that are run by the
 67

Spanish political parties, PP and PSOE, which have a negative effect on the state's
contribution.

Apart from all this, as Anton Borja points out, between 1993 and 2008 Basque capital
invested €51,000m abroad, while the sum of foreign investments in Euskal Herria was
€12,000m. As Jurado says, the problem is not the availability of capital for productive
investments but the fact that this capital is exported at the expense of the development of
our own productive fabric.

Hence the southern Basque Country's problem is not its competitivity to attract foreign
investors, but rather persuading capital already here to stay put.

BEYOND THE FIGURES: STRENGTHS AND WEAKNESSES IN BASQUE STATE

BUILDING

The following chapters also make a useful contribution to identifying the existing strengths
and weaknesses in Basque state building, which can be summed up as follows:

Our weaknesses
weaknesses

Competences and the autonomy strategy

The system of powers or competences for southern Euskal Herria established in 1978
was not the fruit of a pact between equals, as Nekane Jurado points out. The present
system establishes limits, classifying powers into the categories of exclusive competences
of the Spanish state, shared competences, and exclusive competences of the autonomous
communities — meaning, in our case, the Basque Autonomous Community and the
Autonomous Community of Navarre, as defined by basic state legislation. There are no
competences recognised for the area of the northern Basque Country [under French
jurisdiction].

The Basque economic situation is being levelled with that of Spain by the duration of
the economic crisis, the use that is being made by the Spanish state of basic legislation and
the "autonomist" subordination strategy of Basque institutions; furthermore, this is largely
responsible for an increase in the Basque contribution to the state's coffers, denying us the
ability for political and economic maneouvre, and stopping us from finding our own
rational, democratic way out of this crisis.

De-structuring of the territory of Euskal Herria

One of the main consequences of the lack of competences is the legal and political
impossibility of drawing up a nationwide Basque political and socioeconomic project. Such
an option is out of the question. Our territory is divided into two autonomous communities
on the Spanish sie, while the north of Euskal Herria has no institutions of its own; as a result,
we cannot conduct coordinated policies to address economic planning, which amounts to
a great weakness at the present time.

Management of the present economic crisis

The fact that we lack powers to manage our own resources has many negative
implications for our economy and social structure, as Anton Borja points out, quite apart
from the money lost through taxation and funds transferred to the Spanish state: the
Basque agricultural sector is collapsing, industrial production is at a standstill, many small
retail outlets are closing down, and the policy of cutbacks is bringing the economy to a halt
and fuelling unemployment and social alienation, thus reducing domestic demand.
 68

Social cohesion
Acceptance of and subordination to Spanish legislation on fiscal and employment
issues, together with the public policies adopted by the autonomous governments, has
brought with it a concentration of wealth which is leading to an impoverishment of Basque
autonomy, creating an imbalance in the distribution of wealth (with rising unemployment
and social alienation) and a loss of potential for research and innovation (our investment
rate is much lower than that of countries with comparable per capita incomes based on
GDP), all of which has a negative effect on our stability and economic development.

As Nekane Jurado observes, the problem of the economy in the southern Basque
Country at present is not low productivity, for this is much higher than the European
average; rather, it is that its productivity is being channelled into company profits at the
expense of employees' wage packets.

A voice of our own for dialogue and negotiation in Europe

As Ekai Center's study says, the danger of a rupture in Europe's monetary union would
place Euskal Herria in the euro's weakest link, thanks to the Spanish state. The structural
and institutional shortcomings of our economy would increase the duality between central
and peripheral countries; yet those shortcomings might change if our country is able to
make its own decisions in fundamental areas such as bank policy, monetary policy, tax rules
and the policies needed to fix our social and institutional problems.

Within Europe, the ability to represent ourselves and make decisions is fundamental for
our ability to decide on our own project, not only in the political and institutional arena but
also in social and economic issues.

Our strengths

A proactive social and union majority

Our economic and social fabric is broad and our associative network is strong, we have
our own identity and it is an integrating one, and we also have the critical mass needed to
build a national project of sovereignty.

We therefore have the necessary foundations to generate a collective drive, and we

have a home-built model of development for economic progress, to harness citizens,
territory and state in an economically viable project of a state of our own, as Anton Borja's
and Ekai Center's reports both demonstrate.

Within that framework, both Gil de San Vicente and Letamendia place emphasis on the
need for a strategic activation of the Basque unionised majority, and linked to this, the
involvement in the process of other state-level trade unions which it should be possible to
incorporate by promoting this strategy.

In a stateless nation, Letamendia says, a "counter-power" makes no sense as a mere

tool of a single union, but united action that is restricted to the unions also makes no sense,
unless the object is to destroy the alliances that are needed for a national struggle for self-
government. It is pointless and useless to re-create the pillar of a union-party in the old
style. What remains to be seen is whether such a pillar might be adapted to a new style.

Cooperatives
One example of that ability to create associations is provided by the Basque
cooperatives, as discussed by Antxon Mendizabal in this volume. The Basque cooperatives
account for 4.3% of Euskal Herria's GDP and 10% of its industrial GDP. The cooperatives
may prove very important assets for the building of a Basque state, on account of both
 69

their economic weight and their organisational characteristics and history, provided the
internationalisation process is not allowed to stand in the way of the survival of their
cooperative principles and the cooperatives are not integrated into a system which
imposes technocratic control in a way that rules out the possibility of any community or
social project.

The reality of our productive fabric

As Ekai Center says, we have demonstrated a capability to adapt our industry and
develop small and medium-sized businesses into an active, dynamic fabric, maintaining a
more balanced pattern of consumption and investment than in Spain, avoiding excessive
debts; the power of our industry has endured in the area of exports, but we have long-
lasting structural issues in the area of innovation.

Unfortunately, our political leaders have let thirty years go by while flattering
themselves that we are in a better situation than other autonomous communities in the
Spanish state, without taking into account the innovations, social spending and level of
training achieved by European regions with a comparable income per capita or attempting
to keep up with these.

The autonomous dimension of the class struggle

As Gil de San Vicente observes, a national consciousness about the need for a state is
acquired in a distinct material and symbolic, linguistic and cultural, political and
socioeconomic area that is qualitatively different from that of the oppressing state. On that
basis, a fundamental ideological concept crystalises: the autonomous dimension of the
class strugge, a basic component of active Basque society with regard to the building of a
national state.

It is true that, in a way, the virtuality of the concept of the autonomous dimension of
class struggle goes beyond the dimension of labour relations and social protection; but as
Aitor Bengoetxea observes, that is the basic core of power in present-day European states.
The basic model of labour relations is fundamental for building a model of development
and, within that model, the redistribution of wealth. As Bengoetxea says, the current
regulations of labour relations and social protection for the territories of Euskal Herria are
completely controlled by state-level decisions, for which reason they do not take the reality
of Basque social and production networks into consideration, and are furthermore
detrimental to our socioeconomic development. It is particularly significant that the
majority in Euskal Herria are affiliated to unions and are committed to the importance of
having autonomy in labour relations and social protection, as distinct from those of the
state. This is an asset that needs to be nurtured and promoted.

Finally, and to conclude, I think the ideas brought together in this book are an
interesting and necessary contribution which demonstrates the real opportunities for
Euskal Herria to build its own state, on the basis of socioeconomic policy, within the
European Union; they also demonstrate that Euskal Herria is able to participate in the
building of Europe from the perspective of its own interests, independently of the
obstacles created by the lack of will in the present-day Spanish and French states.
Furthermore, the building of a Basque state emerges as an integrating project, given that
in addition to a political and identity-linked choice it is also objectively in the interest of all
the people who live and work in Euskal Herria.
 70

1. Euskal Herria: a standard southwestern EU nation.

nation.

Xabi er Is as i B al antz ateg i, pro f es s o r, Univ ers ity o f th e B as qu e C o u ntry

As ier Ot xo a d e R et an a Si mo n, G AI N D EG I A

Euskal Herria, or the Basque Country, is a southwestern nation comprising 685 municipal
units in seven provinces situated within the Spanish and French states. The fact that it is
located on one of two natural routes linking the Iberian Peninsula to the rest of Europe is
one factor that has influenced this territory’s economic and social development. In general
terms of macro-economic magnitude, Euskal Herria is at least comparable to the most
highly developed of the European Union’s level NUTS2 (Nomenclature des Unités
Territoriales Statistiques). With three million inhabitants and nearly 20,000 sq km, Euskal
Herria could easily be a state of the European Union, economically developed and as
competitive as other similar-sized member states. It is being held back from becoming the
28th state of the European Union by historical and, above all, political reasons. If Euskal
Herria could overcome the centralist aspirations of Spain and France, it would have no
trouble becoming an economically balanced, socially advanced state.
 71

INTRODUCTION

The state is, above all else, a political concept. It is a social institution for regulating the life
of society and imposing its rules through force. In the last resort the state is the institution
of power that regulates the existence of a nation in a specific territory; and that institution
is, furthermore, an institution recognised by the international community. Independence,
territory and authority are the key characteristic of any state. While other characteristics
such as religion, language and culture may also be distinctive features of a nation's
existence, they are not necessary conditions for the articulation of a state. There are
confessional, one-religion states in the world, and there are secular states separated from
religion, and there are states made up of several religions; likewise there are a few states,
though not many, with a single language, and other states, the majority, with a number of
languages. Today, most states may be considered multicultural and multiracial entities.
Thus culture, race, language and religion are not primary conditions for being a state or not
being one.

Per se, Euskal Herria might have been an independent state. The geographical,
demographic, economic and other characteristics of Euskal Herria are similar to those of
any other state or region of the European Union. Indeed, there are plenty of states that are
smaller than Euskal Herria, such as Monaco, Slovenia, Montenegro, Luxembourg, Andorre,
Malta, Liechtenstein and San Marino. And there are states with fewer inhabitants than
Euskal Herria, such as Greenland, Liechtenstein, the Faroe Islands Luxembourg, Malta,
Cyprus, Slovenia and Latvia.

Geographic, demographic, economic and other charateristics of a social nature are not
obstacles making it impossible for Euskal Herria to be a state. The viability of states is not
determined by those characteristics. Whether something is a state or not is usually decided
on for political, historical and military reasons. For example, states that have failed socially,
economically and politically are referred to as failed states; however, these have not ceased
to be states, and they are attributed similar duties and obligations as other states by the
international community.

The formation of a state is not a legal issue. The international community has no special
laws governing the formation, or disbanding, of states; it is the states themselves which
typically proclaim and regulate their own integrity and statehood. The key characteristics of
any state are the following:

– The state is acknowledged and recognised internationally; it has the recognition of

other states.
– A state has the capacity to institutionalise authority; it can organise an army, a police
force, a school system and a system of justice.
– A state has the capacity to organise society and create social services, e.g. through a
system of taxation, a treasury, a health service, services for the management of social
customs and so on.
– A state is capable of constructing a collective identity, with its symbols, national
anthem, language and other distinguishing and identifying characteristics.

These characteristics and powers alone do not make a state, however. There may be
territories or regions with these characteristics which, for one reason or another, are not
states.

However, the main reason for a country, nation or territory not being a state is nearly
always the imposition of another state. That is the situation in Euskal Herria: France and
Spain have determined that, by their rules, the territories of Euskal Herria, its north and its
south, belong to them; they have drawn up the way their territories are organised, and
 72

decided whether or not they will grant it a certain level of self-government, as if there were
only one state, and have established, explicitly in the case of Spain and implicitly in that of
France, that the most important rule of the state is that of its unity.

There is no point in discussing the social or economic viability of a state. To quote an

old saying, it would be like arguing about what sex the angels are: the real issue is not
whether or not angels have a sex, but whether angels themselves exist. All states that exist
have come into being at some time, somehow; and for states that already exist, their
existence as states is always crucial to their survival. So it is a tautology. There are 193 states
in the United Nations, and another ten states in the world that are not in the UN but are
considered de facto states according to the 1933 Montevideo Convention: they are
Abkhazia, Kosovo, Nagorno-Karabakh, Palestine, the Sahrawi Arab Democratic Republic,
Somaliland, South Ossetia, Taiwan, Transnistria and the Turkish Republic of Northern
Cyprus. The interesting point is that there is so much diversity among these 203 states that
it is impossible to pin down one set of common characteristics that they all share.

If, on the other hand, nations that have not achieved the status of states wish to survive,
they will seek statehood because this is the most stable form of long-term international
recognition. If Euskal Herria becomes a state this will not ensure either a better or a worse
way of life, for statehood guarantees neither a more balanced social system nor lesser class
differences; the only thing that being a state would mean for sure is that Euskal Herria
"exists" and is recognised internationally. States today are the only institutions that
guarantee the survival of nations. At the same time, paradoxically, states are mostly
responsible for the disappearance of nations.

Mikel Buesa Blanco, a professor of Applied Economics at the University of Madrid, has
calculated the cost of independence for the Basque Autonomous Community in a worst-
case scenario. He has worked out how much it could cost for Araba, Bizkaia and Gipuzkoa,
together, to set themselves up as an independent state outside the European Union if
Spain were to impose on it a war economy. The study was published in 2004, before the
2008 economic downturn. This economist assumed an almost 20% loss of production by a
self-sufficient, independent state; an unemployment rate ascending to somewhere
between 19% and 29%; a need for the citizens of the present Basque Autonomous
Community to pay 9% more in taxes and a rise in employees' social security payments of
between 3% and 7.6%.

Buesa's study indicates the most that independence might cost. It is useful as a point of
reference. The author tells us himself what is the key to not having such a costly
independence: "the crucial factor," he says, "is to remain within the instutitional framework
of the European Union… so that independence… does not lead to a fall in Basques' levels
of development and welfare."

Yet the apocalyptic projection for independence of the BAC by this scholar actually
doesn't sound so terrible once we consider the negative effects that have since come upon
us due to the current economic crisis! Ardent defenders of the sacred, unbreakable unity of
Spain ahve threatened to wage an economic war against supporters of Basque
independence. And yet the 2008 crash has clearly shown that the BAC and Navarre are
already paying dearly for their dependence on Spain. We are already coming dangerously
close to the economic and social disaster portrayed by Buesa for an independent BAC —
without seeing even one inch of that independence.

In any case, we agree with him that as an independent state, provided it was integrated
into the European Union, Euskal Herria would keep the same level of development and
well-being as it has now, and might very well be even better off. Euskal Herria, that is; not
just the BAC.
 73

Another thing made clear in Mikel Buesa's study is that Basque independence and
sovereignty is a political rather than an economic issue. What is at issue is whether the
states of Spain and France are prepared to recognise the right of Euskal Herria to decide
its own future, and to respect its decision. That, and nothing else, is the central question.

Of course there is nothing wrong with carrying out economic and social studies that
help acquaint us with the realities of the situation. But in the present context this analysis
may support independence because the economic and social climate is favourable, just as
much as, in the next period that comes along, it could represent a valid argument against
independence because there is a new economic and social situation.

Where economy and social development are concerned, having a state gives you
more, greater power. Not having a state means being subjected to someone else's power,
which we think is not in our interest; but whatever we might think, that is what it means.

At the present time, organising Euskal Herria as a state within the European Union is
beneficial for citizens, businesses, the economy and society. According to the parameters
and statistics that we have analysed, Euskal Herria is on the same level as the most
advanced regions of the European Union, though its position has admittedlyl slipped a
little in recent years. By that measure, nobody can doubt that Euskal Herria could be a state
that is compatible with membership in the European Union.

1. THE GEO-
GEO-STRATEGIC DESCRIPTION OF EUSKAL HERRIA AND THE MAIN
MACRO-
MACRO-ECONOMIC INDICATORS IN THE DOMAIN OF THE EUROPEAN UNION

Euskal Herria is a nation in the southwestern part of the European Union, bordering on the
Bay of Biscay, the Landes region and Bearn to the north, Rioja and Zaragoza to the south,
Bearn, Huesca and Zaragoza to the east, and Cantabria, Burgos and Rioja to the west. It
has an area of approximately 20,947.2 sq. km.

Between this simple description and reality, however, mediate a host of qualifications and
nuances. The definition is right, but it is insufficient. To get from this definition to the real
Euskal Herria, we have to discuss many more things, some of which we already know and
some we do not yet know.

Our nation is a territory of approximately 20,947.2 sq km.

From the point of view of territorial organisation, Euskal Herria is like an unfinished jigsaw
puzzle. To live, it needs its own specific territorial regime. We need a basic map and territorial
division of Euskal Herria. Gaindegia, the observatory of the economic and social
development of Euskal Herria, needed to decide on a map and territorial division of the lands
of Euskal Herria in order to implement its project and do some statistics. In assembling this
map it incorporated historical, political, administrative, sociological and linguistic criteria.
From a methodological viewpoint the most important criterion was to come up with a
common, compatible unit of territorial division for the whole of Euskal Herria. The municipality
is one such unit. Building upwards from the municipality, the division of the territories of
Euskal Herria used by Gaindegia consists of districts, regions (provinces) and the nation.
 74

Regions Districts Municipalities

Araba 7 53
Bizkaia 7 113
Gipuzkoa 7 88
Lapurdi 6 42
Low Navarre 5 74
High Navarre 7 272
Zuberoa 3 43
685
Table 1. Territorial division of Euskal Herria into regions, districts and municipalities

This division of the territory covers the whole of Euskal Herria. Although very basic, it can
be used to map out data for the whole country. Figures for numbers of inhabitants,
population trends, births and deaths, age pyramids of the population, migratory movements,
economic sectors, housing and countless other statistics can be mapped on it to give a
picture of the state of affairs in Euskal Herria. This is the map and the divisions that we use to
provide such information.

1.1.
1.1. Basic socio-
socio-demographic characteristics of Euskal Herria

Euskal Herria is a small (with around three million inhabitants), ancient, and currently aging
nation of Europe. Its area is small (20,924.8 sq km), its population density is high (148
inhabitants per sq km) and the population is irregularly distributed over the territory (over half
of the population being concentrated in municipalities with over 25,000 inhabitants).

Demographically the Basque population is old and getting older. It is one of the highest
aged populations of any European region, yet the growth rate of the oldest portion of the
population, people over 65, is close to the European average.

Population by broad age groups (%),

by region. Euskal Herria, 2011
0-14 15-
15-64 65 and older
Araba 13.8 68.5 17.7
Gipuzkoa 14.3 66.3 19.4
High Navarre 15.4 66.9 17.6
Bizkaia 12.9 67.0 20.1
Lapurdi 15.1 64.2 20.7
Low Navarre 16.8 62.0 21.2
Zuberoa 14.0 61.3 24.7
Euskal Herria 14.0 66.7 19.3
Note: Figures for the northern regions are for 2008.
Sources:
Table 2.INE and INSEE.
Distribution of the population of Euskal Herria by age groups (Gaindegia)

Today, three out of ten inhabitants were born outside Euskal Herria. Euskal Herria is
mostly made up of town and city dwellers, i.e. it is a predominantly urban population: most
of the population, 54%, live in municipalities with over 25,000 inhabitants. The growth rate
of the smallest municipalities (those with a thousand or fewer inhabitants) is getting
progressively lower.

Population by size of municipality. Euskal Herria, 2011

Size of municipality ABS. %
1-1.000 inhabitants 143.325,0 4.6
1.001-5.000 inh. 394.548 12,68
5.001-10.000 inh. 317.904 10,22
10.001-25.000 inh. 573.130 18,42
25.001-50.000 inh. 464.974 14,94
50.001 + inh. 1.217.535 39,13
Total 3.111.416 100,0
Source: INE and INSEE (Population Légale)
Table 3. Inhabitants by size of municipality (Gaindegia)
 75

Living conditions and welfare

Living conditions in Euskal Herria are, overall, above the European mean; the average
level of welfare may thus be considered adequate. The educational level of the Basque
population is high. The educational level of women, namely the proportion of women with
higher education qualifications, has risen substantially in recent years.

Thus over half of all employed women (51%) have completed a higher degree; the
proportion among males, on the other hand, is lower than half (43%). The improvement in
the overall situation of women reflects Euskal Herria's level of development in recent years.
Nonetheless, we are now feeling the effects of the severe economic crisis: the
unemployment rate has risen, especially so for young people.

Although the average income of citizens (the active population) is fairly high, it is not
distributed uniformly across the different regions or between different people.

Disposable income per active inhabitant (in euros)

2001 2002 2003 2004 2005 2006 2007 2008
BAC 27.
27.297 28.344 29.485 30.969 32.778 34.527 36.795 39.051
Araba 27.026 28.063 29.193 30.662 32.453 34.185 36.431 38.664
Gipuzkoa 27.495 28.549 29.699 31.193 33.016 34.778 37.062 39.334
Bizkaia 27.250 28.295 29.434 30.915 32.721 34.467 36.732 38.983
H. Navarre 27.856 28.991 30.040 31.441 32.022 33.180 35.436 36.935
North 33.848 34.803 35.186 36.326 37.552 39.528 41.584 42.989
Euskal Herria 27.977 29.035 30.087 31.525 33.038 34.682 36.924 38.944
Source: Eurostat, Eustat, INSEE.
Cannot be updated until summer (+-)
Table 4. Income levels by region (Gaindegia)

The income of the active population of Euskal Herria has grown considerably in the last
ten years, by an average of 5.6% per year. The regions of Araba, Bizkaia and Gipuzkoa have
had higher growth rates than this. The north has had the lowest growth rate, yet the
highest incomes are found there. In the case of High Navarre, the growth rate over the last
ten years has been lower than the average.

In Euskal Herria, as is usual for rich countries, the ocupation rate of family homes has
been around 80%. Of the remaining homes a fifth are empty or are employed as second
homes.

As regards health services, there are in Euskal Herria 420 doctors, 972 nurses and 444
hospital beds per 100,000 inhabitants; these are reasonably good figures.

Not everything is good though. In 2009 there were 246,854 people in Euskal Herria
living in poverty or in danger of falling into poverty, living below the median of wealth in
the territory. Spending on social protection, another parameter of welfare, is not very high,
especially in southern Euskal Herria. Over 55% of the population of Euskal Herria use the
internet often; however, in 2010 the rapid growth of use slowed down significantly.

All in all, we can say that Euskal Herria has a profile quite similar to the rich countries of
Europe to judge from the statistics and parameters that we have looked at.

1.2. Euskal Herria in the context of the European Union

The political and social construction of Europe has been a process full of rivalries and
tensions, and it cay be expected to continue to be so in the future. Regions subordinated
to states, including Euskal Herria, are seeing their hopes of development hanging in the
balance. However, states are under the influence of the strongest regions vying to defend
 76

themselves. Cohesion within and links between European regions can undermine the
strength of states.

In 1989, thirty-one regions in the Atlantic area, including Aquitaine, High Navarre and
the Basque Autonomous Community, came together to form the Atlantic Arc Commission.
These regions' development priorities were specified in the Commission. The objectives
set by the Commission include strengthening the regions of the arc and promoting their
development.

To quote:
At the level of the continent a polycentric European structure should be promoted. The
aim is to evaluate urban conglomerations with sufficient demographic and economic
power. Thus these urban conglomerations, through mutual influence, will have strength
in world and European power centres, and thereby also influence broad areas of
(European) places.

The functionality of multiple centres pursues complementarity between European

urban conglomerations, always based on balance between territories. The
functionality of multiple centres, then, may be a very useful concept on many levels
to integrate activities and functions as well as is possible.

In 1999 a meeting in Postdam of ministers of spatial planning produced a report titled

Towards Balanced and Sustainable Development of the Territory of the European Union
which outlines a system of peripheral urban conglomerations: a territory with at least
500,000 inhabitants where over 150,000 inhabitants live in one city or town, linked to each
other by a transportation system over a distance of 130 km; the urban cluster should have
at least a million inhabitants.

The characteristics of Euskal Herria fully qualify it according to this definition. Moreover,
its geo-strategic location is an advantage, at least for this purpose. About three million
inhabitants, 20,947 sq km, 148.6 inhabitants per sq km, a strategically situated European
transportation node: Euskal Herria is all this. Indeed, it is much more: a population centre of
great sociocultural cohesion, with its own language and culture, i.e. with a specific identity.
And that, as has been demonstrated, is an important factor favouring economic and social
development.

Figure 1. European metropolises. Euskal Herria in the Atlantic Arc

 77

Thus Euskal Herria is an urban conglomeration of the EU's periphery. Its

appearance as a system has many advantages for insertion in the European Union, and
also for conserving its own identity. In the report mentioned, four main aspects are
mentioned:
– Systems' competitiveness.
– Cooperation and connectivity between urban systems, especially by air and rail.
– Functional relations between urban systems, for increased effectiveness of basic
synergies between the periphery and the centre.
– Articulation between urban systems facilitates integration in the main European
and world economic centres and hence into the world dynamic.

Figure 2. Second-level NUTS [Nomenclature of Territorial Units for Statistics] of the European Union
(http://ec.europa.eu/regional_policy/atlas2007/index_es.htm).

Euskal Herria must be an urban conglomeration on the periphery of the European Union.
We have already seen that it has the conditions needed for that even if it hasn't come about
yet. We don't yet know all about Euskal Herria on the economic and social levels, since we are
living with our backs to each other even though we share a language, culture and many
common interests.

Even though the process of structuring the European Union responds to the interests of
its member states, there will be new opportunities for regions to carry out initiatives on
economic and social levels. The European Union will bring new opportunities to Euskal
Herria. New opportunities, that is, if Euskal Herria demonstrates the ability to act as a nation.
For it is clear that Euskal Herria does not have a state-type structure on the basis of which to
act.

We have situated Euskal Herria on the map and described the European Union's model
of territorial organisation in an economic perspective. The conclusion we draw from this
simple study is that, de facto, Euskal Herria is capable of being a special region for economic
and social development, a unit at the NUTS-2 level, since it meets the required conditions.
We will now proceed to look at some of Gaindegia's data.
 78

1.2.1. Gross Domestic Product (GDP) per capita

Although open to objections, Gross Domestic Product is the standard way to measure
the degree of wealth of Euskal Herria. Before Euskal Herria began to feel the detrimental
effects of the 2008 economic crisis, its income per capita was above that of the European
Union's average. However, it has fallen a few points in the last few years. Nonetheless, the
level of wealth of Euskal Herria may still be considered on a par with that of the richest
regions of Europe.

EUSKAL HERRIA AMONG THE NATIONS. The economic dimension: GDP per capita
EH has a higher GDP per capita than many European regions
1999-- 2008
Growth of GDP (in PPP) and GDP per capita (in PPP). Europe. 1999
1999-
1999- 2004 2005 2006 2007 2008 2008
Euskal Herria 5,7 6,0 8,6 7,2 0,5 32.881
Badem-Wurttemberg 2,8 3,2 6,6 5,5 -0,6 32.400
Zeeland 5,2 3,1 4,6 11,3 0,7 30.800
Catalonia 5,0 3,4 7,7 5,1 -1,3 30.300
Scotland 5,6 3,6 5,0 2,2 0,0 28.000
Rhone-Alpes 3,2 3,7 4,8 3,8 -1,5 26.800
European Union (27 countries) 4,4 3,7 5,3 5,5 0,4 25.100
Brittany 4,1 4,8 3,6 3,1 -0,9 23.300
Poitou-Charentes 3,8 3,5 2,4 5,2 -1,8 22.000
Walloon Region 3,8 2,6 3,6 3,0 1,4 21.000
Brandenburg 3,8 4,5 5,4 4,6 0,5 20.500
Mecklenburg-Vorpommem 3,5 5,2 3,8 6,9 1,0 20.400
Sources: Eurostat, INSEE, NEI and Eustat.
Table 5. Euskal Herria's gross domestic product (regions of Europe)

The GDP has its defects, and does not measure a country's standard of living accurately.
However, it does serve as a rough indicator of the level of material wealth in countries.
Concealed behind the GDP are the differences between inhabitants' incomes. Today, in
Euskal Herria as in other advanced countries, there are significant foci of poverty. There are
many people who earn between €12,000 and €16,000 per year or even less, and a few people
who earn €50,000 and €60,000 per year or more.
The financial and economic crisis has hit all sectors of the economy hard. Euskal Herria's
industrial production, for example, has suffered severely from the crisis in Spain, and to make
up for the lack of business resulting therefrom, once the Spanish market ran out of steam, it
has been necessary to increase exports to other countries. This is a case where dependence
on Spain has made the crisis worse for Basques.

GDP in terms of Purchasing Power Parity: growth and per capita. Euskal Herria and internationally, 2002-
2002 -2009

Growth of GDP (in PPP) € per capita

2002/2006 2007 2008 2009 2009
Norway 7,4 4,5 7,1 -13,0 41.200
Ireland 7,6 9,1 -8,1 -9,5 30.000
Euskal Herria 6,1 7,3 -0,3 -5,8 29.977
Baden-Württenberg 3,6 6,1 -0,6 -8,9 29.500
Catalonia 6,5 7,6 -0,8 -5,8 28.200
Iceland 3,6 5,8 5,0 -10,4 27.700
Germany 3,6 5,6 0,4 -6,6 27.200
Finland 3,8 9,3 1,9 -9,2 26.900
Rhône-Alpes 3,4 6,1 -0,3 -4,9 25.500
France 3,0 5,8 -0,2 -4,3 25.400
Scotland 4,5 2,7 -2,1 -5,4 25.200
Italy 1,8 5,9 1,0 -5,8 24.400
Spain 6,7 7,6 0,6 -5,8 24.200
European Union (27) 4,1 6,0 0,6 -5,7 23.500
Brittany 3,8 1,2 0,0 -4,9 21.200
Poitou-Charentes 3,2 2,2 -0,2 -4,3 20.300
Walloon region 3,2 3,8 2,4 -3,8 20.200
Brandenburg 3,8 4,8 0,9 -3,9 20.000
Eastern Finland 3,7 8,8 1,9 -11,2 20.000
Mecklenburg-Vorpommern 3,2 6,3 1,3 -4,8 19.800
Sources: Eurostat, Eustat, INE and INSEE.
Table 6. GDP; Purchasing Power Parity
 79

1.2.2. Gross value added (GVA) per capita

Gross Value Added, or GVA, is a measure in macro-economics of the wealth created by
producers in a given area of the economy. GVA incorporates the values added to goods and
services in the production process. It is closely linked to the gross domestic product (GDP).

According to the 2009 GVA, Euskal Herria appears in general to be in a very good
situation. As with the GDP, we must remember that GVA does not measure citizens'
standards of living.

However, these measurements have a relative value for ranking Euskal Herria among
European regions and states. Overall, growth rates for sectors of the Basque economy are
comparable to those of the richest regions in the European Union: farming, livestock, forestry
and fishing have a meagre presence, while industrial and building sectors are significant
(around 25% of the total) and the services sector predominates.

EUSKAL HERRIA AMONG THE NATIONS. The economic dimension: GDP per capita
EH among the regions and countries with high GVA per capita aside from France or the UK
1999-
1999- 2004 2005 2006 2007 2008 2009
2009
Norway 7,7 16,8 9,6 4,2 - 53.626
Sweden 3,8 1,6 6,3 5,5 -2,1 31.823
Austria 3,2 3,8 5,3 5,5 3,8 30.839
Baden-Württemberg 1,7 0,4 5,5 4,2 2,1 30.469
Zeeland 5,9 1,9 3,8 10,4 3,3 29.252
Euskal Herria 10,3 6,7 7,1 7,0 5,1 28.451
Rhöne-Alpes 3,5 2,6 4,6 3,6 2,2 27.479
France 3,6 3,1 3,5 4,5 2,5 27.349
United Kingdom 4,8 2,9 5,7 4,7 -11,5 26.590
Catalonia 6,6 4,6 5,5 5,4 2,7 25.633
Scotland 4,9 3,6 6,5 5,7 -11,3 25.214
Brittany 4,4 3,6 3,4 2,6 2,8 23.834
Italy 4,5 1,6 2,6 3,7 - 23.387
Poitou-Charentes 4,1 2,0 3,0 4,3 1,6 22.472
Spain 7,1 5,8 6,0 6,0 3,5 21.995
Walloon region 3,8 3,8 4,7 3,9 4,2 21.066
Brandenburg 2,4 2,0 4,4 3,3 3,2 19.237
Mecklenburg-Vorpommern 2,3 1,8 3,2 5,4 3,6 19.067
Sources: Eurostat and INSEE.
Table 7. Euskal Herria's gross value added (regions of Europe)

Mean = 46710.73
Standard deviation = 20025.208
N = 266
Gross Value Added in European regions

Diagram 1. Distribution of gross value added by regions

 80

GVA per employed person. Euskal Herria and NUTS-

NUTS-2, 2009
GVA PER EMPLOYED PERSON (€)
1 Latvia 155.645
2 Brussels-Capital Region 142.923
3 Inner London 138.913
4 Île-de-France 96.235
5 Hamburg 85.365
6 Bremen 83.986
7 Southern and Eastern (Ireland) 81.981
8 Vienna 81.542
9 Capital Region of Denmark 79.780
10 Åland 79.154
11 Groningen 78.663
12 Antwerp Province 76.390
13 Stockholm 75.287
14 Corsica 73.947
15 Darmstadt 73.318
16 Oberbayern 70.297
17 Walloon Brabant 69.986
18 Autonomous Province Bolzano/Bozen (NUTS 2006) 68.645
19 Flemish Brabant 68.149
20 Lazio (NUTS 2006) 67.087
21 Utrecht 67.079
22 Düsseldorf 67.069
23 Lombardy 66.745
24 Southern Finland Province 66.480
25 Salzburg 65.962
26 Aosta Valley/Val d'Aosta 65.888
27 North Holland 65.438
28 Region of Southern Denmark 63.958
29 Rhône-Alpes 63.926
30 Central Denmark Region 63.710
31 North Jutland/North Denmark Region 63.550
32 Povence-Alpes-Côte d'Azur 63.084
33 Vorarlberg 62.558
34 Autonomous Province of Trento (NUTS 2006) 62.414
35 Emilia-Romagna (NUTS 2006) 62.330
36 Euskal
Eus kal Herria 61.838
37 Friuli-Venezia Giulia (NUTS 2006) 61.693
38 West Flanders 61.556
39 Liguria 61.059
40 Karlsruhe 60.998
41 Veneto (NUTS 2006) 60.997
42 Austria 60.891
43 Tirol 60.708
44 Community of Madrid 60.239
45 South Holland 59.630
46 Languedoc-Roussillon 59.616
47 Toscana (NUTS 2006) 59.324
48 Stuttgart 59.320
49 Guadeloupe (FR) 59.220
50 Middle Franconia 59.201
51 Upper Austria 58.994
52 Nord-Pas-de-Calais 58.977
53 North Brabant 58.885
54 Melilla (SP) 58.481
55 Piedmont 58.273
56 Attica 58.051
57 Aquitaine 58.027
58 Réunion (FR) 57.555
59 Cologne 57.406
60 Alsasce 57.122
61 Zeeland 56.975
62 Berkshire, Buckinghamshire and Oxfordshire 56.950
63 East Flanders 56.774
64 Pays de la Loire 56.747
65 Western Finland 56.670
66 Upper Normandy 56.621
67 Midi-Pyrénées
68 Hannover 56.520
56.472
 81

69 Catalonia 56.347
70 Kassel 56.171
71 South Aegean 56.081
72 Liège Province 56.043
73 Saarland 56.020
74 Middle Norrland 55.734
75 Martinique (FR) 55.502
76 Marche (NUTS 2006) 55.329
77 Northern Finland 55.137
78 Border, Midland and Western (Ireland) 55.077
79 Champagne-Ardenne 54.982
80 Bourgogne 54.888
81 Arnsberg 54.373
82 Upper Palatinate 54.155
83 Tûbingen 53.822
84 Braunschweig 53.718
85 Swabia 53.651
86 Detmold 53.620
87 Limburg (NL) 53.577
88 Aragon 53.549
89 Carinthia 53.520
90 Centre Region (FR) 53.481
91 Molise 53.478
92 Brittany 53.443
93 Styria 53.380
94 West Sweden 53.365
95 Campania 53.321
96 Hainaut 53.132
97 French Guiana 53.111
98 Lower Franconia 52.980
99 Lorraine 52.867
100 Berlin 52.787
101 Ceuta (ES) 52.758
102 Rioja 52.656
103 Upper Franconia 52.615
104 Upper Norrland 52.530
105 Poitou-Charentes 52.350
106 Eastern Finland (NUTS 2006) 52.268
107 Limbourg (BE) 52.063
108 Overijssel 51.874
109 Franche-Comté 51.860
110 Auvergne 51.805
111 Sicily 51.761
112 Zealand 51.742
113 Umbria (NUTS 2006) 51.699
114 Lower Bavaria 51.534
115 Gelderland 51.310
116 Giessen 51.301
117 Abruzzo 51.281
118 Namur Province 51.094
119 Calabria 51.073
120 Basilicata 51.042
121 Picardy 50.980
122 North Middle Sweden 50.740
123 Lower Austria 50.531
124 Balearic Islands 50.488
125 Castile and León 50.080
126 Apulia 49.996
127 Friesland (NL) 49.982
128 Rheinhessen-Pfalz 49.880
129 South Sweden 49.849
130 Weser-Ems 49.783
131 Sardinia 49.674
132 Lower Normandy 49.616
133 Asturias 49.525
134 East Middle Sweden 49.502
135 Schleswig-Holstein 49.470
136 Fribourg 49.215
137 Münster
138 Prague 49.145
48.863
 82

139 Surrey, East and West Sussex 48.751

140 Småland and the islands 48.643
141 Bedfordshire and Hertfordshire 48.557
142 Limousin 48.557
143 Bratislava Region 48.277
144 Cantabria 47.912
145 Drenthe 47.862
146 Cheshire (NUTS 2006) 47.774
147 West Midlands 47.767
148 Eastern Scotland 47.349
149 Gloucestershire, Wiltshire and Bristol/Bath area 47.261
150 Southwest Scotland 47.241
151 Luxembourg Province 47.220
152 Canary Islands (ES) 47.048
153 Koblenz 46.686
154 Valencia 46.489
155 Hampshire and Isle of Wight 45.601
156 Andalusia 45.429
157 Galicia 45.238
158 West Macedonia 45.183
159 Murcia 44.717
160 Greater Manchester 44.198
161 Leicestershire, Rutland and Northamptonshire 44.125
162 Leipzig (NUTS 2006) 44.106
163 Central Greece 44.061
164 Castile-La Mancha 43.974
165 Dresden 43.845
166 East Wales 43.752
167 Lisbon 43.185
168 Trier 42.939
169 West Yorkshire 42.934
170 Outer London 42.620
171 Flevoland 42.422
172 Burgenland (AT) 42.139
173 East Anglia 41.672
174 Saxony-Anhalt 41.655
175 Dorset and Somerset 41.601
176 Brandenburg-Southwest (NUTS 2006) 41.387
177 Extremadura 41.361
178 Chemnitz (NUTS 2006) 41.304
179 North Aegean 41.021
180 Mecklenburg-Vorpommern 40.667
181 South Yorkshire 40.660
182 Northern Ireland (UK) 40.575
183 Lüneburg 40.569
184 Derbyshire and Nottinghamshire 40.477
185 Northumberland and Tyne and Wear 40.475
186 Thüringen 39.835
187 Cyprus 39.720
188 Crete 39.572
189 Kent 39.448
190 North Yorkshire 39.366
191 Essex 39.147
192 Ionian Islands 38.897
193 Herefordshire, Worcestershire and Warwickshire 38.805
194 Devon 38.649
195 Central Macedonia 38.621
196 Madeira (PT) 38.211
197 Merseyside (NUTS 2006) 38.091
198 Lancashire 37.678
199 East Yorkshire and Northern Lincolnshire 37.556
200 Western Slovenia 37.325
201 Cumbria 37.242
202 Tees Valley and Durham 37.037
203 Brandenburg - Nordost (NUTS 2006) 36.861
204 East Macedonia and Thrace 35.452
205 Thessalia 35.014
206 Shropshire and Staffordshire 34.892
207 Peloponnese Region
208 Lincolnshire 34.774
34.036
 83

209 West Wales and the Valleys 33.803

210 West Greece 33.618
211 Epirus 32.969
212 Algarve 31.952
213 Cornwall and Isles of Scilly 31.635
214 Malta 30.996
215 Central Hungary 30.679
216 Alentejo 28.973
217 Azores (PT) 28.712
218 Northwest Croatia 26.557
219 Eastern Slovenia 26.069
220 Adriatic Croatia 25.535
221 Bucharest-Ilfov 25.323
222 Mazovia Province 24.344
223 Jihovýchod 23.825
224 Norte Region (PT) 23.754
225 Central Bohemian Region 22.427
226 Moravia-Silesia 22.411
227 Severozápad 22.182
228 Centro Region (PT) 22.052
229 Western Slovakia 21.775
230 Jihozápad 21.772
231 Severovýchod 21.554
232 Central Moravia 21.418
233 Stredné Slovensko 20.427
234 Wielkopolska Province 20.172
235 Estonia 20.052
236 Pomerania Province 19.846
237 Lower Silesia Province 19.824
238 Silesia Province 19.393
239 Central and Eastern (Pannonian) Croatia 18.198
240 West Pomerania Province 18.003
241 Východné Slovensko 17.952
242 Western Transdanubia 17.546
243 Republic of Macedonia 16.968
244 Lithuania 16.935
245 Central Transdanubia 16.219
246 Opole Province 15.808
247 Małopolska Province 15.759
248 Lubuskie Province 15.323
249 Northern Great Plain 15.314
250 Kujawy-Pomerania Province 15.282
251 Southern Transdanubia 14.950
252 Northern Hungary 14.442
253 Southern Great Plain 14.183
254 Warmia-Masuria Province 13.529
255 Łódź 13.168
256 Podlasie Province 12.801
257 Vest (Romania) 12.799
258 Świętokrzyskie Province 12.235
259 Centru (Romania) 12.146
260 Podkarpacie Province 11.729
261 Nord-Vest (Romania) 11.153
262 Lublin Province 10.683
263 Sud-Est (Romania) 9.769
264 Sud-Muntenia (Romania) 9.593
265 Sud-Vest Oltenia (Romania) 8.233
266 Nord-Est (Romania) 6.919
Source: Eurostat, INE and INSEE.
Table 8. Gross value added per working person (NUTS 2)

1.2.3. Employment
In the above sections the situation of Euskal Herria has been described in terms of GDP and
GVA. Taken together with what we know about the distribution of the sectors of the economy of
Euskal Herria, it can be concluded that Euskal Herria is at a similar level to the most highly
developed nations of the European Union. To understand the situation of Euskal Herria in its
 84

entirety, however, it is necessary to take into consideration some further indicators. Here we shall
look at some statistics provided by Asier Otxoa de Retana for Gaindegia.

Like Catalonia, Euskal Herria is one of the parts of southern Europe with the best
employment levels in comparison to other nations, comparable to the EU average or slightly
lower. In the first years of the new century (2000-2005), Euskal Herria's employment grew
significantly and substantially relative to that of other European regions.

Owing to the crisis, negative growth in employment arrived in 2009, and according to recent
data this negative trend has unfortunately not seen any respite.

Employment
Employment growth and employment rates.
Euskal Herria and the European Union, 2002-
2002 -2010

2002-
2002- 2006* 2007 2008 2009 2010 2010
Iceland -0,5 0,6 -1,8 -6,3 -0,1 78,2
Zeeland 1,0 0,3 0,7 2,3 -3,0 74,7
Baden-Württenberg 0,5 2,8 1,8 -0,9 -0,5 74,0
Brandenburg 1,5 4,4 3,2 1,4 1,1 73,0
Sweden -0,2 1,5 0,1 -2,8 0,7 72,7
Germany 0,6 2,8 1,9 0,3 0,3 71,1
Mecklenburg-Vorpommern 1,3 3,0 4,6 1,5 1,6 70,6
Scotland 0,5 1,7 -0,8 -2,5 -2,1 69,4
Finland 0,4 1,4 1,1 -3,4 -0,9 68,1
Poitou-Charentes -0,1 0,9 2,8 -1,7 -0,5 65,2
Brittany 0,6 -0,6 1,4 0,9 -3,0 64,5
Euskal Herria_Eustat 2,0 1,8 -0,1 -4,0 -0,2 64,2
European Union (27) 1,9 -6,2 0,8 -1,8 -0,8 64,1
Euskal Herria_INE 2,1 1,0 -0,4 -5,7 0,5 63,8
France 0,3 1,3 0,8 -1,1 -0,3 63,5
Eastern Finland 1,1 -1,0 2,4 -3,1 2,4 63,3
Spain 2,3 1,2 -2,0 -7,0 -2,0 58,6
Walloon region 0,3 1,6 0,4 -1,7 0,9 56,7
* Average yearly growth in the period indicated.
Sources: Eurostat, Eustat, INE and INSEE.
Note: Taking into consideration the population aged between 16 and 64.
Table 9. Employment in Euskal Herria and the European Union (Gaindegia)

Like the employment rate, the activity rate in Euskal Herria [i.e. the proportion of
people of working age in the population who form the active labour force, i.e. are
participating workers - Translator's Note], which was 71.8% in 2009, was slightly above that
of the 27 states of the European Union. The figures for this index indicate that the situation
of the active population of Europe varies greatly from region to region.

However, for the youngest age group, from 15 to 24, Euskal Herria has one of the
lowest employment rates (27.1% in 2009), well below the average for the 27 states of the
European Union. In the intermediate age groups (25-34 and 35-44), the employment rate in
Euskal Herria is comparable to that for the European Union as a whole (75.9% and 80.7%
respectively). Finally, for the oldest age groups considered (45-54 and 55-64), the
employment rates in the European Union (77.5% and 46.0%) are higher than those found in
Euskal Herria in 2009.

1.2.4. Unemployment
The general unemployment rate in Euskal Herria was 1.9 percentage points higher than
that of the European Union in 2009. But in the last few years the unemployment rate has
risen more sharply in Euskal Herria than in Europe, widening the gap.
 85

2008-- 2010
Trend in unemployment. Euskal Herria and European Union, 2008
Trend in unemployment Number of Unemployment
unemployed rate
2008 2009 2010 2010 2010
Spain 41,3 60,2 11,6 4.632.400 20,1
Mecklenburg-Vorpommern -16,4 -6,1 -11,8 110.300 12,4
Walloon region -3,6 11,8 4,3 170.700 11,4
Euskal Herria 11,2 61,7 -1,1 163.188 11,0
Eastern Finland -11,2 11,4 -4,5 8.400 10,1
Brandenburg -17,4 -1,5 -13 136.100 10,0
France -6,1 23 3 2.831.400 9,7
European Union -1,1 27,8 7,7 23.080.800 9,6
Finland -0,4 23,7 -2,3 67.800 8,4
Sweden 2,4 34,3 1,8 417.200 8,4
Scotland -1,7 48,6 18,8 219.000 8,2
Poitou-Charentes 9,1 18,3 -8,1 62.300 8,1
Iceland 35 139 5,4 13.600 7,6
Brittany -16,7 7,2 21,1 99.200 7,2
Germany -12,8 2,7 -8,7 2.945.500 7,1
Baden-Württemberg -13,7 20,9 -6,3 268.300 4,8
Zeeland 32,5 -22,6 26,8 5.200 2,7
Sources: Eurostat and INSEE.
Table 10. Unemployment rates in Euskal Herria and Europe (Gaindegia)

The growth of the unemployment rate has escalated constantly in the past few years
and it looks like it will not be easy to halt the loss of jobs. As we have already seen, the
lowest employment rate is found among young people, so of course this is where the
highest unemployment rate is found: it is 30.3%. A sharp rise in unemployment the level
high of the European Union. Young people and women, in that order, are the worst hit by
the crisis. In Euskal Herria, the unemployment rate among women over fifteen is a little
higher than that of the whole population. Among adult males in particular, the
unemployment rate is lower.

1.2.5. Level of education

Euskal Herria is the country in which the highest proportion of people have a university
degree in the European Union of 27 states.

Educational level of the population between 25 and 64 (%). Educational level of women between 25 and 64 (%).
Euskal Herria and the European Union, 2010 Euskal Herria and the European Union, 2010
> < > <
secondary secondary Higher secondary secondary Higher
education education education education education education
Euskal Herria 33,8 24,5 41,7 Finland 14,8 41,3 44,0
Finland 17,0 44,8 38,1 Euskal Herria 33,9 24,0 42,1
Scotland 22,5 40,1 37,3 Norway 19,5 39,5 41,0
Norway 19,1 44,0 36,9 Eastern Finland 15,4 44,5 40,2
Denmark 23,5 42,3 34,2 Scotland 25,9 34,5 39,6
Sweden 18,4 47,4 34,2 Iceland 18,5 42,1 39,4
Walloon region 32,8 34,6 32,7 Denmark 33,9 28,2 37,8
Iceland 33,5 34,0 32,5 Walloon region 24,9 37,9 37,1
Eastern Finland 18,2 49,9 31,9 Spain 32,3 32,8 34,9
Spain 47,4 22,0 30,7 Brandenburg 46,3 21,7 32,0
Brandenburg 6,3 63,4 30,3 France 6,3 62,0 31,7
Baden-Württemberg 15,5 55,4 29,1 Brittany 30,4 38,9 30,7
France 29,2 41,8 29,0 Rhöne-Alpes 25,1 44,3 30,6
Rhône-Alpes 27,9 43,4 28,6 Zeeland 29,1 41,2 29,7
Brittany 23,2 48,8 28,0 Poitou-Charentes 31,9 39,9 28,2
Germany 14,2 59,2 26,6 European Union(27) 30,4 42,0 27,5
Zeeland 29,9 43,7 26,4 Germany 28,3 45,1 26,7
European Union(27) 27,3 46,8 25,9 Baden-Württemberg 16,7 59,9 23,4
Poitou-Charentes 29,3 48,0 22,7 Finland 18,8 58,2 23,0

Sources: INE eta INSEE. Table 11. Level of education in Euskal Herria and Europe (Gaindegia)
 86

If the changes that have taken place in Basque society have had one notable aspect, it
has been in the level of education. Although there are still some imbalances, the growth in
educational level is striking. It has been most particularly significant for women; according
to the data available, education levels between the sexes in Euskal Herria is one of the
most balanced in Europe.

This fact is highly significant because the situation of women is one of the best
indicators of a country's state of development. By this it is meant that the better the
situation of women, the higher the whole society's quality of life. When women's situation is
unsatisfactory, the situation of the whole country tends to be worse.

1.2.6. Social protection and risk of poverty

This is an indicator, expressed as a percentage, of the population's risk of poverty and
social exclusion. It includes people who live in or belong to families in danger of falling into
poverty, severe material shortage or with little employment. There is more than one way to
measure risk of poverty, and we have had to harmonise the statistics used by Eurostat,
Eustat INE and INSEE.

Another way to express the well-being of a country is to calculate the fraction of its
gross domestic product that is spent on social welfare. Social protection is, in short, the
amount of help given by public and private organisations in the areas necessary to ensure
that there is coverage of issues such as health, sickness, disability, old age, housing and so
on, to allow people to live with dignity.

Spending on
on social protection (%of GDP). Euskal Herria and European Union, 2001-
2001 -2008
Growth % of
2001 2002 2003 2004 2005 2006 2007 2008 GDP
2008
France 0,12 0,85 0,57 0,33 0,14 -0,65 -0,25 0,38 31,01
Denmark 0,36 0,47 1,19 -0,17 -0,48 -1,00 -0,48 0,88 29,64
Sweden 0,56 0,83 0,97 -0,66 -0,43 -0,77 -1,15 0,30 29,52
Netherlands 0,11 1,08 0,69 0,08 -0,48 0,95 -0,50 0,18 28,48
Austria 0,30 0,38 0,45 -0,33 -0,37 -0,48 -0,47 0,65 28,42
Belgium 0,87 0,35 0,73 0,02 -0,08 -0,26 -0,28 1,36 28,14
Germany 0,07 0,65 0,42 -0,65 -0,06 -1,12 -1,11 0,18 27,97
Italy 0,24 0,36 0,50 0,18 0,39 0,26 0,09 1,08 27,81
European Union (27) - - - - - -0,45 -0,90 0,97 26,70
United Kingdom 0,42 -1,13 0,03 0,14 0,38 -0,24 -2,75 3,01 26,28
Greece 0,82 -0,31 -0,52 0,15 1,23 -0,13 0,09 1,47 26,27
Finland -0,07 0,69 0,91 0,05 0,04 -0,28 -1,06 0,80 26,16
Norway 1,04 0,53 1,25 -1,33 -2,04 -1,24 0,28 -0,39 22,49
Spain -0,30 0,33 0,26 0,05 0,24 -0,06 0,16 1,44 22,12
Ireland 0,95 2,31 0,63 0,22 0,06 0,30 0,51 3,28 22,04
Iceland 0,20 1,82 1,73 -0,35 -0,95 -0,45 0,20 0,55 21,97
Euskal Herria 0,21 0,23 0,21 0,00 - - 0,18 1,28 21,42
Estonia -0,86 -0,34 -0,12 0,46 -0,44 -0,43 -0,02 2,76 14,87
Sources: Eurostat, Eustat, INE and INSEE.
Table 12. Spending on social protection, as a percentage of GDP (Gaindegia)

As we see, Euskal Herria is not the best case in Europe. It is seven percentage points
below the average for the European Union (27). The Basque index is far from that of France
and also below Spain's. In the field of social protection, the difference between the
northern and southern parts of Euskal Herria is very significant. It is in this area that one of
the most striking differences between the societies on the two sides of the state border is
to be found. Many inhabitants of the northern side opt for the French system because it
provides greater protection. They are right! In most European systems of statistics
including the Basque ones (Eustat, INE and INSEE), people who are short of many material
things are among those classified as being persons or families at risk of exclusion: this
includes, among other things, not being able to afford to pay rent, heat one's home or
feed oneself enough protein on a regular basis.
 87

EUSKAL HERRIA AMONG THE NATIONS.

The socio-demographic dimension: risk of poverty. The risk of poverty is small in the methodology
of the European Union
Increase of the risk of falling into poverty and number of people (%). Europe, 20052005-- 2009
2005 2006 2007 2008 2009 2009
Spain -1,0 1,0 -1,0 -0,5 -0,5 19,5
Italy -1,0 3,7 1,5 -6,0 -1,6 18,4
United Kingdom 0,0 -0,5 -1,1 -7,5 17,3
European Union (27) 0,6 1,2 -1,8 -0,6 16,3
Germany 2,5 21,6 0,0 2,0 15,5
Ireland -5,7 -6,1 -7,0 -9,9 -2,6 15,1
Switzerland -6,8 15,1
Belgium 3,5 -0,7 3,4 -3,3 -0,7 14,8
Finland 6,4 7,7 3,2 4,6 1,5 13,8
Sweden -15,9 29,5 -14,6 16,2 9,0 13,3
Denmark 8,3 -0,8 0,0 0,9 11,0 13,1
France -3,7 1,5 -0,8 -3,1 1,6 12,9
Norway 5,6 -0,9 9,7 -8,1 2,6 11,7
Netherlands -8,3 5,2 2,9 5,7 11,1
Iceland -3,0 -1,0 5,2 0,0 1,0 10,2
Euskal
Eu skal Herria - 2,9 5,8 - 24,6 9,3
Source: Eurostat, INE and INSEE.
Table 13. Risk of poverty in Euskal Herria in a European context (Gaindegia)

The risk of poverty in Euskal Herria may overall be considered small. In this case, the
small size of the country with only three million inhabitants, probably helps. In any case, of
late, owing to the crisis, new groups of poor are appearing among the citizens of Euskal
Herria, especially among immigrants and women.

Risk of falling into poverty. Euskal Herria

He rria and the European Union, 2005-
2005- 2010
Growth Rate
2005 2006 2007 2008 2009 2010 2010
Czech Republic - -0,5 -0,3 -0,6 -0,4 0,4 9
Iceland -0,3 -0,1 0,5 0 0,1 -0,4 9,8
Netherlands - -1 0,5 0,3 0,6 -0,8 10,3
Euskal Herria -1,9 0,3 0,6 -3,2 1,9 1,6 10,9
10, 9
Norway 0,6 0,9 -0,4 -0,5 0,3 -0,5 11,2
Slovakia - -1,7 -1 0,3 0,1 1 12
Austria -0,5 0,3 -0,6 0,4 -0,4 0,1 12,1
Hungary - 2,4 -3,6 0,1 0 -0,1 12,3
Slovenia - -0,6 -0,1 0,8 -1 1,4 12,7
Sweden -1,8 2,8 -1,8 1,7 1,1 -0,4 12,9
Finland 0,7 0,9 0,4 0,6 0,2 -0,7 13,1
Denmark 0,9 -0,1 0 0,1 1,3 0,2 13,3
France -0,5 0,2 -0,1 -0,4 0,2 0,6 13,5
Luxembourg 1 0,4 -0,6 -0,1 1,5 -0,4 14,5
Belgium 0,5 -0,1 0,5 -0,5 -0,1 0 14,6
Switzerland - - - - -1,1 -0,1 15
Malta - 0,1 0,8 0,2 0,3 0,2 15,5
Germany - 0,3 2,7 0 0,3 0,1 15,6
Estonia -1,9 0 1,1 0,1 0,2 -3,9 15,8
Ireland -1,2 -1,2 -1,3 -1,7 -0,5 1,1 16,1
European Union (15) -1,3 0,2 0,1 0,2 -0,1 0,1 16,2
European Union (27) - 0,1 0 -0,1 -0,1 0,1 16,4
Cyprus - -0,5 -0,1 0,7 0 0,8 17
United Kingdom - 0 -0,4 0,1 -1,4 -0,2 17,1
Poland - -1,4 -1,8 -0,4 0,2 0,5 17,6
Portugal -1 -0,9 -0,4 0,4 -0,6 0 17,9
Italy -0,2 0,7 0,3 -1,2 -0,3 -0,2 18,2
Greece -0,3 0,9 -0,2 -0,2 -0,4 0,4 20,1
Lithuania - -0,5 -0,9 0,9 0,6 -0,4 20,2
Croatia 0 -1 1 -0,7 0,6 2,6 20,5
Bulgaria -1 4,4 3,6 -0,6 0,4 -1,1 20,7
Spain -0,2 0,2 -0,2 -0,1 -0,1 1,2 20,7
Romania - - - -1,4 -1 -1,3 21,1
Latvia - 3,9 -1,9 4,4 0,1 -4,4 21,3
Table 14. Risk of poverty in the European Union (Gaindegia)
 88

2. INDICATORS OF ECONOMIC AND SOCIAL DEVELOPMENT:

DEVELOPMENT: NATIONAL
COHESION INDI
INDICATORS

Indicators of economic and social development, or socio-economic indicators, provide very

useful information about the situation of a given society. When they are state indicators,
they can tell us how the state ranks among others and show what kind of economy and
social policies each state has.

Indicators of economic and social development can also reveal differences between
geographical areas within a state and give an indication of what the criteria of territorial
organisation in each state are.

In the case of stateless nations such as Euskal Herria, it is very important indeed to have
indicators of economic and social development if we wish to know how much cohesion
there is between different territories. We can assume that the greater the difference
between parts of the nation in this respect, the lower the degree of national cohesion there
will be. For example, young people in the northern Basque Country know that in the south
they will get less social protection, as a result of which there are not many of them who will
take an interest in the job market in the south. The existence of administrative borders of
different kinds can lead to different levels of economic and social development.

Stateless nations in the European Union can find some resources in European and state
administrations to improve and harmonise the level of development of their economies
and societies. However, they will never achieve the same amount of powers and resources
as states will. Subordination to a state and administrative fragmentation of a nation's
territory are factors that undermine a nation's cohesion.
 89

REFERENCES

Bauman, Z.(1997): “Is there a postmodern pociology?”, in S. Seidman (ed.), The postmodern turn.
New perspectives on social theory, Cambridge University Press, New York, 187-204.
––––––––––, (1997): “Espíritus de estado. Génesis y estructura del campo burocrático”, in P.
Bourdieu (ed.), Razones prácticas. Sobre la teoría de la acción, Anagrama, Barcelona,
91-125.
Guinjoan, M. & Cuadras Morató, X. (2011): Sense Espanya. Balanç económic de la independència,
Raval Edicions SLU, Pórtic Barcelona.
Otxoa de Retana, A.: Euskal Herriko zifrak 2011, GANDIEGIA, Andoain.
HARIA (journal), nº 30, 2012 Nabarralde.
(www.)arcat.org/ Atlantikoko Arkuko Hirien Bilgunea [ez du funtzionatzen]
arcatlantique.org/ Atlantic Arc Commission
(www.)ces.eu.int Europako Ekonomia eta Gizarteko Batzordea [ez du funtzionatzen]
www.cesvasco.es Euskadiko Ekonomia eta Gizarte Arazoetarako Batzordea
www.datutalaia.net Euskal Herriko Datuen Talaia
(www.)eurocitie-basque.org/ Euskal Euro Hiria [honek ez du funtzionatzen,
funtzionatzen, baina bai:
http://eurocite- basque.org/ ]
http://eurocite-basque.org/]
www.eurocities.org/ Eurocities
eurometrex.org METREX: The network of European Metropolitan Regions and Areas
gaindegia.org Euskal Herriko Ekonomia eta Gizartearen Garapenerako Behatokia
www.interreg3c.net/ INTERREG IIIC
www.lurraldea.net Devvelopment Council of the [Northern] Basque Country / Council of Elected
Officers of the [Northern] Basque Country
cesr-aquitaine.fr Aquitaine Regional Economic, Social and Environmental Council
 90

2. The Basque state and socioeconomics.

socioeconomics.

N ek an e J urado P érez , d e grees i n e co no mi cs an d s cie nc e co mp ani es ,

bus in es s an d f in an ces s ci en ces a nd c lin ica l ps y cho l o gy , s o cial res e arc her

Globalization theory and its invisible arm — the markets — limit the relevance of politics
and its area of influence: governments are seen as captives of international economic
forces, since these forces configure the space which determines what it is possible for each
state to do. A different kind of Euskal Herria could be constructed outside that which has
been designed by “the markets”.

Our initial premise, in developing a strategic approach to attaining economic

independence so that a new model may be implemented that is fairer and more humane
that the one to which we are currently subjected, is that the socioeconomic feasibility of our
project ensues from the characteristics of the Basque Country: small size, an excellent
geographical location, and the sufficiency of its human, economic and financial resources.
This chapter examines all these issues as well as looking at the principal economic flows
between Euskal Herria and Spain.
 91

1. THE MAIN INDICATORS OF ECONOMIC FLOWS

1.1. Commercial and capital flows

Are markets an economic reality or a paralysing concept?11

The most powerful present-day concept in both politics and economics is that of markets,
even more so than economic globalisation which reigned supreme for the past twenty
years. It is attributed so much authority that it is blamed for nations' diminished role in
shaping their own destiny. The markets are given permission to dictate to national and
regional governments what political and economic direction they should take, limiting the
options open to such governments to a degree with no historical precedent.

In this way, globalisation theory and its invisible hands, the markets, reduce the
importance and even the space that belongs to the political: governments play the roles of
institutions trapped by world economic forces that configure the framework of the possible
within each state. This discourse, which has turned into an unquestionable dogma of faith
(with no division of powers!), is invoked to diagnose the situation, decide on the cure and
prescribe the dosage required of all public policy, while all along there is a dismantling of
all forms of social and worker protection. Surgical operations! And since this is not covered
by law, there is an attempt to give it a constitutional rubber stamp.

In Euskal Herria the political response to globalisation has been a long series of steps
to cut labour, fiscal and social protection costs in pursuit of competitiveness so as to (as the
politicians put it) respond to market demands. In the study referred to in footnote 1, it was
shown how deceitful the premises are that are cited in globalisation theory, no matter how
much they have been sanctified as if they were a new law carved in stone. To quote J.
Hagland in a Washington Post article in 1995:
The financial markets and central banks that set interest rates are now the generals in a war that has
been going on for twenty years and is theoretically justified as necessary to control inflation but in
practice leaves governments bereft of their power and democracy impoverished. Too scared to
raise taxes and afraid of upsetting the bond and security markets, the politicians have surrendered
to the financiers in the battle over budgetary and fiscal policies.12

Globalisation and its markets are spoken of as a global concept (pardon the
redundancy), but in reality refers to a number of quite different things: there is globalisation
of trade, globalisation of productive capital and globalisation of financial capital.

a. Globalisation of trade in South Euskal Herria

South Euskal Herria (henceforth SEH) has not only displayed a historical tendency to
trade with the countries of the OCDE and above all with the European Union, but appears
to have consolidated these trade flows, maintained by the weight of trade relations within
them, between the multinational matrix and subsidiaries in SEH such as Mercedes-Benz,
Wolksvagen and so on.

11
Jurado N. (1999) “Ejes económicos para una construcción nacional”- Formazio Koadernoak Nº 26, published by IPES. I carried out a
similar exercise twelve years ago, and except for the figures which need to be updated, the study is fully up to date, so I shall base the
present work on the same ideas again.

12
Hagland, J. Washington Post, 10 Dec. 1995. [Translator's Note: This text is retranslated from a Spanish translation since the English original
could not be recovered.]
 92

It should be noted that the publicly available figures do not show the full volume of
trade between SEH and the Spanish state, for which reason a complete analysis of SEH
external trade is not possible.

2006 2008 2010

A-B-G* Navarre SEH* A-B-G* Navarre SEH* A-B-G* Navarre SEH*

Total exports 16.647,40 5.495,70 22.143,10 20.279,40 6.378,90 26.658,30 17.545,90 7.407,30 24.953,20

OCDE 13.939,90 4.810,10 18.750,00 16.044,20 5.158,10 21.202,30 12.902,30 6.128,90 19.031,20

European Union 11.653,60 4.184,00 15.837,60 13.541,50 4.272,70 17.814,20 10.837,50 5.803,90 16.641,40

France 3.068,90 1.241,60 4.310,50 3.524,70 1.210,80 4.735,50 3.020,40 1.343,30 4.363,70

Non-OCDE 2.707,50 685,60 3.393,10 4.235,20 1.220,80 5.456,00 4.643,60 1.278,40 5.922,00

Total imports
imp orts 17.478,10 5.250,60 22.728,7 20.118,00 4.908,60 25.026,60 15.257,20 4.468,20 19.725,40

OCDE 10.056,60 4.489,90 14.546,50 11.016,60 3913,25 14.929,85 8.788,50 3.664,90 12.453,40

European Union 8.878,00 4.390,70 13.268,70 9.747,40 3.762,00 13.509,40 7.394,40 3.622,80 11.017,20

France 1.779,00 624,5 2.403,50 1.989,00 506,3 2.495,30 1.560,90 542,1 2.103,00

Non-OCDE 7.421,50 760,70 8.182,20 9.101,40 995,35 10.096,75 6.468,70 803,30 7.272,00

Trade balance -830,70 245,10 -585,60 161,40 1.470,30 1.631,70 2.288,70 2.939,10 5.227,80

A-B-G = The three provinces of Araba, Bizkaia and Gipuzkoa. SEH = South Euskal Herria.
Sources: Eustat's foreign trade statistics. Customs registry, Government of Navarre: foreign trade statistics.

Table 1. External trade of the Southern Basque Country (2006-2010), in €m

Let us note that SEH's trade balance (its exports and imports) is positive, with a growing
surplus which was around €5,227.8m in 2010.

The historical trend peaked, for external trade, in 2008, the first year of the crisis; from
then on, the recovery of imports is much slower than that of exports, owing to the
continued weakness of domestic demand due to a combination of sharp cuts in public
spending, an overall drop in earnings from wages and the reduction of domestic
investment, not because of the lack of capital (this is analysed in the next section) but
because Basque capital is investing abroad, turning its back on its own economic
heartland.

In 2010 two-thirds (66.69%) of exports went to the European Union13, with France, the
top commercial trading partner, absorbing 27.2% of total EU sales. In imports, 55.85% were
with the EU, and again France was SEH's number one supplier, with 19% of its purchases
from the EU.

13
The integration of Navarre with the EU is much higher than that of Araba, Bizkaia and Gipuzkoa; in 2010 Navarrese exports to
the EU were 78.35% of the total and its imports were 81%.
 93

b. Globalisation of productive
productive capital
Analysing the flow of foreign investment in SEH, we note that in Euskal Herria there is
no shortage of capital. Quite the contrary: in Araba, Bizkaia and Gipuzkoa what is going on
is a massive outflow of capital being sent abroad at the expense of the stagnation of
internal productive investment. I call it a massive outflow becuse the qualitative significance
of the drain of capital is much greater than that of any other economic indicator. According
to the records of Spain's Ministry of Industry, Tourism and Commerce, in 2008 and 2009
investment in these three provinces represented a little more than 11% of the total foreign
investment of the Spanish state.

2008 2009 2010

A-B-G* Navarre SHE* A-B-G* Navarre SHE* A-B-G* Navarre SHE*

Foreign
investment in SEH 429,4 123,9 553,3 770,3 27,8 798,1 252,2 109,4 361,6

Invested abroad
by SEH 5.341,60 72 5413,6 2.507,40 34,2 2541,6 2.111,20 5,3 2116,5

Balance of
capital -4.912,20 51,90 -4.860,30 -1.737,10 -6,40 -1.743,50 -1.859,00 104,10
104,10 -1.754,90

A-B-G = The three provinces of Araba, Bizkaia and Gipuzkoa. SEH = South Euskal Herria.
Sources: Foreign investments: Ministry of Industry, Tourism and Trade. Gross investment. Includes ETVE (foreign stock holding entities).

Table 2. Foreign investment in Southern Euskal Herria (2008-2010), in €m

Hence the challenge for SEH is not to compete for foreign investment but to provide
incentives for domestic capital to stay home.

c. Globalisation of financial capital

Financial capital is the heart and soul of "the markets", and its instability and economic
knuckle are responsible for the economic and social problems wrongly attributed to
globalisation of trade and productive capital.

Twelve years ago, in my 1999 study (see footnote 1), I said something that no one else
wanted to admit: "It is widespread financial instability and speculation that are leading to
less productive investment which results in less growth of the real economy, which is the
main cause, in turn, of the growth of the public deficit. This process is the opposite of what
is preached by neoliberal ideology, which considers the public deficit the culprit, rather
than the consequence, of the economic slowdown."

This capital is opaque to statistics and registers, particularly when hidden away in tax
havens. But there are many telltale signs of it in SEH, such as deposits worth over 30% of
the entire GDP in mutuals and pension funds, annual fiscal fraud worth over 15% of the
GDP and the higest concentration of income in the EU, which mean that the sum of
speculative financial capital in Basque hands is much greater than the average for countries
of Euskal Herria's geographical size.

1.2 Insititutional economic flows

In the preceding session we lacked data for the northern Basque Country with which to
analyse the total for Euskal Herria as a whole — this is a constant problem when studying
 94

the flow of institutional money — and the analysis in the present section is also limited to
SEH given the specific nature of the economic agreements whereby the Basque Country is
required to pay an annual sum to Madrid independently of what Madrid gives back to SEH.
The clearest way to analyse the economic subjection of SEH to the Spanish state is through
a study of the net economic flow between the two.

To perform a breakdown of the instutional flow between the Basque Country and the
Spanish state, it is necessary to know the total that the SEH "pays in" through different
routes (which include the Basque economic agreement, social security payments by
workers and employees, other taxes, lottery takings, public deficit financing and so on, and
what it receives from the state (in the forms of pensions and unemployment benefits
provided by the national health service and the Public Institute of Employment, lottery
prizes, real spending and investment in SEH by the state in areas not covered by the
above, funds from the European Union, and so forth).

Given the complexity of these calculations, there are no comprehensive studies on the
matter. In 2003 the net annual flow in SEH was estimated at around €3,600m.14

Some figures:
figures:

a. The Basque Economic Agreement

The fiscal and financial relations between each of the southern Basque provinces and the
Spanish state are laid out in legal documents establishing economic agreements between
each of the parts. The northern Basque provinces, on the other hand, are regulated entirely
by French fiscal law.

The economic agreement represents one of the chief short-term threats to the financial
sustainability of the Basqe public administration given the fact that it represents a unilateral
risk for SEH.

The Spanish state does not take part in tax collection in these provinces, so it doesn't
cover the public costs of the transferred powers either. SEH contributes 7.84% of the
operating costs of the state for undevolved powers through the Economic Agreement,15
(6.24% from Araba, Bizkaia and Gipuzkoa taken together, plus 1.6% from Navarre).

Thus the amount of money implied by the agreement depends on several externally
determined variables: the state's expenditure on powers that have not been devolved
(referred to below as "undevolved competences" or UDCs) without taking into consideration
either the amount collected in SEH or its own costs. As a consequence of these
circumstances, the results of the economic cycle, as determined by how much is collected
through taxation and how high public spending is, are covered exclusively by SEH.

Given the difficulty of calculating the gross quota (known as the Cupo), at the
beginning of each five-year period a fixed amount is established taking the current year as

14
Analysing only the flows of the Social Security and the Department of Employment (INEM) in Araba, Bizkaia and Gipuzkoa, an economic
report showed that between 1998 and 2003 Madrid was paid 3,482.7 million euros. (“El sometimiento de Hego Euskal Herria a Madrid”
(2004) N. Jurado. Editado en la red por Red Vasca Roja ).

15
In the general budget of the state, undeveolved competences (UDCs) account for over 60% of expenditure. And it is precisely the
spending on UDCs that are growing much faster than average spending. The cost of the public debt, the bank bailout, the principal
contributions to NATO both financially and in human resources, infrastructure, unemployment payments, early retirement costs and so on
are all UDCs, 7.84% of which will have to paid by SEH when that part of the quota is calculated (this part of the payments of each budget
year is paid according to the estimate of the provisional quota). This greater commitment coincides with a drastic drop in agreed tax
collection which has fallen by 25%, and the financial problem that arises from this quota mechanism is leading the autonomous
administrations towards bankrupcy: the first effects of this are already being felt in Basque town councils, since they are at the bottom of the
list when it comes to sharing out what has been collected. This may be compared to having a loan during an economic crisis: even though
the family's income diminishes, its payment has the highest priority even if the family is unable to cover its most basic needs.
 95

the basis, and in successive years a provisional amount is calculated which is subsequently
modified when "squaring up".

The adjustments that are carried out afterwards taking into account the state's public
deficit or surplus and income collected by the state in the form of customs, lottery, subsidies
received and so on, give rise to an operation popularly referred to as the cupo and which is
budgeted in a legal document under the heading of "liquid quota", without any mention of
the amount of the gross quota. In 2010, according to the budgets, SEH was to pay Madrid
€1,783.68m as a provisional liquid quota: €1,241.98m in the Basque Autonomous Community
and €651.7m in Navarre.

The Joint Committee on the Economic Agreement (Comisión Mixta del Concierto
Económico) approved a procedure on the 30th of July, 2007, in Madrid, for specifying the
quota for Araba, Bizkaia and Gipuzkoa for the five-year period 2007-2011, making 2007 the
base year for this five-year period. It was determined that there would be a gross quota of
€5,350.96m16 and that the liquid quota to pay that year would be €1,565.23m. The
corresponding figures for Navarre that year were 1,372.04 million and 596 million, respectively.

We should also mention that undevolved competences represent more than half of the
spending in the Spanish government's yearly budget. And it is precisely the UDCs that are
growing much faster than the average for spending as a whole. At this very time when
there is a crisis everywhere, the state is increasing its spending on UDCs. The cost of the
public debt, the bank bailout, the principal contributions to NATO both financially and in
human resources, infrastructure, unemployment payments, early retirement costs and so
on are all UDCs, 7.84% of which will have to paid by SEH when that part of the quota is
calculated (this part of the payments of each budget year is paid according to the estimate
of the provisional quota). This greater commitment coincides with a drastic drop in agreed
tax collection which has fallen by 25%, and the financial problem that arises from this quota
mechanism is leading the autonomous administrations towards bankrupcy: the first effects
of this are already being felt in Basque town councils, since they come last in the pecking
order when it comes to sharing out what has been collected.17 This may be compared to
having a loan during an economic crisis: even though the family's income diminishes,
paying it off has the highest priority even if the family is unable to cover its most basic
needs.

2004 2005 2006 2007 2008 2009

A-B-G* 328,81 374,73 411,36 477,69 520,17 565,47
Espainiar Estatuaren inbertsioak
Nafarroa 143,37 79,15 116,58 140,51 152,8 209,09
SEH* 472,18 453,88 527,94 618,2 672,97 774,56
A-B-G* 1.339,60 1452,75 1.572,77 1.565,23 1.556,41
Kupo Likidoa
Nafarroa 464,20 487,70 580,99 596,00 532,00
SEH* 1.555,00 1.803,80 1.940,45 2.153,76 2.161,23 2.088,41
* A-B-G = The three provinces of Araba, Bizkaia and Gipuzkoa. SEH = South Euskal Herria.
Sources: Ministry of Territorial Administration and Public Administration. General Budget of the BAC and Navarre.

Table 3. SEH's contribution to the liquid quota and the Spanish state's investments, in €m

16
This corresponds to 6.24% of the state's total spending on undevolved competences, which at the time was estimated to have a value of
85,752.62 million euros. Navarre pays 1.6% of undevolved competences through the Concierto Económico.

17
The provincial governments collect their taxes, and first of all the quota is paid. In the BAC, 70% of the rest goes to the Basque
Government and the provincial governments must pay their expenses and those of the town councils out of the remaining 30%. In
Navarre, after paying the quota, the Government of Navarre pays its own budget and whatever is left over is distributed among the town
councils.
 96

Between 2004 and 2009, Madrid was paid more than €11,700m as liquid quota, while
investment by the Spanish state in SEH over the same period adds up to €3,520m.

The quota is one manifestation of the situation of dependency in the Basque Country's
financial relationship with the Spanish state, but of course it is not the only dependency
relationship; another important channel where money is funneled to Madrid is that of the
Basque Country's net payments to the Spanish social security system. The bottom line is
that the situation of dependence entailed by the agreements between the Basque
provinces and the Spanish state (i.e. the Convenio Económico, the Concierto Económico,
the "Amejoramiento" and the Statute of Autonomy) shows up in an analysis of economic
flow between SEH and Madrid.

b. Investment by the Spanish state

Direct investment
The state invests in the undevolved areas of competence. In 2009 direct investment by
the Madrid government in South Euskal Herria amounted to 2.98% of the total amount
invested by the Spanish state in the same spending areas; this percentage comes nowhere
near the Basque proportion of the state's GDP, the size of the Basque population, or any
other indicator one might think of using, and the contribution of the SEH to the state in the
same period was 7.84%.

It should be said that much of this investment goes into infrastructure on Basque
territory whose desirability is questioned socially. Thus, 65% of the investment mentioned is
on ADIF (responsible for the high-speed rail project to connect Spain to France), the state-
owned ports of Bilbao and Pasaia, the airport authority AENA and SETTSA.

2008 2009
A-B-G* Navarre SEH* A-B-G* Navarre SEH*
Administrative public services 95,6 28,52 124,12 77,14 33,72 110,86

Public services to businesses and 424,57 124,28 548,85 488,33 175,37 663,70
foundations
TOTAL 520,17 152,8 672,97 565,47 209,09 774,56
* A-B-G = The three provinces of Araba, Bizkaia and Gipuzkoa. SEH = South Euskal Herria.
Source: Ministry of Territorial Administration and Public Administration. February 2011

Table 4. Investment by the Spanish state in SEH 2008-2009, in €m

European funds
SEH provides 7.84% of the Spanish state's entire contribution to the EU. Out of the total
amount approved in regional community aid for the period from 2007 to 2013, SEH has
been assigned €763.11m, which is only 1.91% of the money given to the Spanish state
during that time.

A-B-G* Navarre SEH*

Total (ERDF) 271,34 57,65 328,99
Total (ESF) 152,4 34,1 186,5
EAFRD 78,14 112,3 190,44
FEP 56,38 0,8 57,18
TOTAL 558,26 204,85 763,11
* A-B-G = The three provinces of Araba, Bizkaia and Gipuzkoa. SEH = South Euskal Herria.
Source: Ministry of Territorial Administration and Public Administration. February 2011

Table 5. Overview of community investments, in 2007-2013, in millions of euros

 97

c. Social Security
Social Security (SS) flows are complex; here we shall consider the biggest component thereof
(covering more than 95% of the total) consisting of SS payments including SS coverage of accidents
in the workplace and occupational diseases as well as unemployment benefits, occupational
training and the wage guarantee fund (FOGASA) and the fund for pension and unemployment
services and those received from FOGASA and derived from restructuring processes (early
retirement).

Historically18 the net balance of Social Security flow (i.e. everything paid in minus the total of
services provided) has tended to be in Madrid's favour: in the period between 2000 and 2009, a net
amount of €12,438.27m was paid into Social Security's Single Fund (Caja Única). 2010 was a year of
negative flow according to the provisional figures, on account of the crisis which has resulted in less
money being collected and skyrocketing unemployment rates. In Navarre the first ever negative SS
balance of -€56.4m occurred in 2009, and the balance was negative throughout SEH in 2010 too.

2000 2002 2004 2006 2008 2009 2010*

Paid in to SS A-B-G 4.106,31 4.608,75 5.166,65 5.744,72 6.447,71 6.495,11 6.514,40

Paid in (Unemployment,
Training programmes, A-B-G 800,73 898,71 1.007,51 1.120,22 1.257,31 1.266,55 1.270,65
FOGASA)

Navarre** 1.263,73 1.348,10 1.693,06 1.942,86 2.223,92 1.996,25

TOTAL PAID IN SEH 6.170,77 6.855,56 7.867,22 8.807,80 9.928,94 9.757,91 7.785,05

SS services A-B-G 3.499,44 3.951,09 4592,22 5327,93 6132,83 6.398,82 6.792,94

Business restructuring
rest ructuring
A-B-G 8,06 5,79 6,67 10,51 11,14 10,33 6,51
proceseses

Unemployent benefits A-B-G 419,07 465,68 542,51 598,63 692,46 1.188,79 1.224,69

FOGASA A-B-G 15,37 11,93 25,97 20,08 39,92 89,25 108,02

6,51
Navarre** 913,33 1.060,09 1.232,58 1.482,27 1.788,92 2.052,64

4.855,27 5.494,58 6.399,95 7.439,42 8.665,27 9.739,83 8.138,67

TOTAL PAID OUT SEH

SEH 1.315,50 1.360,98 1.467,27 1.368,38 1.263,67 18,08 -353,62

NET FLOW

* Provisional figures. Since they only include Araba, Bizkaia and Gipuzkoa, the net flow only refers to these three provinces.
** The figures given for Navarre include total amounts paid in and services provided by SS, unemployment, professional training and FOGASA.
Sources: Spanish government offices in the BAC; Statistic Yearbook of Work and Social Afairs of the Spanish Ministry of Work and Immigration
(data for various years)

Table 6. Main cash flow of Social Security, in millions of euros

This negative social security balance does not imply in the least that the Spanish state is
financing Euskal Herria in this respect. Rather, the negative flow should be read in the

18
Throughout the eighties the financial effect of the arrangement for Social Security was that the three provinces alone of Araba,
Bizkaia and Gipuzkoa paid out almost 2,700 million euros (i.e. in the currency of the time, 447,000 million pesetas). But between
1992 and 1997, owing to the crisis of 1993 which was aggravated in SEH by the second phase of industrial reconversion, the
financial balance of Social Security was slightly on the negative side for Araba, Bizkaia and Gipuzkoa, to return out of the red from
1998 onwards: in 1998 and 1999 there were net payments to Madrid of 455 and 509 million euros respectively.
 98

context of the way the Spanish social security's accounting system works; it has had a
negative balance everywhere throughout Spanish territory that has had to be made up for
using the social security's reserve fund, and if the present situation of the job market
continues unchanged that will continue to be the case.

The negative balance between services and contributions is mainly explained as

follows:

– The substantial increase in the number of pensioners though early retirements

owing to the crisis was absorbed by the social security funds. Thus the cost was
transferred to the workers' accumulated saving fund held by SS instead of being
paid out of the pockets of the companies concerned or the Spanish ministry of
industry as a cost of the "labour adjustments to maintain levels of business
profits".

– The increase in the average cost of the new pensions owing to the fact that what
are being destroyed are high-quality, long-term jobs, from which money has been
paid in to the social security system over long periods of time on the basis of
better salaries than those now being offered under exploitative junk contracts.

While the demand for services is increased by these two factors, contributions are
simultaneously being undermined by two other things:

– Reduction of the number of people paying in owing to wide-scale loss of jobs.

– Reduction of monthly contributions given that there is a real reduction of wages,

not just through real pay cuts to salaries for regular jobs (as in the case of civil
servants) but also because new work contracts offer lower salaries.

Given this trend, Social Security's so-called "piggy bank" has begun to shrink. SEH
owes its negative balance to the fact that the difference that we have spoken of has come
out of the piggy bank. The curious thing is that the Spanish state has had to take a larger
part out of the piggy bank to make up for its own negative balance, and while the Spanish
state takes out a proportionally larger part than SEH takes, there is still a net contribution by
SEH to Madrid by allowing it a larger part of the "piggy bank" that had previously been
filled with money from SEH.19

2. THE IMPORTANCE OF THE BASQUE PUBLIC SECTOR FOR THE BASQUE

ECONOMY AND SOCIETY

2.1. The configuration of the public sector in SEH

The public sector is made up of public bodies that act in the territorial area. They are the
following, listed by administrative division and powers:
The state
state public sector (general administration and autonomous community bodies
that have not been devolved in SEH). The most important of these in terms of their impact

19
Given its conceptual difficulty, let us attempt to explain what had just been said. Suppose SEH has contributed 10% of the
Spanish Social Security's reserve fund (or "piggy bank"), and the state has put in the other 90%. If at a give time, because of
negative money flows (more paid out in services provided than paid in by wage earners), SEH takes 6% of the piggy bank and the
state takes the other 94%, we see that even in this perios of negative flows SEH is still financing Madrid by allowing Madrid to use a
larger part of the resources than corresponds to what it has generated.
 99

on social cohesion are Social Security and INEM (the department of employment); the list
of undevolved competences is long; in fact, more than half of the Spanish government's
budget is spent on undevolved competences.

This sector is also ultimately in charge of implementation of the European Union's

regional policies.

Governments of the Basque Autonomous Community and the Autonomous

Community of Navarre (general administration and autonomous community bodies which
manage spending for most of the powers devolved by Madrid). This management takes
place in the framework of the legislation of the devolution system itself, in which all laws, in
no matter what area, derive from Madrid; this supreme authority of Madrid over all
legislation is the source of constant conflicts in those areas which are supposedly the areas
of devolved competence of the autonomous community.

Provincial (or foral,

foral, i.e. fuero-
fuero-based) governments of Araba, Bizkaia and Gipuzkoa.
The Law of Historical Territories lays down the legal framework that mediates between the
provincial governments and the government of the Basque Autonomous Community. This
legislation and the laws that ensue have progressively emptied the competences of the
provincial governments of real meaning, limiting them to what are called minor
competences of a more social nature. The true problem underlying this legislation is none
other than the actual distribution of power (made effective through control over funding)
between the Basque Government and the provincial governments.20 In theory the "foral
governments" have the historical right to exclusive control of tax collection on their
territories, but in practice the exercise of that power is not only supervised, but directed, by
the Basque Government itself.

Town councils.
councils These institutions, as well as the financial limitation discussed in the
preceding section (given that their principal sources of income are the provincial
governments), are limited by the state through the Law of Local Revenues (Ley de las
Haciendas Locales) which establishes a legal framework concerning regulation and the
powers of the state. Not only does it set limits on the ability of town councils to collect
revenue, but also to pass laws. Town councils are allowed to join up in larger groupings for
various economic or social purposes, giving rise to inter-district organisms.21

Each of these institutional entities has its own history and background: in a minority of
cases the relationships were the fruits of voluntary pacts; more often they emerged
historically as a result of relations of forced allegiance.

This is the basic legislation within the legal framework of the Spanish constitution which
regulates both the maximum degree of power of the adminstrative bodies in question in
terms of expenditure and revenue and also normative articulation, and the configuration of

20
It is now public knowledge that the main disagreements within the Basque Nationalist Party under Garaikoetxea's mandate were about
this distribution of power, and the first law signed by his successor Ardanza was Law of Historical Territories in 1985.
21
In addition to this institutional structure, in Araba there are also historical institutions called Consejos with their own revenue collection, but
their power is becoming more and more diluted within the municipalities; this may lead to the complete loss of a traditional form of
territorial, social and economic organisation and of institutions that have survived from the Middle Ages, and which were abolished
elsewhere in the nineteenth century.
 100

the "Basque public sector" itself, the limitations of which have been made clear repeatedly
in recent years.

With this clarified, we shall now see how the autonomous community administrations of
Araba, Bizkaia and Gipuzkoa on the one hand, and Navarre on the other, make their
presence felt in economy and society in South Euskal Herria.

2.2. The Basque public sector in big numbers: less money coming in

The Basque public sector provided 12% of all jobs in SEH in 2009 and according to the
2012 budget will account for 17% of its GDP. The portion of the GDP corresponding to the
Basque public sector has fallen by 7.4 percentage points since 2007, reflecting the
calamitous contraction of public spending thereafter, using the crisis as a pretext.

The most notable thing in the crisis is the drastic drop in tax collection, which is much
sharper than the decrease in economic activity. Tax collection in SEH has fallen in terms of
current prices by 14.46% from 2008 to 2012 (bearing in mind the effect of inflation, the real
fall, at constant prices, would be 21.51%), while the GDP at current prices fell by 1.45% in
the same period (8.5% at constant prices).

A careful analysis of this fall in tax collection yields a worrying conclusion indeed: the
crisis has been taken advantage of to increase tax fraud.

This increase in tax fraud correlates directly with the fall in the tax burden in South
Euskal Herria (understood as the quotient of taxes collected divided by the GDP), situated
according to budgetary figures at 17.88% in 2012 as compared to 20.6% in 2007.

The GDP in SEH has fallen by 1.45% in the crisis, and if tax collection were
maintained at the same level of burden it would have fallen by the same proportion,
instead of which it has fallen by 14.46%. So if in 2007 taxes collected represented
20.6% of the wealth that was generated, in 2012 only 17.8% of the wealth generated
will have been paid for, on average, despite the fact that there have been sharp rises
in VAT and taxes on fuels, tabacco, electricity and so on over this period.

An ever larger part of the GDP is escaping taxation through tax havens or simply
through a greater degree of outright fraud. According to a report published by
professor Ignacio Zubiri, tax fraud in the BAC in 2010 was worth more than €10,000m.

The 2010 report of the Observatorio de Responsabilidad Social Corporativa indicated

that 69% of companies in IBEX-35 do business in tax havens, pointing specifically to
Iberdrola, Iberdrola Renovables and BBVA (the last-mentioned has €12,628m deposited in
the Cayman Islands).
 101

AMOUNTS IN €m NAVARRE NAVARRE Variat. % BAC BAC Variat. % SEH SEH Variat. %

2008 2012 2008-

2008- 12 2008 2012 2008-
2008- 12 2008 2012 2008-
2008- 12

DIRECT TAXATION 1.791,24 1.434,62 -19,91 6.794,79 5.746,03 -15,43 8.586,03 7.180,65 -16,37
16,3 7

Income tax 1.112,00 1.118,31 0,57 4.402,08 4.448,09 1,05 5.514,08 5.566,40 0,95

Corporation tax 567,07 236,79 -58,24 2.024,73 1.139,72 -43,71 2.591,80 1.376,51 -46,89

Non-resident 9,31 9,08 -2,47 119,7 76,75 -35,88 129,01 85,83 -33,47
income tax
Inheritance and 37,01 40,43 9,23 80,75 81,27 0,64 117,77 121,7 3,34
donation tax
Wealth tax 65,85 30 -54,44 167,52 0,2 -99,88 233,37 30,2 -87,06

INDIRECT 1.540,76 1.763,84 14,48 6.167,40 5.160,51 -16,33 7.708,15 6.924,35 -10,17
TAXATION
Self-managed VAT 931,22 1.076,67 15,62 3.861,23 3.387,48 -12,27 4.792,45 4.464,15 -6,85

Fuel 235,02 271,91 15,7 1.084,00 1.039,80 -4,08 1.319,02 1.311,71 -0,55

Wealth transfer 84,45 42,95 -49,14 409,74 109,7 -73,23 494,19 152,65 -69,11

Documented legal 57,92 19,98 -65,51 139,71 59,37 -57,51 197,64 79,35 -59,85
acts
Insurance premiums 21,9 20,37 -6,99 81,68 79,72 -2,39 103,58 100,09 -3,37

Means of transport 22,64 6,96 -69,25 80,78 24,58 -69,57 103,42 31,54 -69,5

Tobacco 148,72 135,58 -8,84 355,37 341 -4,04 504,09 476,58 -5,46

Electricity 20,73 23,81 14,89 76,6 94,9 23,89 97,33 118,71 21,97

Other indirect taxes 18,16 61,8 240,23 68,29 23,95 -64,93 86,46 85,75 -0,82

DUTIES AND 14,75 104 122,22 114,39 136,97 218,39

VARIOUS
VAT adjustment 302,29 103,81 1.279,15 1.206,50 1.581,44 1.310,31

Special tax (-81,19) (-110,72)

adjustment
TOTAL TAXES 3.649,04 3.221,90 -11,71 14.282,36 12.116,71 -15,16 17.931,40 15.338,61 -14,46
AGREED
GDP 19.106,97 18.850,56 -1,34 67.924,49 66.918,96 -1,48 87.031,46 85.769,52 -1,45

Tax burden 19,09 17,09 21,02 18,1 20,60 17,88

Source: Compiled from information in the budgets of Navarre and the BAC for 2008 and 2012

Table 7. Comparative table of tax collection and tax burden in 2008 and 2012 (in €m)

2.3
2.3. Resorting
Resorting to massive debt: "social mortgage"

Navarre was set to accumulate a public debt of €1,839.1m (representing 9.8% of its
GDP) by the end of 2011. The outstanding current debt has increased threefold since the
beginning of the crisis: at the end of 2007 it was €628.4m (8.1% of the GDP). Private debt
had reached €23,920m by the end of 2010 (we lack data for 2011). The sum total of debt in
Navarre, combining public and private, amounts to more than 137% of the GDP.
 102

GROWTH OF DEBT OF THE GOVERNMENT OF NAVARRE

Thousands of euros

2.000.000
1.839.081

Navarrese debt
Other sources of financint
1.500.000
Total debt

1.000.000

500.000

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: Department of Economy and Finance

In the general administration for Araba, Bizkaia and Gipuzkoa (not including the
provincial administration or local councils22), the public debt has shot up in the last four
years, the budgets indicate for the end of 2011 an outstanding debt of €5,394.62m and a
net debt increase for 2012 of €1,207.8m, out of a total of €6,432.93m. The financial burden
for 2012, according to the estimation of the budget, will be €401.32m of which €169.48m
corresponds to paying back capital and €231.84m is interest.

December
December 2007 December 2011

Navarre 628,4 1.839,10

BAC 642,0 5.394,62

South Euskal Herria 1.270,4 7.233,72

Source: BAC and Navarrese budgets; Eustat.

Table 8: Public debt of governments of autonomous communities (in €m)

protection23
2.4. Spending on social protection

South Euskal Herria entered its so-called democratic era with the lowest level of public
social spending anywhere in Europe, as a consequence of forty years of dictatorship
characterised by terrible repression and great social indifference. In 1975, the year the
dictator died, Spain (for Euskal Herria had no powers of its own) had a level of public social

22
According to the latest figure available (October 2011) in the 2009 Annual Report of Basque Internal Revenue, the debt of the
foral governments of Araba, Bizkaia and Gipuzkoa at the end of 2 008 was €724,967m, and that of their town councils at the end of
2007 was €644,472m. But these numbers may have become three times as large by now.

23
Social protection is defined by the European System of Integrated Social Protection Statistics as "all interventions from public or
private bodies intended to relieve households and individuals of the burden of a defined set of risks or needs". This spending
leads to the intervention of a third party, be it a public entity or a private not-for-profit body or institution (in all cases occurring as
collective spending, for which reason private spending for personal consumption is not included), without a simultaneous and
equivalent payment by the beneficiary.
 103

spending of 14% of its GDP, a percentage far lower than the western European average of
22%. During the eighties and the early nineties, public social spending increased
substantially as a result of decentralisation and the development of public services which
had previously been very minimal, and reached their highest level in 1993 when spending
on social protection (which includes pensions and other payments, and public services such
as health care and family services such as nurseries, home help for the elderly and disabled,
old age homes and others, subsidised housing and services for the prevention of social
exclusion) rose to 24% of the GDP, which is the percentage of public spending on social
protection ever attained which comes closest to the EU average of 28.8%.

Since the Treaty of Maastricht, however, the deterioration of spending on social

protection has been much faster in SEH than the EU average: between 1993 and 2007
social spending in SEH plummeted from 24% of the GDP to 18.8% in Araba, Bizkaia and
Gipuzkoa, and 16.7% in Navarre, while in the EU as a whole it decreased from 28.8% to
26.2% over the same period.

EU-27 average A-B-G Navarre North EH Spain

Spending on social protection as % of GDP 26.2 18.8 16.7 33.62 21.0

Sources: INE, Eustat, Government of Navarre. For North EH, INSEE, provided by Gaindegia.

Table 9. Spending on social protection in Euskal Herria (2007)

There is a huge difference between social spending in SEH and North Euskal Herria
(NEH): while the South averages less than 18%, the figure in the North is over 33%, and this
creates a major problem which we shall discuss in the last section.

3. STRENGTHS AND WEAKNESSES

WEAKNESSES OF THE PRESENT FRAMEWORK OF
COMPETENCES AND INSTITUTIONS

3.1 Limitations of the present legal framework in the area of economics

The presesnt legal and political framework limits Euskal Herria's economic capacity. In
the system of autonomous communities set up by the Spanish constitution, no allowance is
made for the development of an economic and social policy differentiated from that of the
state, and in the monolithic French state even less freedom exists. The established system
is clearcut: in the South there is a single state (Spain) composed of autonomous
communities with a certain degree of political devolution (a limited legislative capacity
subordinated to the sovereignty of the state); in the North, a single monolithic state
(France) with just an occasional hint of administrative devolution.

In the present period of crisis and change, the economy is becoming increasingly
structureless owing to the centralism of the states to which it is tied; Euskal Herria's
economic structure is becoming progressively weaker, dependent and disperse, while
social inequality grows apace.
 104

The Spanish and French states are the only entities controlling budgetary policy. And it
is they who decide, in part, how foreign investment and European funds are to be
distributed. In the important area of foreign trade, the situation is similar, and it affects the
Basque economy because this is so active in that sector. In South Euskal Herria no progress
has been made in Social Security, employment policy or the Institute of Finance. The states
play a key role in determining the future of Euskal Herria since they retain control of such
basic infrastructure as shipyards, ports, airports, railways and the postal service.

The Spanish constitution of 1978 made no bones about the question of who makes
important decisions on the economy. Subsequent developments and high court rulings,
unambiguously taking the state's side, show that we are looking at a type of state that
imposes a system of hierarchical, top-down relations on the administrations of the
autonomous communities.

Article 2 of the Spanish constitution declares the "indissoluble unity of the Spanish
nation". All rights, including that of property, are subordinated to the common interest. In
the French constitution, Article 1 establishes that France is an indivisible republic, and
Article 3 vests national sovereignty in the people (i.e. the French people). Hence power
over budgetary and economic issues rests unreservedly with the French state.

The economic sovereignty of any people rests on several basic pillars discussed below;
only full control of all of them can guarantee this sovereignty.

a. Full power to regulate the territory

A basic economic infrastructure is built on a country's territory and territorial
infrastructure; this deteremines citizens' standard of living. The first limit placed on this
economic infrastructure is the territory itself; the second is the ability to make decisions
affecting basic infrastructure in the area in question on matters of fundamental importance
such as transport, environment, energy and so on.

The division of Euskal Herria between two states, Spain and France, and between four
autonomous communities within the Spanish state (the BAC, Navarre, Castile-León and
Cantabria), stands in the way of any attempt to implement an economic policy that
responds to its needs based on the concept of a Basque nation. This circumstance
reinforces the peripheral character of Euskal Herria vis-à-vis the Spanish and French states
and the strongly centralist nature of the states, based on their constitutions.

The exclusive powers of the Spanish state which have not been devolved to any
autonomous community include the control of strategic infrastructures; those that affect
Basque territory are the main roads (the N-1 and others that might be declared carreteras
nacionales by Spain), motorways, broad gauge railways (RENFE and TAV), the airports of
Loiu (serving Bilbao), Foronda (Gasteiz), Hondarribia (Donostia) and Noain (Iruñea), and the
major sea ports of Pasaia and Bilbao.

b. Power to regulate the economy

There exists a wide range of possible economic models; those assuming state control
range from neoliberal capitalism, with maximum market deregulation and social
protection, to state socialism, with maximum regulation and market intervention. There are
also other models that fall outside of any higher power structure, such as libertarian
anarchism or the commune.
 105

Choice of one or another model is an attribute of economic sovereignty. Looking at the

models of public intervention which, in one form or another, have developed in Europe over
the past fifty years, the following may be mentioned:

– Market economy and the subsidiarity principle.

principle The state does not interfere
directly in the economic planning of companies, although it does so indirectly
through legislation on employment, taxes and so on, and by facilitating adequate
infrastructure to support the company's activities. Ownership of the means of
production is private, as are the profits therefrom, but part of the production costs
(infrastructure, environment, social protection etc.) is socialised. The market is given
absolute priority over the public sector which only covers things not provided by the
market and deemed necessary for it (this is the subsidiarity principle). This is what is
referred to as the capitalist economy.

– Centrally run economy.

economy The development of both the productive process and
consumption is the result of an Economic Plan established by the state. Ownership of
the means of production is public, and the market is relegated because it is
considered a waster of resources. This is what is referred to as a socialist economy,
such as was developed in the USSR.

– Mixed economy.
economy A mix of the above in which private initiative and the market are
allowed to coexist, with planning in the public sector and public means of production
in state enterprises, focusing mainly on the basic sectors of production such as
energy, finance, health care, education, transport and housing. Depending on which
predominates, the public or the private sector, the economy will lean towards a more
socialising model (which reached its peak in the nineteen-sixties with the welfare
state) or a neoliberal one (as at present).

Venezuela is developing a state based on Bolivarian socialism, basically a mixed

model with a strong emphasis on public property in strategic sectors.

– Social economy.
economy This is the name given to a system in which the means of
production belong to the workers, who are free to regulate them as they see fit, and
consumption is free. The main exponents of social economy are found in
Scandinavian countries.

Although in the official Basque discourse social economy is treated as synonymous

with the cooperative approach, there is a big difference between a socialist
cooperative movement and neoliberal cooperativism.

Along with many positive aspects over past years, we are witnessing many elements
in the Mondragon Cooperative Corporation that are a cause for great concern.
There has been a worrying trend towards the weakening of the sovereign organs and
organs of government in the movement, and a move towards a more technocratic
approach. There is also an increasing risk of diluting the movement's commitment to
Basque society. There is an alarming lack of analysis of the social consequences of
internationalisation and the movement's role in the territorial articulation of Euskal
Herria. It also needs to be said that there has been a progressive weakening of the
ideological component in cooperative training and an increase in the number of
people hired on self-employment contracts, entailing the exploitation of workers and
denial of job security by the very same means used by non-cooperative businesses, a
drop in the participation of the various internal organs and a relative disconnect
between the Mondragon Cooperative Corporation and the social forces that are
working actively in Euskal Herria.
 106

– Identity socialism.
socialism What has been called socialismo identitario ("identity socialism")
is an attempt to adapt economic policy to the place where it is implemented, with
special emphasis on endogenous development, i.e. development based on the local
territory and human, natural, economic and cultural resources, promoting synergies
between these in an integrated and maximally harmonious way based on consensus
through active social participation, giving priority to the social dimension:
redistribution of wealth, social protection, and reorganisation aind distribution of
salaried and non-salaried work. Ownership of the means of production will be both
public and private, adapting the market to the collective welfare. Identity socialism
also envisages public planning that is binding for the public sector so as to make it
"strong, effective and honest" and offers the private sector non-binding guidelines;
the principle of inverse subsidiarity which gives priority to the public over the private
sector; and promotion of the social economy and self-management.

The Spanish and French states both have exclusive power over economic planning
throughout their territories. Euskal Herria has no power whatsoever to choose the
kind of economic order that suits it best. The constitutions of Spain and France
establish the priority of the market and private property, with legislation favouring
neoliberal interests, as we have seen.

c. Public-
Public-sector direct planning and intervention in the economy
Through economic planning and some degree of intervention, the public sector
determines the economic model. The key question in the economy is in whose favour this
intervention occurs: in that of a privileged minority or the majority of the people? Here
again, Euskal Herria lacks the powers necessary to decide that for itself.

Article 149.13 of the Spanish constitution states in black and white that economic
planning is the exclusive competence of the state. In Section VII on Economy and Finance,
Article 131.1 empowers the state to plan general economic activity. This competence is
covered by Article 10.25 of the Statute of the BAC and in Article 56.1.a of the equivalent
Navarrese document. Both of these provisions subordinated to the constitution: in the case
of the BAC, to the "general planning of the economy", and in the case of Navarre to
"bases and planning of economic activity", which in either case refers to the state. Article
138.2 of the constitution states that no statute of autonomy may assign social or economic
privileges. Article 139.1 insists that "all Spaniards have the same rights and obligations in
any part of the state's territory." Article 139.2 ensures "freedom of movement and
settlement of persons and free movement of goods throughout the Spanish territory."
Article 149.2 establishes that "the State shall have exclusive competence over… customs
and tariff regulations [and] foreign trade."

The monolithic French state subordinates the northern Basque provinces of Lapurdi,
Low Navarre and Zuberoa to French economic planning even more thoroughly.

d. Fiscal sovereignty24
Fiscal sovereignty allows planning of what economic resourses will be obtained and
where from. The fiscal and financial relations between Navarre and the Spanish state, and
between Araba, Bizkzia and Gipuzkoa and the state, are determined by agreements between
these areas and Spain. North Euskal Herria is regulated entirely by French fiscal law.

The outcome of the financial and fiscal relations which South Euskal Herria is forced to
maintain with the Spanish state is summed up in the following points:

24
For a detailed analysis of the SEH fiscal system and the scope of the Concierto and the Convenio agreements with the state in
terms of economic subjection, not only of the fiscal and legal model but also economic contribution to the cupo or quota, see
Jurado's (2004) study “El sometimiento económico de HEH a Madrid”, published online by Red Vasca Roja.
 107

– Notwithstanding the Basque Nationalist Party (PNV)'s claims to the contrary, it is not
a system based on a pact between two sovereign bodies. The fuero regime was
modified as a consequence of a series of military defeats in the course of the
nineteenth century; this process emerged out of a loss of sovereignty through force,
with the direct intervention of the Spanish army, with the express purpose of
integrating South Euskal Herria into the Spanish system.

The present legal situation is that established by the Spanish constitution, which
contains no consideration of rights of the Basque people and in the subsequent
development of which it is made perfectly clear, where the fueros receive any
mention at all, that their real function is to maintain them in appearance while
keeping them on a short leash so that their practical content differs little in substance
from the Spanish arrangement. This state of affairs bears no resemblance to an
agreement between two sovereign bodies, and all talk of laws based on a pact is
stuff and nonsense.

– Powers of regulation and taxation.

taxation. The defenders of this system insist that "as well
as the state, the authorities of the Historical Territories have the power to regulate
matters relating to taxation, and can develop and configure their own system of
taxes".

The answer to this statement is to point out that a tax system is a coherent system of
taxes in accordance with a certain set of economic, budgetary and income policies
answering to particular principles and objectives; a set of taxes alone does not
constitute a system of taxation. Underlying the creation of a tax system is a whole
socioeconomic theory going beyond the mere objective of collecting taxes, and the
system revolves around certain predetermined goals.

From this point of view, the taxes over which, by prior agreement, Araba, Bizkaia,
Gipuzkoa and Navarre possess certain rights of regulation and collection do not
constitute a tax system, since Article 3 of the Concierto Económico and Article 2 of
the Convenio themselves incorporate a set of general principles which dictate
defining aspects of the Spanish system of taxation:

- Respect for "solidarity" in the terms laid out in the Spanish constitution and
the statute of autonomy.
- Accommodatio of the general tax structure of the state.
- Coordination, tax "harmony" and collaboration with the state.
- The system is to be subject to any international treaties and pacts that the
Spanish state has signed, ratified or joined.
- The clauses of the agreement shall be interpreted according to the dictates of
the General Law of Taxation.

According to the general law of taxation, the same tax deductions on income tax
and corporation tax are to be applied; the same rules as in the state are applicable
to bank operations and money markets; no fiscal measures to promote investment
may be adopted that differ from those of the state; when establishing rules of
taxation, the institutions of the historical territories must accord with the principles
of the Spanish state's overall economic policy, and on and on it goes.

In these agreements there is a general tendency to uphold the overriding principle

of unity of the market, hence there can be no tax exemptions, no tax-related
privileges, and rules of taxation of a special or exceptional character that are
established by the state must be applied. There are also provisions requiring that
the overall effective tax burden be equivalent to that of the state, and to make sure
 108

nothing is left hanging, the devolution of the management of tax collection is to be

organised in accordance with a principle of cooperation which demands the
exchange of information and joint inspection plans.

The state reserves to itself exclusive powers such as, for instance, those involving
taxes not forming part of the agreement or inspection of the implementation of
these agreements.

SEH is not allowed to create new taxes (such as a Tobin tax or currency conversion
tax); it must comply with the state taxation system — a system where it has no
regulatory capacity over more than half of the taxes concerned — and it is obliged
to follow the state's general fiscal policy.

In short, then, the "broad fiscal autonomy" of the Basque Country is contrained or
blocked by requirements in the Spanish constitution, the statute of autonomy of
Navarre or the BAC depending on the case, and the legal stipulations in the
economic agreements themselves. Not to mention that given that the latter were
approved by the Cortes Generales in Madrid, it is Madrid that has jurisdiction over
any modifications thereunto.

– Unilateral risk of the quota.

quota. As explained earlier in the discussion of economic flow,
the quota is subject to exogenous variables, that is, it depends on the spending of
the state on undevolved competences while allowing no consideration for either how
much tax was collected in SEH or its own spending.

A system of taxation is a coherent set of taxes; their coherence derives from certain
overall principles and criteria and the endeavour to achieve certain objectives which
go beyond the mere intention to collect taxes. A Basque system of taxation ought to
rest on a foundation consisting of criteria and objectives of national construction
based on the decisions of the inhabitants of Euskal Herria.

– Coordination of tax policies. Both agreements contain a clause stating that "the
competent institutions of the Historic Territories shall adopt the relevant agreements,
with the object of applying within their respective territories whatever exceptional or
provisional tax rules the State may decide to enforce in the ordinary territory. Such
rules shall remain in force for the same length of time as in the ordinary territory" and
stipulate that the overall effective tax burden may not be less than that in the rest of
the state.

Despite its triumphalist claims in the media, the PNV has never denied that the
agreement has great limitations and cannot be presented as a fine example of fiscal
sovereignty within a system of subordination to a state. Thus we read in a document
from the president's office titled "Economic reasons for a new institutional
framework" (Razones económicas de un nuevo marco institucional, April 2004):

The restoration of the Concierto by Bizkaia and Gipuzkoa represents the return of an
institution lost during the period of loss of liberty, but is certainly not an example of
what is known in English as a "devolution" process. Bearing in mind that the First
Additional Provision of the constitution "protects and respects historic rights", and
that the Repeal rescinds the laws of 25 October, 1839 and 21 July, 1876 which
abolished the fueros, "devolution" would imply the restoration of the Concierto and
other forms of self-government through their incorporation into the text of the
Statute ("in the framework of the Constitution and the Statutes of Autonomy")
without there being any question of limiting it to the distribution of the powers of
 109

Article VIII of the Carta Magna which would have meant that the Concierto
Económico itself was impossible.

Rather than admitting the fargoing, logical implications of this "constitutionalization

of historical rights", the attempt has been made to stop its scope from extending
beyond the restoration of an Institution which Araba and Navarre already conserved
under the Franco regime, and so to set going a process of deterioration of
competences acknowledged in the Statute of Autonomy, even those that come
closest to the intangible core concept of the fueros, as is shown by the rulings of the
Constitutional Court in numerous cases.25

– Monetary policy.
policy. Article 149.11 of the Spanish constitution declares that the state
has exclusive competence over the monetary system, including foreign currency,
exchange and convertibility, and bases for regulations concerning credit, banking
(including the savings banks) and insurance. The exclusivity of those powers is
reiterated explicitly in Articles 10.26 and 11.2.a of the Statute of Autonomy which
regulates the BAC and in Article 51.1.e and f of the "Amejoramiento del Fuero",
which is the corresponding document for the Navarrese Autonomous Community.

On account of EU monetary and economic policies, certain powers that were held by
the Spanish and French states have been transferred to the European Central Bank
and the European System of Central Banks (see Article 108 of the Maastricht Treaty).
This relinquishment or delegation of powers, let us remember, is entirely voluntary
on the states' part (hence only thirteen of the countries in the EU have the euro, the
UK for example having chosen to remain outside the system and maintain its
monetary sovereignty), having come about through a free pact, an option
unavailable to Euskal Herria which is bound by whatever pacts the Spanish and
French states choose to make.

– Labour relations.
relations. Article 149.7 of the Spanish constitution attributes exclusive
competence to the Spanish state over labour legislation. The state also retains the
exclusive right to regulate social security, establish the minimum wage and any
matters relating to workers' basic rights. In other words: all laws and official
regulations concerning employment and rights relating to employoment are
controlled exclusively by the state. The only competence left to South Euskal Herria
to perform is to fulfil the laws of the state with regard to those services which have
been devolved to it. The demand for a Basque framework of labour relations is a
response to the need to ensure recognition for a domain of Basque decision-making
in this area of concern.

Not only is there a vacuum in legislative capacity on social and labour issues: there is
also a lack of independent administrative entities operating in the area of active
employment policy and intermediary roles for employment, passive employment

25
Ruling 76/1988 of the Constitutional Court (CC) was explicit about the present framework's scope. A summary puts it this way:
"The constitution is not the result of a pact between historical territorial bodies that conserve rights prior to the constitution and
taking precedence over it, but a constitutive regulation of power which imposes by general binding force in its domain, without
exclusion of prior "historical" situations. In this sense, the action of historical rights clearly implies the suppression and non-
acknowledgment of those which contradict constitutional principles. Hence historical rights derive, or keep their current validity,
from the first additional provision of the Spanish constitution, not from their historical legitimacy.

The CC makes it clear that it does not recognise any kind of historical rights which might be interpreted as a projection of a
certain sovereignty. The CC later defines the scope of the foral regime in the framework of the constitution: "What is guaranteed
is the existence of a foral regime, that is, a special regime for each historical territory of territorial self-government, i.e. its
"forality", but not that of each and every right which historically may have characterised it. The institutional guarantee imlies that
the content of forality should preserve, in both its organisational features and its own domain of power, the identifiable image of
that traditional foral regime. It is this identifiable core that is assured, the terms of our ruling 32/1981 of the 28th of July being
applicable to this when it stated that, by definition, the institutional guarantee does not assure a specific content or area of
competence determined and fixed once and for all, but the preservation of an institution in recognisable terms for the image that
the social conscience has thereof in each time and place."
 110

policy (unemployment benefits) and social protection, health at work, further training
for employees, and work inspection which take into account Euskal Herria's
economic, labour and social particularities and diversity.

– International relations.
relations. International relations are specifically regulated by Articles
93 to 96 of the Spanish constitution. It is stated in Article 149.1.3 that these relations
are the exclusive domain of the state. Neither the Statute of Autonomy for the BAC
nor the Amejoramiento del Fuero document for Navarre make the least mention of
any participation whatsoever by these communities in international relations. The
only possible reference to be noted here is Article 20.5 of the Statute of Autonomy
which says: "The Basque Government shall be informed of the concluding of treaties
and agreements and of projected customs legislation, in so far as they affect matters
of particular interest to the Basque Country." In the Navarrese document, on the
contrary, there is no such clause and in its place only the following, in Article 58.2: "It
is also the task of the Foral Community to implement within its territory the
international treaties and agreements which affect matters coming under Navarre's
competence."

Needless to say, Spain's entry into the European Union in 1986 had far-reaching
consequences for South Euskal Herria, and there was no consultation whatsoever,
nor was any option given to take part in the work leading up to the treaty of
accession, the repetition of this procedure for the Treaty of Maastricht, or the
strategic Lisbon Agreement, nor for the treaty establishing a European constitution,
which establishes unambiguously that only states may have international
representation. For the autonomous communities this entails the progressive loss of
their already limited competences, and the area in which this is seen most clearly of
all is in agriculture.

North Euskal Herria entered the European Union in 1958 through the 1957 Treaty of
Rome, one of the founding members of which was the French state.

So to sum up:up Euskal Herria's economic subordinationto the French and Spanish
states (i.e. economic non-sovereignty) entails a set of consequences which leave a
clear mark on EH's economic development and social system.

It is clear that in order to respond to the political aspirations and conquer the
democratic rights and political and economic power to which we are entitled as a
people and distinct nation, it is necessary to set out on a different route from the
present one, a route which can only amount to achieving a new legal and political
framework. However, this new framework ought not be an end unto itself, but the
necessary tool that will lead us towards a new, fairer type of society.

3.2.
3.2. Strong points favouring the creation a Basque state

Euskal Herria has resources to face the challenges of independence

Our starting point for developing our strategic approach to achieving the economic
independence needed to set going a new, juster, more humane model of society than the
one to which we are now subjected, is the concept that the social and economic viability of
our project is the result of the small size of Euskal Herria, its excellent geographical
location, and the sufficiency of its human, economic and financial resources.
 111

a. Any such project will require, as an initial point of departure, to go back and achieve
a new consensus on the need to build in earnest a stronger democracy in politics and the
economy.

Comparative law shows that Euskal Herria is economically viable: approximately one-
fourth of the member states of the United Nations are smaller and have fewer resources
than it. Its area of 20,924.9 sq km and its population of 3,102,884 inhabitants make it the
right size for a national project of human proportions.

b. The territory and population are more than an economic framework: they are an
economic resource in themselves. In this sense it is the territory's specificity which makes it
possible to bring together technology and a given culture to yield a unique product based
on one's own cultural contribution, permitting the social identification of its inhabitants with
an economic process over which there is a consensus and in which the inhabitants see
themselves as participants.

In this framework, research and development acquires special value since, in

combination with a high proportion of well-qualified workers, it implies great advantages
for innovation in a territory characterised by a strong enterprising spirit. Spending on R&D
in Euskal Herria is 1.83% of the GDP, slightly lower than the average for the EU-27 and
France, but well above the average for the Spanish state.

c. With its 200 km coastline, adequate water resources and ample options for
obtaining natural energy, Euskal Herria is a viable, self-
self-contained, natural economic
community.
community It presents an integrated socioeconomic space where each of its current
administrative areas — the BAC, Navarre and the North — complement each other
economically. In Euskal Herria the GDP per capita measured in terms of equivalent
purchasing power is €31,065 for 200926 as compared to €23,600 for the EU-27.

d. Euskal Herria possesses underused human capital.

capital Basque human capital has a
respectable standing in EU terms. 71.33% of the population aged between 25 and 64 have
a secondary school education or higher (data are for 2007: 24.58% had studied as far as
secondary school, and 46.75% had completed higher education), as compared to an EU
average of 70.77% (47.24% secondary, 23.53% higher), thus doubling the EU average for
higher education. There is a stark contrast between these good figures for education and
the 30.3% unemployment rate and 57.2% of temporary work contracts for young adults.

Given the overall unemployment rate of close to 13%, and 23% temporary contracts,
we can see that the distribution of decent jobs is the chief structural problem and most
basic issue here that needs to be addressed in order to mobilise and take advantage of our
underused human resources.

If we assume a larger number of people with jobs including people under 25 (the age
group in the whole life cycle with the greatest creativity potential), taken together with the
high level of education of the Basque population, there is no good reason for thinking that
an improvement in the distribution of employment would lead to any loss of productivity;
the injection of the "human intangible" factor is not being taken into account by the
"monetarist economists".

e. With regard to taxation through direct and indirect taxes and social deductions,
Euskal Herria is well below the European Union average, with a tax burden (i.e. taxation to

26
The present problem in Euskal Herria is not the per capita income level but its uneven distribution and the excessive
concentration of wealth. See N. Jurado “La Euskal Herria ¿de quién?” IPES (2008).
 112

GDP ratio) that is 9.3 points lower: compare the EU average of 40.5% to the figures of
31.6% for Araba, Bizkaia and Gipuzkoa, and 29.8% for Navarre, in 2008).

In the 2011 budget, the total tax collection target in South Euskal Herria through the tax
agreement was €15,802.3m (€12,501.0m in Araba, Bizkaia and Gipuzkoa, €3,301.3m in
Navarre). If the tax burden in SEH were at the same level as the average for the EU, this
would result in the collection of €5,005m more in taxes, and if it were at the level of North
Euskal Herria, 44.6%, there would be €5,512m more.

If we add to this the money that is not collected owing to "tax holidays" and "fiscal
spending", which was budgeted at €7,8929m in 2011 (€6,306.1m in Araba, Bizkaia and
Gipuzkoa, and €1,586.8m in Navarre), plus tax fraud which is estimated to be worth over
€10,000m27, or more than 63% of the taxes that are collected, the conclusion we reach is
that collecting more taxes is not necessarily a question of raising the tax rate, but has more
to do with fighting fraud and striving for fairness, defending the principle of equal taxation
for equal income.

Real accorded tax collection 15,802.3

Uncollected 17,892.9
Tax fraud (est. minimum) 10,000.0
Tax holidays or fiscal spending 7,892.9

Potential total collection 33,

33,695.
695. 2
Sources: 2011 general budgets for Araba, Bizkaia, Gipuzkoa and Navarre

Table 10. Real tax collection and potential collection in South Euskal Herria. 2011 (in millions of euros)

f. Besides important fiscal resources that could be mobilised to undertake a new

socioeconomic model, there are also Euskal Herria's physical capital and financial and
natural resources to be considered.

Physical capital.
capital. In SEH, more fixed assets per employed person are used28 than the
EU average, with a continuous accumulation over the years since the nineteen-sixties.

2000 2001 2002 2003 2004

A -B-G 11.0 11.4 11.9 12.3 13.4

Navarre 13.3 14.3 14.9 15.8 16.2

EU-
EU - 27 9.4 9.5 9.5 9.6 10.0
Sources: Ministerio de Cooperación Territoral y Administraciones Públicas.
Economic-financial profile of the Autonomous Communities, 2009 (published Feb. 2011).

Table 11. Gross formation of fixed capital per employed person (in thousands of euros per employee)

27
Professor Ignacio Zubiri of the University of the Basque Country estimated that in 2010 €10,000m were lost in tax fraud in Araba, Bizkaia
and Gipuzkoa; thus this figure does not include Navarre.

In 1997 N. Jurado wrote a report (under the direction of I. Zubiri) on tax fraud in SEH which was published by I.A., where it was established
that on average another 70% of the yearly amount collected in taxes was fraudulently withheld, which is to say that if fraud were to be
stopped the real amount collected would be approximately 170% of what is actually collected.

28
“El Stock y los Servicios de Capital en España y su distribución Territorial (1964-2005)”, Fundación BBVA (2007).
 113

There are more than €75,000m in private deposits in banks and credit co-ops, not
including funds deposited in insurance companies and collective investment funds which
fall outside the scope of certified banking entities. The funds in Voluntary Mutual Benefit
Organisations alone amount to more than 25% of the GDP. A different economic system
could incorporate these public savings in a constructive way, mobilising it productively
rather than speculatively, through socially controlled public finance bodies.

g. Lastly, as we saw in the section on institutional economic flow, year in, year out
an important proportion of public economic resources goes to Madrid because of a
contract that amounts to economic submission, or the sub-contracting of SEH, entailed by
the Convenio and Concierto Económico. The annual net outflow to Madrid (income minus
payments) exceeds €5000m. No wonder Euskal Herria is considered so important to the
unity of Spain!

To sum up, the physical infrastructure of Euskal Herria and its important human, fiscal
and financial resources, properly channelled, would suffice to make a Basque state viable.

3.3. The main threat: the weakness of social cohesion

An indigenous-hearted woman asked me: Why do you economists consider my people

to be undeveloped, when in my community we share what life provides to us each day, and
nobody — neither children nor the elderly — is left out in the cold or is alone in their soul?
And when I thought about it I realised that I needed to tell her about Gross Domestic
Product (GDP) and social cohesion.

The GDP is a monetary indicator which ultimately reflects the entire doings that go on
in the market. The more insecure a developed society, the more it spends on defence,
protection of the homeland, and this causes the GDP to go up; or the more illness there is,
the more pharmaceutical products it consumes, which raises the GDP. There is no reason
why quality of life, happiness, should move in the same direction as the GDP, and the truth
of the matter is that they rarely do.

In 1968 Robert Kennedy said that GDP may be a measure of the degree of destruction.
Our gross national product, he said, "counts air pollution and cigarette advertising, and
ambulances to clear our highways of carnage. It counts special locks for our doors and the
jails for those who break them. It counts the destruction of our redwoods and the loss of
our natural wonder in chaotic sprawl. It counts napalm and the cost of a nuclear warhead,
and armored cars for police who fight riots in our streets."

So we should remember that there are many factors that are leading to the ongoing
degradation of the quality of life in Euskal Herria, despite our high GDP, life expectancy
and level of education, all of which are presently used as indicators for the Human
Development Index.

A new concept of development, then, should challenge the present models of

economic growth at all costs with its inevitable aftermath of environmental impact such as
degradation of the ecosystem and the exhaustion of resources, and social consequences
such as unemployment, exclusion and wars. For this it is essential to "bring about a change
in the present processes of develpment, and above all, in the concept held until now of the
 114

economy, establishing new forms of action on the international level and a new model of
development which, overcoming inequalities between the north and the south, make
possible a world that is ecologically feasible and socially just" (Conference of Rio, 1991).

The concept of "human development" responds in part to this idea, given that it
includes a new model for measuring development and puts the emphasis on the
development of capacities such as a better state of health and knowledge, but omits key
indicators such as the distribution of wealth or access to and quality of employment,
environmental quality, cultural integration, coverage of housing needs or psycho-affective
needs.

But that is not all there is to human development: other opportunities range from
political, economic and social freedom to the possibility to be creative and productive
while enjoying the guarantee of human rights.

Making human development possible in Euskal Herria implies an improvement in the

exercise of true democracy and, thereby, pursuing and achieving an economic model that
assigns priority to the rational, harmonious use of one's own existing human and natural
resources to satisfy the individual and collective needs of all members of society, without
compromising the ability of future generations to attend to their needs.

For a society to be really sustainable, it must be so both physically (through sustainable

use of resources) and socially (overcoming social and territorial inequalities). There can be
no sustainability without justice for all.

A truly sustainable society gives priority to development over growth, to the qualitative
(quality of life) over the quantitative (standard of living), solidarity over competitiveness.
Possibly economic democracy that produces sufficiency, justice and fairness for the whole
community is the greatest and fullest social value of them all, and it is not measured by
GDP, nor by the current Human Development Index which was created to correct it.

The crisis is not only an economic crisis, it is an ecological crisis, a crisis of food
sovereignty, a health crisis, a crisis of gender relations and of values; a crisis of the
paradigm of civilisation developed by capitalism, and of the ideological system on which it
is based.

This crisis of values has changed the rules in such a way as to turn Euskal Herria today
into a society where many live in uncertainty. The public sector has played a big part in this
trend towards precarious conditions which affects most of the population, since it has an
impact on immigrants, women, young people and the elderly: this has come about through
laws that have been passed deregulating the job market and leaving people exposed.
However, all this is covered up and concealed by statistics that are done up to sound
triumphalistic, but don't talk about the extremes, or inequalities, so we need to look at
what is really behind the numbers and glossed over by Euskal Herria's structural indicators.

a. Territory and population in Euskal Herria: growing density. In 2010 Euskal Herria
had a population of 3,102,884 in its 20,947 sq km, giving a density of 148.2 inh/km2, well
above the EU average of 116 inh/km2. But this is a mere average resulting from levelling
 115

out between extremes: the population density of Zuberoa is 18.7 inh/km2, while that of
Bizkaia is 518 inh/km2; all of North Euskal Herria is below the EU average. 90.8% of the
population of the Basque Country live in the South, only 9.2% in the North (of which 8.8% in
Lapurdi, 1% in Low Navarre and 0.5% in Zuberoa).

Area Inhabitants Density

Araba 3,311.0 319,326 96.44
Bizkaia 2,236.8 1,154,099 515.96
Gipuzkoa 1,980.4 707,263 357.13
High Navarre 10,390.4 636,924 61.30
Low Navarre 1,325.0 30,357 22.91
Lapurdi 863.3 239,635 277.58
Zuberoa 818.0 15,280 18.68

Sources: For SEH, INE (2010), for NEH, INSEE (2009). Data provided by Gaindegia.

Table 12. Population distribution in Euskal Herria in 2010

Within each province there also exists a strong polarisation between rural and urban
areas. The progressive destruction of the agricultural sector, industrial conversion and
concentration on the development of services located in the districts closest to the main
cities have resulted in the concentration of 62.6%29 of the population of the whole of Euskal
Herria in those districts: thus as many as 72.8% and 77.5% of their respective provinces
reside in the Great Bilbao and Vitoria-Gasteiz urban districts.

Population distribution in metropolitan districts in Euskal Herria, in percentages

120 Percent of population

90
85,8
77,7
72,8
64,9
60
53,5
46,7
40,4

30

0
Bilbao Donostia Bayonne Pamplona Gasteiz Maule Donibane
Garazi

In addition to territorial imbalance, another pressing issue is the aging of the

population, 19% of which is over 65 years old, 1.5 points above the EU average. Aging of
the population (especially in the North, and above all in Zuberoa where the figure reaches
25.6%) is important for many reasons, but here we shall single out the fact that it is the
elderly who are most deeply affected by the design of the Euskal Hiria, the Basque City,
because they are the people who remain in localities that are being excluded from that
design and are consequently the victims of spatial exclusion, which entails exclusion from
access to most services.

29
The corresponding figure in the 2001 census was 70%; over the past decade there has been a return to native villages motivated
above all by the high prices of housing in the metropolitan areas.
 116

The great territorial imbalance brought about by the imposition of the Euskal Hiria
project on an already quasi-utopian Euskal Herria is made worse still by the grand plans for
infrastructure such as the high-speed railway, which is set to create further territorial chaos
by supporting a still more centralised and polarised system. This is perhaps the most
tremendous example ever of focusing investments in a way that leads to ever greater
centralisation of economic activity around metropolitan areas. The Spanish government's
Strategic Plan for Infrastructure and Transport (PEIT) has the gall to say explicitly that "these
high-standard infrastructures are less accessible for the territory as a whole: they limit
access to a small number of nodes whereby they create a dual configuration of the
territory" and admits that "on the whole, centralisation of the system has been made
greater, increasing the disparity between territories… and facilitating the concentration
and centralisation of economic activity in a small number of large centres [while] weakening
less powerful centres to the benefit of the dominant areas."

The kind of lifestyle promoted by the high-speed rail project not only preys on the
territory and energy resources but distorts local life as a domain of relations to such a
degree that it results in creating distances between nearby things as much as it brings
things that are remote more and more into touch. Ways of life and cultures linked to the
land are vanishing before our eyes, pushed out by the proliferation of traffic space and so-
called non-places as opposed to the anthropological concept of a place which
simultaneously invokes for those who inhabit it a sense of belonging, identity, relationship
and history.

The very low birth rate had recovered a percentage point between 2004 and 2008,
coming back up from 9.2 births per thousand inhabitants to 10.2. This increase was mainly
due to the statistical contribution of immigrants. But as of 2008, the rate is shrinking once
again, on account of the crisis. Under-14s constitute 13.8% of the population, about two
percentage points lower than the EU average.

The death rate

rate has remained stable throughout the decade; in 2009 it was 9.03 per
thousand inhabitants. Once again there are consistent differences between the north and
the south, with the rate reaching 13.92 in Low Navarre (a northern region). Given that in the
North the death rate is greater than the birth rate and the rate of immigration taken
together, the population there declined year by year between 2000 and 2010.

b. Income distribution.
distribution Economic indicators acquire special relevance in times of crisis,
not so much for their magnitude as for their distribution among different parts of the
population. In 2009, Euskal Herria had a per capita GDP of €31,065, which is 30% higher
than the EU average. Looking at the differences between the north's GDP per capita of
€23,824 and that of the south (€30,808 in Navarre and over €33,000 in the BAC), one might
be led to believe that ordinary people in the south have a better standard of living, but that
assumption is not borne out in the least by the minimum wage, the average pension of
€12,180, or the earnings of the majority of young people, women and immigrants with
incomes below €1000 per month. In fact, the difference in the distribution of wealth, which
is alarming in the BAC and especially in Bizkaia, and between income policies and social
protection which translate into much higher salaries and services in the north, is so great
that today this is the chief obstacle to greater mobility of employment and residence
between the north and the south. Lurking behind the averages is the concentration of
wealth in a few hands in Euskal Herria, to a much greater extent than in any EU country, as
 117

a result of which 34.4% of young people between the ages of 18 and 44 cannot leave their
parents' home because they lack sufficient economic resources.30

In 200831, 1.67% of the population of Araba, Bizkaia and Gipuzkoa (we lack comparable
data for Navarre) controlled 44.78% of the wealth, while 8% survive on an income of less
than €500 per month and 36.33% are below the poverty threshold of 37.5% of the country's
per capita GDP. The highest incomes rose by 114.52% between 2002-2008 (126.53% in
Bizkaia, the region with the highest level of concentration of wealth), while salaries and
pensions lost purchasing power over the same period (that is, the real consumer price
index rose more each year than salaries did).

In Bizkaia, where more than 50% of the population of Euskal Herria lives, 205,570
people declared annual incomes of under €13,200 on their income tax declarations32, while
8,708 taxpayers declared incomes greater than €90,000 per annum.33

These figures are merely the tip of the iceberg since they are based on incomes
registered with Internal Revenue, which do not include the €10,000m per year of tax fraud,
mostly carried out by this super-rich group.

According to Eurostat34, inequality between quintiles in the eurozone in 2008 was 4.8,
while in France it was 4.1, and in Spain 5.8. What this means is that the income of the 20%
of the population that earns most increased by the percentage indicated relative to the
20% that earns least. The index for the BAC was much higher than that of the whole
Spanish state.

The concentration of incomes is directly proportional to the occurrence of low wage

policies, reduced social services and a limited tax burden (in other words, low taxes and a
great deal of fraud).

The minimum wage,

wage which is a reference point for many entities and social services,
was €641.40 in South Euskal Herria in 2012; in the north it was €1,398.37, which is more than
double.35

The disposable income (i.e. personal income minus taxes and deductions) per
employed person is also higher in the north, as shown in the 2008 statistics; in the current
crisis, this difference has widened on account of the fall in salaries in the south.

30
2008 report on poverty and social inequality published by the Basque Government in March, 2009. This figure is provided once
every four years, and indicates very sharp growth from 8.4% in 1996, 15.2% in 2000 and 21.7% in 2004.

31
“Informe Anual Integrado de la Hacienda Vasca 2008”, published in October, 2010. This is the latest available figure because
the corresponding report for 2009, publiched in October 2011, does not include this analysis.

32
There is no obligation to declare an income of less than €21,000 except in certain circumstances, so the number or people with
low incomes is certainly more than double the number given, including half-pensioners, widows, unemployed, seasonal workers
and so on, who generally have low incomes and are therefore not required to declare what they earn.

33
This is again a partial figure because it is this income group which commits more tax fraud than anyone else through
sophisticated bookkeeping techniques.

34
Eurostat. Statistical Yearbook 2011.

35
In relation to purchasing power, the minimum wage in SEH is about 40% lower than the average minimum wage in the
eurozone. We stand at the top of the statistical list of "poor workers" who are those that are active in the labour market but whose
yearly incomes are not above the poverty threshold.
 118

Araba 38,664

Bizkaia 39,334

Gipuzkoa 38,983

Navarre 36,935

North 42,989

Euskal Herria 38,944

Sources: Eustat, INE, INSEE. Data provided by Gaindegia.

Table 13. Annual disposable income per employed person (2008)

The average36 retirement pension is €915.72 in Navarre and €1000.53 across Araba,
Bizkaia and Gipuzkoa (normally two people have to live on this, as the widows' pension is
around €670). Translated, this means that most pensioners find it hard to make ends meet.
In 2007 the total per capita yearly spending on old-age pensioners (including their pension,
residence, home assistance and so forth) was in the BAC37 €13,585 and in Navarre €10,665,
lower than the EU average of €14,607, while in the French state, adjusting for purchasing
power, the corresponding figure is €18.585 which is 27 percentage points above the EU
average. There is a significant difference between these regions across the board in social
spending: in health care, the amount spent per capita that year was €1894 in Navarre,
€1956 in the BAC as against €2349 in the French state.

Given these figures, poverty rates are also relevant. As measured by Eurostat, which
sets the poverty threshold at 60% of the mean, the poverty index in the BAC in 2008 was
14.8% and the figure for Navarre was similar, whereas in the north it was a little below 8%.
Despite this difference, once more the numbers do not give the whole picture because the
poverty threshold is distorted by uneven income distrubition,38 so it is important to take
into account where the threshold is in each country. In 2008, for instance, for equal
purchasing power, people earning less than €10,800 p.a. were considered poor (giving the
poverty threshold for the NEH) whereas in the BAC one had to earn less than €7,290 a year
to be considered poor (this was the poverty threshold for the BAC39).

To sum up: in 2007, the last year for which we dispose of fully comparable figures,
spending on social protection in proportion to the gross domestic product was 33.62% in
North Euskal Herria, 18.8% in the BAC and 16.7% in Navarre. The upshot is that whatever
social indicator we take, whether it be minimum wages, minimum pensions, education,
health, housing or family benefits, the residents of the northern Basque Country are much
better protected than those in the south, and in consequence, it will be necessary for a
future Basque state to base its social protection on that of the French state as a minimum
so as not to entail a fall in living standards for the inhabitants of North Euskal Herria.

36
Source: INSS, December 2011.
37
Sources:Social Protection Accounot, Eustat and the Navarre statistics institute. For North Euskal Herria see INSEE.
38
The more unevenly incomes are distributed, the lower the poverty threshold will be, so fewer people will be placed below it as a
result, which means that less poverty is claimed to exist. So, people who earn (in terms of purchasing power) between €7290 and
€10,800 are not considered poor in SEH yet they are in NEH. Therefore, when comparing poverty rates between different
countries we need to ssay where the poverty threshold (in terms of purchasing power) is set in each of the countries. See Nekane
Jurado's methodological study in the Gaindegia Yearbook, 2010.
39
The poverty threshold recognised by the EU is 60% of the median of per capita income. This statistical indicator was established
by the Lisbon Strategy (2000), replacing the earlier measure which took 50% of the mean, which gave higher thresholds and so
placed more people below the threshold, or in other words, counted more poor people. A large part of the European social
movement, including Elkartzen considers the poverty threshold to be 37.5% of the GDP per capita, according to which the
threshold for Euskal Herria would be €11,649 per annum (that is, 37.5% of the GDP per capita which is €31,065).
 119

d. Unequal profits: higher worker exploitation

exploitation rates in the south.
south. In economics,
surplus value refers to what the company obtains from each worker as a function of his or
her productivity and the cost attributable to the worker in question.

Productivity is the quotient obtained by dividing the value of what is produced by the
size of the staff employed. At the macroeconomic level, used for comparisons between
countries: productivity = GDP / number of workers.

In South Euskal Herria, productivity in 2008 was almost 30% higher than the EU
average, whereas labour costs were lower than the average for the European Union, which
means capital achieved a higher rate of profit, or to put it another way, labour was over-
exploited.

Araba 78,111

Bizkaia 74,235

Gipuzkoa 72,035

Navarre 67,406

North 60,346

Euskal Herria 74,219

Sources: Eustat, INE, INSEE. Data provided by Gaindegia.

Table 14. Productivity per employed person in 2008

(2009 for NEH and Navarre)

If we look at productivity per employed person together with the total disposable
income per employed person, what is striking is that North Euskal Herria, with a
productivity level of €60,346, has a disposable income per person of €42,98240, whereas
Araba, with a productivity of €78,111, has a disposable income of €38,664.

The problem at present with the economy in SEH is not low productivity but the
distribution of productivity, which is concentrated in favour of business profits to the
detriment of salaries. Low wages lead to shrinking consumption and that, precisely, is the
problem: it leades to a fall in demand and low consumption, and the measures needed to
address this are not freezing salaries and taking away jobs but the opposite: redistributing
productivity to favour salaries and creating new jobs to incentivize responsible
consumption.

The cohesion indicators, whether we look at social protection or income policy, show
greater imbalance in SEH than in NEH, and as a result inhabitants of the north do not view
the job market in the south as a way to bring the country closer together and move
towards national unity; instead, they migrate in the opposite direction, being attracted by
the French state. A future Basque state needs to be based on an economic model that
puts the distribution of the wealth it generates first (distribution of productivity) and places
much more emphasis on the public sector, focusing on social production (public spending
in proportion to the GDP), so that at the very least socioeconomic protection is
comparable throughout the whole of Euskal Herria and equals that of North Euskal Herria,
the highest standard existing today.

40
Our figures for productivity are for 2009 and those for income are for 2008, so the productivity given really corresponds to a
higher income level because it grew from 2008 to 2009. In the BAC both figures are for 2008.
 120

3. Towards a Basque state: weaknesses, strengths

and the consequences of the economic crisis for the
Basque economic fabric.
fabric.

Ántó n B o rja Alv ar ez , ind u s trial e ngi ne er, P h.D . in E co no mics ,

Univ ers ity o f the B as q ue C o untry pro f es s o r

This chapter examines the Basque Country’s strengths, weaknesses and other aspects
in agriculture, industry and services, focusing special attention on the financial sector.
Central features of the Spanish and French economic crisis and its impact upon the
Basque economy are considered. These subjects are studied here with a view to
evaluating the feasibility of a Basque state as a more efficient way of addressing
present and future economic and social challenges. Some thoughts and proposals are
also presented in anticipation of the foreseeable needs of the next few years.
 121

INTRODUCTION

In the following pages we will examine aspects of agriculture, industry and services. We
shall take note of basic features of the Spanish and French economic crisis and their effects
on the Basque economy. The study is written from the perspective of assessing the option
of a Basque state as the most effective strategy for dealing with the economic and social
challenges that we face at present. There is also a discussion of certain thoughts and
proposals about how to make progress in coming years.

1. STRUCTURAL FEATURES OF THE BASQUE ECONOMY

1.1. The agricultural sector

Farming, cattle-raising and forestry have little weight within the economies of Bizkaia,
Gipuzkoa and Araba today, where they represent under 3% of the GDP, and Navarre,
where they make up for less than 5%. However, the agricultural balance is more favourable
in Navarre and the north than in the Basque Autonomous Community as a whole.

AGRICULTURE

⇒ Little economic weight in Bizkaia and Gipuzkoa.

⇒ Uneven food balance.
⇒ More weight in Navarre.
⇒ Relatively better food balance.
⇒ More important in North.

In the north agriculture provides 5,707 jobs, 4.8% of the total, and activity and production
are being maintained. 92% of farms provide no salaried jobs, according to 2006 data.

If we look at the foreign balance of commercial food production for the BAC and
Navarre we shall find that it improved in 2009 relative to 2008, with a 8.9% reduction of the
deficit in the BAC and a 21.7% increase of the surplus in Navarre.

There was a gradual decrease in the number of jobs: south Euskal Herria had 31,400
agricultural jobs in 2001 and only 24,100 by 2009. The downward trend has continued. Let
us look at some aspects of the agricultural, cattle-raising and forestry subsectors of the
economy of South Euskal Herria.
Foreign trade in products of the food industry, South Euskal Herria (€ million)
Exports Imports
Type of duty Area 2008 2009 2008 2009
BAC 204,8 204,7 371,9 331,7
Livestock and animal products Navarre 70,0 64,2 97,5 80,6
S. Euskal Herria 274,8 268,9 469,4 412,3

BAC 87,1 24,4 203,2 165,9

Vegetable products, fats and oils Navarre 144,2 171,5 125,9 120,5
S. Euskal Herria 231,3 195,9 329,1 286,4

BAC 355,8 336,6 319,6 293,1

Food industry products Navarre 323,6 301,3 174,0 146,6
S. Euskal Herria 679,4 637,9 493,6 439,7

BAC 647,7 565,7 894,7 790,7

Food industry sector Navarre 537,8 537,0 397,4 347,7
S. Euskal Herria 1.185,5 1.102,7 1.292,1 1.138,4

BAC 3,3 3,9 4,5 3,9

Food industry sector as % of all exports
Navarre 8,4 9,8 8,0 6,4
and imports
S. Euskal Herria 4,5 5,5 5,2 4,8
Source: Boletín de Coyuntura y Estadística del País Vasco. Basque Chambers of Commerce. Instituto de Estadística de Navarra,
for data from the General Department of Customs
 122

Agriculture
Agriculture
There is currently a negative trend in the agricultural subsector in both the BAC and
Navarre, though less marked in Navarre. The next table shows the volume of cereal
production for two crops, wheat and barley, and production of alfalfa, tomatoes and wine.
Production of wheat and wine has decreased, while tomato production has risen with a
smaller growing area.

Chief agricultural crops (m t)

CROP 2008 2009 %A 09/08 % BAC/Spain 2009
CEREALS
· Wheat 419,8 324,3 -22,7 6,8
· Barley 422,2 430,4 1,9 5,8
· Oats 113,1 100,0 -11,6 11,0
· Maize 137,7 128,5 -6,7 3,7
FODDER
· Maize 167,5 160,0 -4,5 4,3
· Alfalfa 357,4 370,0 3,5 3,3

VEGETABLES
· Cabbage 6,0 6,0 -3,2 3,0
· Asparagus 4,8 5,4 12,5 11,1
· Lettuce 23,1 23,4 1,3 2,7
· Tomatoes 150,3 190,1 26,5 4,1
· Peppers 22,7 25,4 11,9 2,6
· Artichoke 13,8 12,9 -6,5 6,5
· Cauliflower 79,2 69,0 -12,9 16,0
- Onion 20,4 17,6 -13,7 1,4
· Runner beans 9,9 9,6 -3,0 5,1
· Peas 7,1 8,3 16,9 10,0

ORCHARDS
· Cider apples 8,5 6,4 -24,7 6,9
· Eating apples 17,9 18,1 1,1 3,6
· Pears 16,5 15,9 -3,6 3,7
· Peaches 17,9 19,8 10,6 2,5
· Almonds 1,9 2,0 5,3 0,7
WINE / GRAPE JUICE (m Hl) 1.490,2 1.346,6 -9,6 3,3
POTATOES 73,4 90,7 23,6 3,7
SUGAR BEETS 187,8 193,1 2,8 4,6
* Estimates
Sources: Boletín Mensual del Ministerio de Medio Ambiente y Medio Rural y Marino. Boletí de Coyuntura Agraria de Navarra.

Livestock
The livestock count has decreased in recent years. The distribution between different
kinds of animals varies between the BAC and Navarre.
Livestock census (December of each year) (head)
Area Year Cattle Sheep Goats Pigs
2005 168.124 354.445 26.694 31.991
2006 159.548 354.484 28.987 33.712
BAC 2007 158.255 344.288 28.453 31.836
2008 155.443 333.090 28.641 32.357
2009 151.801 333.255 27.270 31.166
2005 117.316 814.602 10.840 545.863
2006 121.895 786.298 11.890 557.470
Navarre 2007 113.069 744.119 12.180 508.589
2008 111.919 705.332 11.920 547.542
2009 107.486 625.238 10.417 547.256
2005 285.440 1.169.047 37.534 577.854
2006 281.443 1.140.782 40.877 591.182
South Euskal Herria 2007 271.324 1.088.407 40.633 540.425
2008 267.362 1.038.422 40.561 579.899
2009 259.287 958.493 39.190 578.422
Sources: Basque Government, Government of Navarre.
 123

Milk production has stabilized in recent years, reaching 398 million litres. In meat
production, bovine, ovine, goat and pork meats have fallen to the following levels: bovine
28,855 metric tonnes, ovine 4,568 t, goat and pork 50,123 t; while fowl production has
increased to 89,002 t. In combined total, the amount slaughtered in South Euskal Herria
has reached 177,746 t.

Forestry
A significant volume of wood has been cut in the BAC. In 2007, 1,086 million m3 was
cut, of which 90% was conifer wood. In 2009 the volume of wood cut had fallen by 57% to
411,941 m3. One factor to account for the decrease was the building slump, given that the
building trade was supplied from this wood production and related areas of business such
as furniture.

Agriculture: in synthesis
There are differences and distinct rhythms in the agricultural sector depending on
which part of the country we look at, the Basque Autonomous Community, Navarre or
North Euskal Herria. Industrialisation of farming, livestock raising and forestry, although
prevalent, has limits given the increasing demand for sustainable development in western
developed societies. This problem also affects Euskal Herria. Another aspect is the
negative trade balance of the agricultural sector both in the rest of the Spanish state and
abroad. The Basque population's demand for quality in food products favours the
development of quality labels and ecological farming.

Mention should also be made of the prices of agricultural products which are always
too low from the growers' point of view, and the growing subordination of small farmers to
the big multinational companies. Further issues are the aging of the sector and the harsh
living conditions associated with it.

1.2. The industrial sector

1.2.1. Bizkaia, Gipuzkoa and Araba

The driving force in the Basque economy, to a lesser or greater extent and exception
made for the north, is its industry.

An analysis shows that industrial activities accounted for 29.4% of the total wealth of
Bizkaia, Gipuzkoa and Araba in 2007 and provided 25.5% of its jobs, that is, 257,297 jobs in
all. But in 2010 industry only represented 24.4% of the area's wealth, providing 224,327 job;
this clearly shows the impact of the economic crisis.

Breaking this down according to branches of industry, pride of place still goes to
metallurgy and metal work, machinery and transport equipment in terms of production
volume and number of jobs within the Basque economy.

The first category, metallurgy and metal work, encompasses iron and steel, other
metals, foundries and steelworks, metallic construction, forging and stamping, mechanical
engineering and metal articles; this group of concerns account by themselves for 26.9% of
Gross Value Added (GVA, a measure of industrial wealth), 34.9% of jobs, 21% of
investments and 25.6% of net sales.
 124

Machinery covers machine tools, household appliances and other machinery; this area
makes up a further 9.2% of the industrial GVA, 9.9% of jobs, 8.2% of investment and 7.8% of
net sales.

As for transport equipment, by this we mean cars and car parts, ship building and other
transportation equipment; this represents 8.7% of the industrial GVA, 8.1% of jobs, 45.7%
of investment and 9.6% of net sales.

According to the OECD's classification (which is followed by Eustat) of industries in

terms of the level of technology they contain, the high R&D intensity or high tech
industries include aircraft and spacecraft manufacturing, pharmaceuticals, office and
computing machinery, electronic equipment, and medical and precision instruments.

At the mid-
mid-high level of technology we encounter electrical machinery and
equipment, motor vehicles, chemicals apart from pharmaceuticals, other transportation
equipment, and mechanical machinery and equipment; while the mid- mid-low level includes
ships, rubber and plastics, oil refining products, iron and other metals, metal products and
non-metallic mineral products.

Industry with low-

low-level technology takes in miscellaneous manufactures and recycling,
wood pulp and paper products, food, drink and tobacco products, textile production, the
garment industry, leather products and footwear.

As the next figure shows, according to Eustat data, 2009 saw a new step backwards,
relative to 2008, in the branches of industry involving high and mid-high level technology,
with drops in the number of people employed, value added and sales. It is significant that
the amount of wealth generated by high and mid-high tech activity was less in 2009 than in
both 2000 and 2005. And the same may be said of the number of jobs at these
technological levels.

So the branches of industry that use high level and mid-high level technologies are the
ones where the most jobs are being lost, less value added is being generated and the
volume of business is falling fastest.

Technological rating of Basque industry (2009)

Jobs % GVA (wealth) %

High 3,8 3,3

Mid-high 25,4 25,0

Mid-low 48,3 40,4

Low 18,6 15,2

Unclassified 3,9 16,1

TOTAL 225,337 €14,074.8m

 125

Technology in the industry of the Basque Autonomous Community

2008 2009 Weight in Weight in Change

2008 2009 2008-- 2009
2008

JOBS (number)

Total 249.230 225.337 - 9,6

High and mid-

mid -high tech 71.388 65.825 28,6 29,2 -7,8
High tech 9.245 8.592 3,7 -7,1
Mid-high tech 62.143 57.523 24,9 -7,9

Mid-
Mid-low and low tech 168.852 150.677 67,7 -10,8
Mid-low tech 123.204 108.867 49,4 -11,6
Low tech 45.648 41.810 18,3 -8,4
Unclassified 8.990 8.835 3,6 -1,7
GVA (x €1000)

Total 17.658.352 14.074.809

14.0 74.809 - 20,3
High and mid-
mid -high tech 4.771.339 3.976.385 27,0 -16,7
High tech 565.986 462.130 3,2 -18,3
Mid-high tech 4.205.353 3.514.255 23,8 -16,4
Mid-
Mid-low and low tech 10.458.145 7.826.355 59,2 -25,2
Mid-low tech 8.058.523 5.689.769 45,6 -29,4
Low tech 2.399.622 2.136.586 13,6 -11,0
Unclassified 2.428.868 2.272.069 13,8 -6,5
SALES (x €1000)

Total 65.654.476 49.226.282 - 25,0

High and mid-
mid -high tech 17.320.816 13.369.518 26,4 27,2 -22,8
High tech 1.734.645 1.439.103 2,6 2,9 -17,0
Mid-high tech 15.586.171 11.930.415 23,7 24,2 -23,5
Mid-
Mid-low and low tech 41.255.235 29.373.668 62,8 59,7 -28,8
Mid-low tech 33.261.434 22.195.462 50,7 45,1 -33,3
Low tech 7.993.801 7.178.206 12,2 14,6 -10,2
Unclassified 7.078.425 6.483.096 10,8 13,2 -8,4

PRODUCTIVITY

Total nd - 11,8
Sources: Eustat, Industrial statistics.

In 2009 the wealth generated by the high and mid-high tech sectors of industry
represented 29% of Baque industrial wealth, while the sectors classed as mid-low or low
tech made up 55.6%.

There are parts of our industry of considerable economic importance, such as the iron
and steel sector, which while belonging to the mid-low technological level are intensive
energy consumers. The fact that over half of Basque industry is characterised by intensive
energy consumption adds a further factor of vulnerability, which is being exacerbated by
the rising price of oil.
 126

Another source of worry is the trend in business investments. Between 1993 and 2008, a
period of economic prosperity, Basque capital invested €51,000m abroad while the total of
foreign investment in Euskal Herria only amounted to €12,000m. Basically, Basque capital
has no interest in investment in the Basque territory. Figures for 2010 and 2011 confirm this
trend. This is also a factor contributing to our vulnerability. It is true that many companies
have internationalised and need to invest in their subsidiaries, but it is after all Basque
capital that is being used to set up companies abroad because they are more profitable.

The Lisbon strategy proposed that EU states should spend 3% of their GDP on R&D in
2010.

In the BAC, in 2004 spending on R&D amounted to 1.43% of the GDP, and in 2010 this
had risen to 1.85% (with industry constituting 29.4% of the economy), which is close to the
European Union average of 1.9% but a long shot from that of developed economies such
as Germany, France or Sweden.

It is more useful to compare the trends in similar European regions. The BAC ranks in
55th place on a list of 203 European regions in terms of innovation (2006 data).

The proportion of innovating companies is small in comparison to the EU-27 average.

For innovations in processes and products, according to the Spanish institute of statistics
INE only 19.8% of Basque companies innovated in 2007-9. This is a far cry from the figures
for Germany, Ireland or Austria.

There is a similar state of affairs for patents: the index based on the number of patents
per million inhabitants is a long way, in South Euskal Herria, from that of other European
regions with a similar profile.

The European Innovation Index

The European Innovation Index (or SII) is a measure of the extent to which the economy
of a country is capable of and carries out innovative activities.

It uses of 25 indicators to produce compound index reflecting the importance of

different dimensions. According to Eustat figures, the BAC occupies the thirteenth place in
an EU ranking. The low ranking of the BAC in comparison to the European average is
striking given that the BAC is an industrialised European region with an income level above
that of the European average, and if compared to other European regions with similar
characeristics the BAC comes out worse for the comparison.

In the years following the SII ranking presented here, the position of the BAC has not
improved. An analysis of the BAC's SII standing for 2009 yields a value of 0.51, below that
of countries like Ireland, Belgium, Austria and Denmark.
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EUROPEAN INNOVATION INDEX (SII): BAC and EU-27

0,8

0,7

0,6

0,5 0,45
0,4 0,35
0,31
0,3

0,2

0,1

Belgium

United Kingdom
Greece

Spain

France
Czech Republic

Denmark
Poland

Ireland

Luxembourg

Finland
Hungary

Italy

Germany
Romania

Bulgaria

Latvia

Slovakia

Lithuania

Malta

Estonia

Slovenia

EU-25

Austria
Cyprus

Basque Aut. Com.

Netherlands
Portugal

Source: Eustat

Furthermore, the economic crisis has been undermining our industrial production since
2008. In 2009 the crisis hit BAC industry hard and the industrial GDP fell by 9.5%.

The Industrial Production Index (IPI) fell by 25.3% for the intermediate goods sector,
25.1% for equipment and 12.2% for consumer goods.

Exports also contracted to the tune of 28% that year. Although there has been a certain
degree of relative improvement in exports, they had stagnated economically by 2012 and
this is expected to continue in 2013.

Some analysts (M. Navarro et al., 2008) have developed a classification of seven groups
of innovation system in European regions. The BAC is in group G3, the group of "regions
with moderate economic and technological results" which contains 45 regions including
some parts of Italy, Austria and Ireland; the reference point is G4, "advanced regions with
some industrial specialisation", which contains 33 regions belonging to Germany, the
United Kingdom, Italy and Holland, among other countries.

It is advisable for the G3 regions, hence also the BAC, to "increase their capacity to
absorb and create knowledge" and "constitute the regional system of innovation in a
harmonious manner and increase the quality and quantity of relations between its agents";
the example of the German region of Baden-Württenberg is held up as an example, in the
G4 group, which has a similar sectorial specialisation to the BAC but a much higher level of
technological development, productivity and per capita income.

Earlier analyses raise questions about the convergence strategies developed in the
BAC government's Competitiveness Plan and its Science, Technology and Innovation Plan
(PCTI 2010) given that there is no qualitative or quantitative improvement in the conditions,
resources and personnel in our innovation system and its repercussions on industrial
activity.

Clearly the experience of 2010 and 2011 has been unsatisfactory. 9,900 industrial jobs
were lost in the last quarter of 2011 in the BAC; business representatives in Araba say more
than half of the companies will have less productive activity in 2012 than they had in 2011
and there will be more layoffs.
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1.2.2. Navarre
In Navarre industry accounts for 31% of the industrial wealth and 28% of overall
employment. In 2010 Navarrese industry provided 62,760 jobs (a loss of 6,500 jobs since
2007), and in 2009 was worth €3,707.9m. Over 90% of Navarrese businesses are small or
medium size. There are also some medium or large businesses, twenty of which have
foreign majority shareholders and constitute 25% of real industrial jobs. In all, there is
foreign investment in about a hundred companies, most of which belong to the branches
of transportation equipment or food production, but there are also foreign companies in
rubber and plastics, metallurgy, machinery and chemicals. Foreign investment in 2010
amounted to 41.7 million euros.

There are significant amounts of manufacturing in the metal industry, food and
transortation equipment. Low and medium tech industries, and those of moderate
demand, predominate.

The policy situation on innovation is shown by the fact that resources invested in
research, development and innovation in 2010 represented 1.97% of Navarre's GDP, a
percentage very close to that of the BAC, and Navarre does better than the BAC in the
number of patents per million inhabitants.

The economic crisis is hitting Navarre hard: during 2011 company closures and layoffs
gave rise to an unemployment rate of arouond 12%, which is higher than in the BAC, while
youth unemployment is as high as 44%. In 2012 things just got worse, with an
unemployment rate of 16%, higher than the BAC figure of 15%.

1.2.3. North Euskal Herria

The 12,673 jobs in industry make up 10.6% of the total in the north of Euskal Herria. In
79% of these companies there are fewer than ten employees. There are 37 firms employing
over fifty people, which together account for 6,425 jobs. Four of these firms have more than
250 employees. The building trade employs 9,624 people, 8.1% of the total. There is a
steady demand in this sector both for first and second homes.

Industrial companies fall into two large blocks. One is made of businesses in the
aeronautics, metal and mechanical equipment sectors, where 35% of industrial jobs are to
be found; the other block is the food industry which makes up 21%.

In the first block, the aeronautical subcontracting companies, which include Dassault,
the biggest employer in the north with 991 jobs, are staying afloat despite some falling off
since 2004. A substantial proportion of subcontractors are companies that manufacture
mechanical items and tools (50%). There is the "Aerospace Valley" aeronautical cluster
which forms part of the Bordeaux-Toulouse corridor, which includes Dassault as well as
thirteen other business groups and a bunch of small and medium-sized industrial
companies, with partnership relations among them.

The mechanical specialisation of this subsector in North Euskal Herria is not matched
up with specialist suppliers of high technology, and this stands in the way of these
companies achieving a higher level of specialisation in cooperation with technicians from
the big user companies. This situation makes it more difficult to adapt to change and
diversify production.
 129

The privatisation of France Telecom has led to further vulnerability for the businesses
that supply this sector, some of which are local. It is therefore true to say that innovation
and technological change is limited to large companies, both in the aeronautical and
related sector and in the food industry. There is also innovation in certain subsectors such
as defence electronics, medicine and computing.

In recent times there has been growth in the development of companies in the surf and
sportswear business, which numbered 400 in 2008, with joint sales of €1.2m.

But industrial development in the north is weak and faces a difficult future. Research
takes place either in bodies affiliated to the University or state-run research entities. 57% of
the companies have staffs of under five employees and cannot contemplate innovation on
any level. Despite this and the limited resources available for research and development,
there are 219 people doing R&D work in a variety of organisations.

1.3. The service sector

Within the services macro-sector, a distinction should be made between market

services (which are private) and non-market services (which are public) such as education,
national health and so on. It is also necessary to distinguish between subsectors such as
sales and repairs, transport and communication, financial services, commercial distribution,
company services and tourism.

SERVICES
⇒ Includes public and private, commercial and non-commercial services.
⇒ Education, health.
⇒ Commercial distribution and repairs.
⇒ Transport and communication.
⇒ Tourism.
⇒ Financial services.

The Basque financial sector is particularly important, especially the banks. The former
Caja Navarra had around €10,000m in deposits, while deposits in the former BBK, Kutxa
and Caja Vital had a sum value of €34,816m in 2010. The Basque savings banks held a
larger amount in deposits than the other banks operating on Basque territory.

In the BAC, services account for 60.2% of the overall wealth, with a value of €39.608m
and 645,464 jobs in 2010. The main subsectors are company services (which make up 27.2%
of the total), sales and repairs (17.5%), transportation and communication (10.8%), banks
and insurance companies (10.3%), health and social services (8.7%) and public
administration (8.1%).

In Navarre the service sector accounts for 56% of the wealth generated and provides
62% of all jobs. Over recent years there has been growth in the areas of company services,
public services, commerce, and hotels and catering.

In North Euskal Herria, there was still a flourishing commercial sector in 2007 with 4,582
businesses providing 19,368 jobs, 16.2% of the total. Services are also strong, with 15,212
businesses and 64,269 jobs, 53.8% of the total. This category includes personal services,
company services, education, health, social action, finance, public administration and
transport.
 130

2. FEATURES OF THE SPANISH AND FRENCH ECONOMIC CRISIS

The Spanish economy already had a deficit going years back in its trade balance
(between exports and imports) and current account balance (including not just goods but
services, incomes and transfers). The crisis has weakened productive activity, and
particularly imports, as a result of which the trade deficit became lower than in previous
years, reaching €50,000m in 2010.

Various effects have derived from the Spanish building slump and bank crisis. One is an
increase in the Spanish unemployment rate to 24% in 2012; another, the increase of private
debt (including family accounts and company debts) to over 2.1 billion euros in 2011. Public
debt also rose to over 8% of the Spanish GDP, at more than €80,000m, by the end of 2011.

These figures suffice to indicate that the Spanish economy is in trouble and heading
towards solvency issues. Other factors that will not help to develop economic potential,
such as the public sector's relatively small size at 46% of the GDP (compare France, at 56%,
and Italy and the UK, at 51%), lapsed debt payable between 2012 and 2015 at interest rates
that will not fall and average 3%, mean that any possible change for the better will be
delayed at least a further five years.

The crisis has also affected the French economy, but less drastically than in the case of
Spain. The unemployment rate between 2010 and 2012 was close to 9.9%. The internal
market is weak and the foreign trade balance is not looking good, but its statistics are still
much better than the Spanish ones. The current account balance was 2.5% in the red in
2010 on account of weak domestic demand given that the private sector, families and
companies are working their way out of debt. Requisites for obtaining credit are strict
becauase of uncertainty in the banks, and company profits fell from 7.5% of the GDP in
2010 to 6.7% in 2011.

The sluggishness in production in the Basque economy is being translated into a

certain degree of deindustrialisation, with a contraction in manufacturing jobs in recent
years and less value added and wealth generated in 2010-11; there is no growth of
productive capacity.

3. EFFECT OF THE CRISIS ON THE BASQUE SOCIOECONOMIC FABRIC

The crisis in Europe, France and Spain obviously has negative repercussions for Euskal
Herria. Some vulnerable parts of the Basque economy have already been singled out. Add
to this the prevailing neoliberal approach taken in Brussels, Madrid, Paris and the
autonomous goverments of Gasteiz and Pamplona, and the worst consequences for the
Basque productive fabric can be summed up as follows:

– A permanently weak Basque agricultural sector, especially in the BAC but also in
Navarre and the North. Europe's Common Agricultural Policy does not favour
Basque agricultural development. The fishing industry is also at a disadvantage.
– Stagnation of Basque industrial production. Scant private and public investment in
the Basque industrial fabric in both the north and the south of Euskal Herria. The
 131

economy looks to exports as a way out of the crisis, yet without significantly changing
the productive model based on low and mid-low tech production systems that seek
to compete through low prices (by attempting to lower wages) without developing
the Basque domestic market, given the limited consumption. It is not by chance that
the slight rallying of Basque exports in 2011 coincided with an increase in layoffs and
wage freezes. It is also significant that Basque business owners and political leaders
stated unambiguously that there would be fewer jobs in industry in 2012, followed by
a standstill in industry in 2013.
– In the building industry, building of housing has come to a standstill but there are still
jobs in public works thanks to projects such as high speed rail.
– In the service sector, a great many retail businesses have closed down while the large
supermarket chains and hypermarkets have come out on top. In the financial
subsector, banks operating within the Basque area have been consolidated, savings
entities have turned into financial banks and sought financial growth.
– A policy of cuts in public spending, especially in social areas, has been pursued by
the autonomous governments of Gasteiz and Pamplona.

The present crisis may last for another five or six years (in addition to the four so far), so
the weakening of our productive fabric is likely to continue. Per capita income is going to
fall and the distance between ourselves and similar European industrial regions will widen.

The challenge is to change our productive model, reduce social differences and
maintain the existing standard of living.

The Basque strategy: Economic and political sovereignty

We need economic and political sovereignty in order to be able to develop a different
economic policy and a different, better integrated economy of the community. We have
seen some of the negative effects on different sectors, but there is also a further negative
efffect of a structural kind that comes from the institutional establishment.

The structural deficits have to do with a model of powers that stands in the way of real
economic planning in the broadest sense and the creation of a regulatorily sound labour
and social policy, and a territorial division which makes it very difficult indeed for there to
be any integrated planning of the territory and Basque economy as a while, or for the
favourable synergies of all the territories of Euskal Herria to be exploited.

In this sense the set of measures adopted by the different governments of Spain and
France represents an obstacle to our progress towards sovereignty and our ability to
decide on our own policies to deal with this situation. This is amply demonstrated by the
cutbacks in powers within the present system through constitutional reforms or
modifications of basic legislation.

In the area of socioeconomics we would do well to develop proposals addressing both

the model of economic development and measures for adoption in the middle or short
term within the perspective of the building of a Basque state.
 132

4. A SUSTAINABLE, ENDOGENOUS MODEL OF DEVELOPMENT.

MEASURES
MEA SURES TO BE TAKEN

Sustainable endogenous development

Sustainable endogenous development is a development model which seeks to
maximise the intrinsic potential of a territory and its population on the basis of creating a
fabric (through independent chains) of production and consumption. It aims to increase
social production, eliminate inequality and achieve ecological sustainability.

Endogenous development goes hand in hand with institutional development and a

political ability to make sovereign decisions and have an international presence. In the case
of Euskal Herria, given that it has an open economy, it is very important to develop its
potential and capacity for production in a framework of coherent and balanced economic
development.

Citizens, territory and the state are linked to sustainable endogenous development in
several different ways:

– In terms of production, based on the creation of goods and services.

– In terms of innovation and education, based on the actual work of generating
knowledge and transmitting know-how.
– In social terms, which involve the relations between members of society.
– In institutional terms, based on the need to systematise relations between society
members.
– In political terms: the exercise of sovereignty.

Endogenous development thus entails economic, institutional, cultural, political and

social implications. From this perspective we must bear in mind that the citizens should be
made to take part in the community and building society. We need to consider and link up
the need for social participation and the need for bottom-up planning in endogenous
development.

To achieve political control of the economic situation, we need our own institutional
means of ensuring that the decisions made address our real needs, and not the interests of
others. National sovereignty would give solid strength to the development of our economy
with a voice of our own in European decision-making and an ability to build a Basque
society of a kind that is focused on and apt for our needs.

Some considerations about Euskal Herria from this perspective follow.

4.1. The agricultural sector

A sovereign Basque agriculture should be built on the principle of sustainable
development and pursue the following objectives:

– To produce agricultural food products in sufficient quantities to supply the

population's food needs. Improve the food balance.
– To maintain an equilibrium with the environment and conserve the natural
environment. Proper management of the territory.
– To sustain farmers and cattle breeders in the countryside with incomes and living
conditions comparable to those enjoyed by inhabitants of urban areas.
 133

We should promote models of agricultural food processing based on small, diversified

industries and service companies spread over the territory, controlled by producers and
giving priority to short commercial circuits so as to keep the largest amount possible of
value added in the hands of the producers.

We should support a model of sustainable agriculture linked to domestic farming and

partnered or cooperative exploitation, developing agricultural policies that favour small
and medium size farmers, acknowledging social rights and putting them on the same level
as those of other citizens. For it to be possible to maintain agriculture long-term, farmers
need to have access to and learn about methods that protect nature and the environment.

The principle of the free market must take second place to the principle of sustainable
development. Europe's Common Agricultural Policy must be made compatible with the
principles of food sovereignty and sustainable development. Technological research and
development in agriculture should favour types of farming that are socially and
environmentally sustainable.

4.2. The industrial sector

Organising
Organising the industrial fabric of Euskal Herria
The aim should be to promote "networking" between different parts of Basque
industry, to increase structural cohesion and the density of production flows, while also
increasing productive relations of a more "cooperative" kind. This involves the action of
other bodies too, such as town councils, provincial governments, and the government
departments in Gasteiz and Pamplona; social forces such as the trade unions; and other
entities, e.g. universities, technology centres and training programmes.

This would be good for the development and modernisation of many small and
medium sized businesses, including "mature" industries such as subsectors of the metal
industry which could adapt to new scientific and technological advances.

There are also parts of industry such as machine tools, tool making and so on to
underpin sustained economic development. A good number of businesses are kept going
by these subsectors through their knock-on effect, giving rise to a portion of the market in
which exports play a significant part, creating many jobs and moving money.

But there are also other factors to be considered:

– For the most part the technology of the Basque productive fabric is at the low or
mid-low level, in consequence of which companies in this area are forced to
compete exclusively through their pricing, particularly with production originating in
countries with cheap labour.
– Basque industry is intensive in energy consumption; at least 50% of Basque industrial
production is highly energy-intensive.
– Some subsectors, such as metal, paper, cement among others, remain highly
polluting, which is very bad for the kind of development we are seeking.
 134

In view of this, it is necessary to increase diversification in production, meaning not only

taking a second look at some manufacturing subsectors but also pushing forward with new
activities outside of classical manufacturing, whether it be in nanotechnology,
biotechnology and related areas, or in the group of activities subsumed under "advanced
services for businesses" such as engineering, consulting and so on.

Developing an active industrial policy

There is a need for strategic public intervention in certain industrial sectors and a range
of complementary measures to reinforce it. Public and private capital should be used in
such a way as to ensure that private and public business strategies complement each
other.

This affects traditional sectors of industry such as iron, steel and shipbuilding, but we
should also keep in sight emerging high-tech sectors with growing markets such as
aeronautics, biomedicine, nanotechnology and so on. There needs to be public
investment, which can and should adopt different forms ranging from majority
shareholdings to significant holdings of at least 30% of companies, which will influence
private business strategies in a way that is beneficial for long-term industrial development
along the lines of internationalisation pursued by Basque companies such as the
Mondragon Corporation.

Therefore it is necessary to develop public industrial enterprises in areas of

biotechnology (genetic engineering, biomedical research), renewable energy and urban
engineering (treatment equipment and disribution of public utilities such as water, gas,
electricity, schools and hospitals).

Structural fund
From this point of view it would be a good thing to create a structural fund to facilitate
the transition towards a new model of Basque productivity.

It would have to be a fund jointly managed by institutions, economic forces and trade
unions. It should be completely open to evaluation and its activities and leadership should
be made transparent through a procedure of public, social planning of economic policy.

This fund would serve to optimise public Reserach, Development and Innovation
resources, promote public investment in productivity in Euskal Herria, improve professional
qualifications, guarantee access to the job market for groups tending to be excluded from
it, and improvements in training for the unemployed. This public fund should therefore
coordinate different programmes offered by different institutions.

The economic resources of this fund would come from various sources of financing:

– Our own management of funds for innovation currently managed on our behalf by
the Spanish state.
– Direct management of European funds earmarked for economic promotion,
innovation and job creation.
 135

– Contributions from companies and employees for the purpose of carrying out active
and passive job creation policies (such as Fogasa).
– Contributions from various institutions that currently invest in research, development
and innovation in order to rationalise the present dispersal of these resources.
– The involvement of Kutxabank which would contribute through socialisation of credit
for Basque economic and social development, and by making available for this some
of its social fund.
– Private participation would be considered, following certain criteria.

Scientific and technological development of Basque businesses should be promoted.

Spending on Basque R&D should be close to 2.3-2.5% of our GDP. Similar considerations
should apply to an attempt to improve our standing according to the indicator of patents
per million inhabitants.

Challenges for the Basque innovation system

There are four areas in which there is work to be done on Basque innovation. The first
of these is the area of administration: there is a need for a publicly financed permanent
observatory, to be developed in order to make it possible to carry out diagnostic analyses
concerning innovation; more public money should be spent on research, development and
innovation, and it should be distributed better among research bodies, including
technology centres, universities etc.

The second area comprises the entities that disseminate knowledge. There is an urgent
need to change the orientation of centres of technology both to provide better support for
traditional small and medium-sized businesses and to address newly emerging areas such
as biotechnology and the use of nano-products in various industrial subsectors. There
needs to be more cooperation between technology centres and universities given the
growing importance of science in industry.

The third area is the system of using knowledge: there should be more financial
support for recognised projects in research, development and innovation in private
enterprise; financial support for investment in fixed assets when there are "technological
leaps" or alternatively a search for commercial partners; support is needed for
technological consulting and technological alert centres and anticipatory intelligence
across South Euskal Herria (in the manner of Zaintek in Bizkaia), and continuous training
should be reviewed from the strategic innovation perspective.

The fourth area is interface: financial support is needed for action to promote
communication between the bodies that are involved in innovation, like Innobasque, which
seek synergy and systemic efficiency.

Coordinated action along these four lines may make it easier to overcome the present
dualism between traditional, low or mid tech industries on the one hand (mostly small and
medium sized companies) and a number of larger companies and small subsectors with
mid-high or high technology, together with emerging new sectors.
 136

4.3. The service sector and infrastructure

The financial sector

Kutxabank and other Basque financial bodies should promote channelling their resources
towards strengthening the Basque productive fabric, especially that of small and medium-size
enterprises. In any case it is desirable to defend the function of the savings banks (kutxak,
cajas) from the point of view of endogenous development, which supports Basque social and
productive wealth.

A Basque public bank which can manage its own cash ratio appears to be out of reach at
present; in its favour it can be said that, although such a bank would not be abe to create its
own interest rate structure independenty of the market, it would be in a position to represent
the Basques before public opinion, and before investors and financial entities in particular.

In the quest for sources of financing, especially for innovative and newly-emerging
projects and activities, it should be borne in mind that the European Investment Bank makes
loans to European regional governments for particular projects in areas such as renewable
energy and the "green economy".

Commerce
Hypermarkets are the new trend, but we should bear in mind how important small retail
outlets are in our towns and cities, both to cover the needs of inhabitants adequately and in
terms of the jobs and wealth that they generate locally. Apart from anything else, they lead to
important savings in social and environmental costs, mainly by reducing unnecessary use of
cars.

From this perspective, here are some guidelines:

– Local commerce should be integrated into our towns and cities.

– Town markets should be encouraged.
– People should able to participate in the development of commercial policies.
– Municipal or district consulting services should be set up to help people
endeavouring to open new businesses.
– Business owners should be encouraged to work together.
– Basque produce should be promoted, and a "Made in Euskal Herria" label created.

External trade:
Given the open nature of the Basque economy, generally with a positive trade balance,
steps towards improvement should be taken.

– Public, selective assistance should be provided to small and medium-sized

businesses on financial issues, customs, promotion and other matters, and market
information should be facilitated.
– A Basque institute of foreign trade should be created.
– Companies' own distribution channels should be consolidated abroad, and more
consortia created.

Services connected to industry should be supported.

Computer services should be supported both for large business concerns and for small
and medium-sized businesses, as well as consulting, marketing and engineering companies
of a size appropriate to the challenges presented by the European and international context.
 137

Infrastructure
Infrastructure
There is a direct connection between endogenous development and the networks that
relate a territory to the international domain, and also the type of energy infrastructure used.

Transport and territorial regulation

The territorial structure of South Euskal Herria requires a combined transport system with
road and rail networks. The present high-speed train project will make the existing territorial
imbalance worse, favouring large metropolitan conglomerations and damaging the
environment. The high cost and long-term debt that will be incurred will mean, in the present
situation of enduring crisis, holding to ransom Basque budgets for the foreseeable future and
turning our back on other important activities and social needs.

A proposal for infrastructure improvement should include the following:

– Structuring the territory in a way that links up the provincial capitals and also other
important towns.
– Taking maximum advantage of existing networks.
– Minimising environmental impact.
– Access to major lines of communication both within the state and with the rest of Europe.
– Economic rationality of investments.
– Promotion of intermodality.

Energy
Energy
Our energy model is based on intensive consumption of energy, especially in the case of
industry and transport (only 3% of goods transport is by rail).

Renewable energy should be promoted using public capital, as should saving and greater
energy efficiency, aiming for minimum gas consumption and use of petroleum derivatives. We
should refuse to use gas obtained from fracking, which is defended and supported by the
political leaders in the BAC, because this process involves the hydraulic rupture of underground
layers of slate covering up gas and oil resources, which results in pollution (in the case of
aquifers), and in any case the result is of poor quality for the energy value needed (i.e. the energy
we obtain is barely higher that that necessary to make it worth extracting).

Public sec
sector involvement
The public sector should get involved through a comprehensive strategy in order gradually
to create a new productive model that addresses present-day challenges, improves productive
efficiency and improves employees' working conditions. Some relevant areas of action are
listed in the following table:

Public sector involvement

⇒ Economic planning by the state.

- Action by a public bank.
- A strategic industrial policy.

⇒ Fiscal sovereignty:
- The economic agreements of BAC and Navarre with the Spanish state.
- Subordination to the Spanish system of taxation: the effective overall tax burden must be equivalent to that of the state.
- The "quota".
- A tax system that favours capital. ¿Who pays taxes?
o Reduction of tax collection.
o Debt.
 138

Developing measures in time, contributing to synergy, will make it possible for a model of
socially productive development to unfold that is endogenous and sustainable, and more
balanced and fairer than the present system.

In the perspective of building the Basque state it is necessary to consolidate a social

hegemony of large majorities that make sovereignty feasible and lend it credibility. The
following table sums up the main lines of action, which must be developed in detail for each
part of the territory and planned out over time, with specification of short, medium and long
term priorities.

The fight for economic sovereignty

⇒ Social hegemony for sovereignty.

⇒ Building the Basque socioeconomic domain.
- Construct the Baque productive fabric.
- Progressive taxation; fight tax fraud.
- Basque domain of labour relations.
- Basque system of social protection.

⇒ Social hegemony for sovereignty.

- Fight social insecurity and defend social rights.
- Creation and distribution of jobs.
- Right to housing for everybody.
- Defend Mother Earth: sustainable development.
 139

REFERENCES

Borja, A. (2008): “Plan de Ciencia, Tecnologia e Innovación 2010. Una visión crítica”, in R. Zallo
(ed.), El Pais Vasco en sus encrucijadas, Ttarttalo, Donostia, 345-359.
–––––––––– (2009): “Claves de la política industrial española y del sistema de innovación”, El Viejo
Topo, 253, Barcelona, 135-145.
–––––––––– (2012): “EconomÍa e independencia en Euskal Heria”, Haria, 30, Iruñea.
EGK (CES) (2010): Txosten sozioekonomikoa, Euskadiko EGK, Bilbo, 2011.
Eustat: various years.
Gaindegia: various issues.
Eusko Jaurlaritza (2008): “Transformación productiva y despegue de innovación”, <http://www.ej-
gv.es>.
Navarro, M. et al. (2008): “Patrones regionales de innovación en la U.E-25: tipologia y
recomendaciones de políticas”, in Orkestra Working Papers.
 140

4. The Basque economy at the crossroads

Ekai Center, research centre for the promotion of

and dissemination of information about the study of public policy

The Basque economy is moving towards a change of context, as a result of the

obsolescence of the present economic model and the challenges ensuing from the
financial crisis in the Eurozone. We are at a real crossroads: the future outlook for the
Basque economy depends on whether or not the right decisions will be made now. It
is crucial that budgetary policies ensure a solid financial system, deal with the
challenges posed by the monetary system, strengthen industry, and above all, achieve
a qualitative leap both in the technical equipment of industry and the effectiveness of
our public institutions.
 141

1. THE FINANCIAL CRISIS AND THE CRISIS OF THE EUROPEAN PROJECT

We are standing on the peak of a financial crisis that, latent for decades, finally erupted in
July 2007, although some economic and political circles didn't fully react to the situation
until 2009.

This is a structural, economic and political crisis of bigger proportions than any we have
seen to date which, on account of western governments' all-round political impotence,
threatens to trigger off the final downfall of Europe and the United States in the face of the
emerging countries.

It needs to be said that this decline of the West is not the result of a natural process of
fatigue in the course of development but a direct consequence of public policies that may
be called self-destructive, most notably from the seventies onwards. Therefore, it is also a
reversible process if Europe and the US are capable of reorienting their economic policies
fast, and probably their political structures too.

The financial crisis erupted in 2007 as a consequence of an accumulation of

unsustainable debts all across the West. Some of our government leaders may claim that
they were unaware of what was going on at the time. That the figures on the growth of
GDP for the previous few decades were grossly distorted with respect to the growth of
debt. That very serious trends of deindustrialisation and an effective drop in productive
capacity were being systematically concealed by financial expansion. That our trade
policies, which can also be described as self-destructive, only made sense in a context of
twisted political conduct by a political class incapable of defending general European and
American interests over and above private agendas set by particular pressure groups.

In this context of the West's loss of economic and political hegemony, the Basque
Country's economic structure is specially affected by the way the situation is developing in
the European Union. European monetary union — the euro — is in freefall. And with it, the
foundation on the basis of which we have been taking positions on economic policy for
decades.

Indeed, our country's economic and political strategies were set in the framework
known until now as the process of "European integration" for much of the twentieth
century.

Specifically, our industry has taken its bearings from the initial framework of
incorporation into the common market, followed by the single market and, finally,
monetary union.

Our politicians, whichever their colour, have situated themselves within the context of
progressive European political integration, which without a doubt has done much to
temper the radicality of the Baque political conflict, at least as far as the domain of
economic decision-making was concerned.

But this crisis, which is financial in its outbreak but political in its origin and economic in its
consequences, is going to change many things, and Basque economic policy is one of them.
 142

It is important that our social, economic and political leaders should interpret what is
going on correctly. It is important, in this sense, to avoid the kind of self-deception that is
becoming commonplace in Europe's different ideological currents on both the Left and
the Right.

If during the years prior to the crisis certain economic variables evolved in the West in
the way they did, it wasn't on account of mere conceptual miscalculations, or as some
traditional economists naively argue, due to "the errors of neoliberal ideology" or "the
ideology of globalisation". All these years, behind those policies which we have called self-
destructive stood group interests. Interests that are usually not interests of some countries
over other countries but the interests of particular interest groups which are clearly contrary
to the general interests of Europe and the United States, which our politicians have failed
to stand up to. This is also the reason why it is so difficult to correct misguided economic
policies even in the face of drastic situations like this.

Indeed, this network of particular interests has constantly fuelled an academic,

ideological and cultural current more and more detached from reality and a collective
commitment to social, technological and economic progress. In the Basque Country we
have not been untouched by this trend, which has left us with a progressive loss of
industrial culture, which is precisely the culture of creativity and solidarity that feeds into
advanced societies.

2. THE POSITION ADOPTED BY THE BASQUE ECONOMY

The big question we should ask ourselves here is: Is it possible to do anything about this
negative context that has grown up over decades and defend the real economy, productive
development and the socioeconomic fabric in the middle and long term?

The answer is yes, with reservations. That essentially different economic policies are
possible is demonstrated by the present situation. We only need to look around us.

There are western countries, and economic policies, which, up to a point, have managed
to ward off trouble. Countries that have defended their industry. Countries that have
defended their productive capacity. That have defended their financial fabric against
capitalist speculation. That have not allowed themselves to get carried away by the cycle of
escalating debt that has brought other countries to economic ruin. Basically, these are the
core countries of the European Union.

Other economic structures, on the contrary, have proved incapable of defending

themselves. There are countries that have let their productive capacity slide downhill,
borrowing their way into debt in self-deception. Countries which, independently of whether
their positions are supposedly right-wing or left, have allowed their economic policy to
depend increasingly on strategies dictated by financial pressure groups. These countries have
even gone so far as to permit large financial entities to acquire influence to an unwonted
degree over their political life, over their media, over their large companies, and increasingly
over their financial system. All this has been happening, to varying degrees, in the English-
speaking countries and the countries of the so-called European periphery.
 143

Where does this leave us now? Four years on from the beginning of the crisis, the
outlook is bleak. Exceptions aside, official western policies have refused to address the
basic problems, and find themselves ensnared in a permanent strategy to "gain time",
putting off the real issues of European and US economies and even making them worse.

Within this scenario, what position is Euskal Herria in? It has to be said, first of all, that
the country has done remarkably well at defending its industry and productive capacity in a
very tough situation, made tougher by the decline of its traditional big industry which has
forced our businesses to readapt constantly, and rather successfully too. But just as much
difficulty was posed by the prevalent way of thinking in the past few decades which did
nothing but beckon away from industry and farming. By and large we have lost the battle
for agriculture, but have done a better job at defending industry. Despite the predominant
neoliberal view, according to which only services, financial figures and unrestrained
consumption seem to matter, we have upheld the notions of industrial policy and
economic policy, actively intervening when necessary, supporting industrial conversion and
repositioning of our industry while encouraging the development of an active, dynamic
fabric of small and medium sized enterprises.

Euskal Herria has maintained a sobre level of consumption and investment without
entering the spiral of overspending and overborrowing of which the English-speaking
world and the European periphery have been guilty. It has also avoided for the most part
the trap of property or financial speculation.

Our industrial capacity remains intact thanks to exports, which make up an increasing
proportion of our industrial sales.

But we also suffer from some palpable structural flaws: the low technological level of
our products, the clearly insufficient capacity to innovate, education, health, and in general
the institutional dimension of our socioeconomic fabric.

To a large extent, these shortcomings were inherited from a political and institutional
setting that predated the achievement of Basque self-government which we have not
succeeded in adapting to the competitive development of our industry.

As a consequence of the quantitative development-at-any-cost policy of the Franco

era, which only made sense under a dictatorship, our country emerged from that regime in
a clearly debilitated state and poorly equipped to take on the long-term challenge of
productive development.

Euskal Herria had a productive fabric based on an outdated industry developed with
cheap labour and insufficient investment, with our country ranking considerably lower, in
relative terms, than it had before the dictatorship began. Euskal Herria had of course
"grown", but the relative value of its per capita income in comparison to Europe or the
whole of the Spanish state was much lower than it had been in the nineteen-thirties when
Franco came to power. True, great fortunes were made in this period, but at the price of a
relative deterioration of the average standard of living, and the virtual disappearance of the
farming sector, and an overall degradation of the environment in much of the country; and
at the cost of a cultural, sociological and political crisis of unheard-of proportions for
Europe, a third-world-style public administration and health and educational services that
were absolutely inefficient.
 144

Over the last three decades our industry has nonetheless managed to work its way into
the European market, and following Europe's monetary unification, take on first-class
international competition. Unfortunately the same cannot be said of our social and
institutional track record. The ecological disasters brought about by the dictatorship have
only been partially set right. Our administration and our system of schools and universities
still rank near the bottom in Europe.

Unfortunately our political leaders have lacked initiative to compare the state of our
administrative and educational structures with the top European standards, and having
done so, to act on what they would have found. For thirty years they have adopted a
complacent strategy aiming simply to do better than Spain's other autonomous
communities. As soon as European-level comparative analyses began to become known it
was realised that the relative position of our official bodies, schools and universities in
matters of ecological balance is lamentable.

Our companies have no choice but to compete with world-class companies. That is
only possible if our social and institutional apparatus is able to bring us up to their
standard, which certainly is not the case at present. We are lagging behind on both counts,
and that, in addition to the lack of a resolution of our political conflict and the historical
demands regarding our territorial configuration as a country, which are still unfinished
business, is probably the biggest hurdle in the way of achieving satisfactory productive
development in the mid or long term.

What future awaits Euskal Herria in such circumstances? The aim of this chapter is to
make the point that the Basque Country stands at a crossroads in this respect. Why?
Because the open-ended variables in the present situation regarding the economy and
economic policy may develop in a number of different directions depending, in part, on
how things turn out. But the important thing to grasp is that this will also depend on how
able we are to make a stand as a country and orient our political, economic and social
decisions in one general direction or another.

The essential points to bear in mind at this crossroads for the Basque economy are the
following:

a) The high risk that the present economic crisis may continue or worsen, with a
dangerous threat that the Spanish economy in particular may take a turn for the worse.

b) The high risk of a breakup of the European monetary union, and in particular, the risk
of such a split-up occurring along the divide of the Pyrenees.

c) The even more likely scenario that the European Union may divide up into two
socioeconomic sections with increasingly different profiles and policies: the countries
of the centre and the countries of the periphery.

d) Doubts about the political future of the European Union itself which, depending on
how the financial crisis develops, might move in the short term in the direction of a
federal state, or may, on the contrary, disintegrate, setting out towards the status of an
association of clearly established national states along traditional lines.
 145

e) Clear structural deficits which still remain despite the success of the Basque strategy of
defence of the industrial model. Our community will need to make good decisions
about those structural deficits which aim either to address them or to continue to
accept the risk of falling into a tendency towards progressive economic decadence
because the issues were not addressed resolutely when they should have been.

f) In particular, the need to address the challenge to make a qualitative leap:

- in our industry's capacity for technological innovation;
- in the efficiency of our institutional apparatus and the way our businesses work.

Despite the alarming situation of the crisis and the worrying breakdown of Europe's
peripheral states among which we find ourselves, we face a crossroads because nothing is
carved in stone and there are various options open to us which can decide our economic
future in the middle and long term.

Finally, it is also true, as we shall see, that our chances of occupying one position or
another as we come to this crossroads may vary significantly depending on what power
and authority we have and, in particular, whether or not our country has a capacity to make
crucial decisions on things that will come up (and at the present time that boils down to
what powers the Spanish and French state devolve to us), such as:

- Banking policy.
- Monetary policy, regarding the availability of options in the event of a breakup of the euro.
- Tax regulation, in order to ensure maintenance of the present "theoretical" power to regulate
in this area.
- Policies needed to resolve our social and institutional deficit (regulation of employment;
employment, university and social security policy).

3. A SENSIBLE BUDGETARY POLICY

For economically and politically strategic purposes, one of the main goals of budgetary
policy in the coming years is going to have to be to limit debt. Given that we managed to
avoid structural deficits in the years of economic expansion, now it should be easier for us
to balance our budgets through judicious adjustments, tightening our belts as necessity
dictates while applying taxation adequately. Avoiding debt is a prerequisite for ensuring
true autonomy in our public policies which are not dependent on short-term external
conditions.

In this sense it is imperative that we steer clear of outmoded thinking; we must forget
about both the Keynesian and the neoliberal clichés, discard concepts which view
borrowing as the sacred solution for all problems while also enthroning austerity as a sort
of sacred prescription to cure all economic ills. We must be aware, now more than ever, of
the scarcity of public resources and above all, the need to set clear spending priorities.
Nor, of course, should we ignore the fact that a point may be reached after which belt-
tightening and austerity, instead of strengthening the economy, produce the opposite
effect, especially when they start to eat away at social cohesion, social or economic
infrastructure, educational policy or technological equipment.
 146

Above all, it is important to avoid dogmatism and remain alert to what the next few
months and years may bring. Nobody knows for sure how far this crisis is going to continue
or how far public revenue may fall.

In a nutshell, then, the main objectives of Basque budgetary policy should be:

a) To avoid debt.
b) To protect the real economy.
c) To protect social cohesion.
d) Beyond these requirements, control public spending.
e) Adjust tax revenues as necessary to achieve a balanced budget.

In budgetary policy it is also essential not to allow ourselves to be carried away by

trends in other socioeconomic settings. As we have said, there are "adjustments" that are
necessary and which affect the economy positively, but there comes a point where such
adjustments may interfere with the balance between supply and demand, threaten social
cohesion or affect our socioeconomic, educational or innovative capacity.

Our economy has not over-borrowed to such a great extent as the countries of the
European periphery. Therefore, social adjustments that make sense in those countries may
not be warranted and could be destructive for Basque society.

4. KEEPING THE FINANCIAL SYSTEM " ROOTED"

ROOTED "

One of the main pillars for countries aspiring to a model of endogenous development is to
possess a financial system that is sufficiently committed to the productive development of
the country. That is why the countries which have respected their commitment to the real
economy, those in the European centre, have defended tooth and nail the maintenance of
a majority share in the banking sector of entities with proper roots in the country such as
credit cooperatives and savings banks (kutxak, cajas).

This has been a constant feature of the Basque economy thanks to the structural
weight of savings banks and credit cooperatives in the Basque banking system.

In this sense, the process begun in 2011 of turning the savings banks into financial
banks has raised alarm. It is indeed worrying that such a strategically risky operation for our
economic structure should have been set going with such a flimsy justification.

The loss of control of the Caja de Ahorros de Navarra is probably irreversible, and the
Navarrese social fabric will have to recover from this little by little. Such a fate appears to
have been avoided, or warded off for now, in the case of the fusion of the three provincial
savings banks of the Basque Autonomous Community.

Several aspects of this process cause concern and must put us on our guard against
certain obvious dangers (which have already become realities in the Navarrese case) which
would entail a big step backwards or even the collapse of our financial system, not just
caused by the stumbling blocks of the financial crisis but by the total irresponsibility of our
political class in this area.
 147

We think that the measures it is necessary to pursue from the point of view of economic
policy are:

a) Make sure that shareholders other than the various savings banks are not admitted
into Kutxabank.

b) Safeguard the Basque financial system through strategies radically limiting the
extent of borrowing and concentrating investment in the Basque socioeconomic
fabric, reducing the risks taken by the savings banks in non-domestic areas.

c) Ensure the commitment of the savings banks to their own geographical area, the
self-employed and small and medium-sized business, and to recovery from the
present crisis in the short and middle term. Probably this means some sort of
institutional link will have to be created between these banks and small and
medium-sized businesses.

d) Involve the whole of the Basque political class in these strategies through a pact
between institutions laying down that the purpose of the savings banks is to
constitute the foundation of our financial system and to support the
socioeconomic fabric of our society, avoiding external growth strategies difficult to
justify in entities of this character which may put the foundations of our whole
productive system at risk.

It is important, indeed urgent, that throughout our financial system there should be a
change of mentality among the executives running these institutions. This applies,
basically, to two areas: the current overestimation, even idealization, of the advantages of
dimensional growth in the financial sector, and the underestimation of the importance of
linking financial activity to the real economy.

The political leaders of this country should therefore adopt a new function which hardly
seemed necessary until recently: to supervise, and if necessary, intervene in the Basque
financial system to make sure that it remains rooted and stays linked to the real economy
and the Basque socioeconomic fabric.

This also implies ensuring that savings banks and credit cooperatives continue to be
majority shareholders in the Basque financial system, in line with the habitual criteria of the
countries of the European centre.

Needless to say, the entities that make up the Basque financial system must be strong
and solvent. Basically what this entails is:

a) Proper management, which requires technically qualified personnel and includes

the necessity for bank executives to become imbued with the attitude of
commitment to the productive economy.

b) Most especially at the present time, avoiding unnecessary risks that arise from
borrowing, investment in speculative markets or in non-domestic areas.

The rooting of the financial system is an essential requirement not just to ensure the
efficiency of financial activity itself but also to be able to maintain financial, industrial and
 148

even political autonomy in countries or regions which generate the savings that drive these
entities. Rooting the financial fabric is also essential in order to keep going the fabric of
small businesses and the dynamic operation of production and industry.

Ensuring the rooting of the core of the financial system is absolutely essential if we wish
to maintain our financial autonomy; this will permit:

* greater autonomy in the management of our institutions, basically the municipal

councils;

* greater independence for our businesses vis-à-vis extraneous interests from beyond
our territory, whether they be Spanish or international;

* greater availability of financial resources for productive development, innovation and

creating social and economic fabric;

* capping the funnelling off of resources towards speculative projects;

* the focusing of the savings of Basque families on investment in the area immediately
surrounding us, in our own social and productive fabric, which is typically less of a risk
than investments further afield;

* greater independence of our companies, institutions and political class from a

financial sector with interests that are unrelated to our socioeconomic structure.

5. THE MONETARY POLICY CROSSROADS

The unusual circumstances the European monetary system is now in are playing a decisive
part in the present state of the economy. The euro's future is hanging in the balance in
terms of how it is regulated and where the euro is used. Given this situation it seems to be
essential to position ourselves regarding both the risks and the opportunities for the
Basque economy posed by a possible breakup of the euro.

It is true that monetary policy is an area of administration that is virtually unknown in our
country for well-known historical and political reasons. Those reasons have everything to do
with the regional character of our economic domain, which are therefore outside the
bounds of monetary policy which is directly linked to sovereign states and, in the euro's
case, the European Union.

However, at this time there is an obvious need for Basque economic policy to at least
think about the possible scenarios that may lie ahead of us on accounot of the euro's
present structural crisis.

Briefly, the basic theoretical options on the table with respect to the euro's future are:

i. For things to stay the same.

ii. To keep the present monetary structure but with stronger economic government.
iii. For some countries to leave the euro.
iv. A division into two areas with different monetary statuses.
v. The end of the euro.
 149

Although it is possible to imagine theoretical ways to configure European monetary

policies that would be more efficient than the single currency, their implemenatation and,
particularly, political costs would be so immense that we may write them off as improbable
in practice. European political leaders are working all-out to avoid such scenarios, which, it
seems, would only be contemplated in the event of some sort of economic or political
catastrophe. But that said, it is also true that the sense of an impending "catastrophe" of
some sort is being felt more and more, at the very least where Greece is concerned.

Clearly we are looking at two quite different scenarios, on account of the distinct
geographical and geopolitical scope of the risks, in the case of a challenge to the present
monetary union in terms of a given peripheral country's hypothetical exit from the euro or,
on the other hand, a challenge deriving from the exit of one of the central states.

Although the scenarios are different from a political perspective, in macroeconomic

terms we might classify the possible resulting scenarios regarding the future monetary
position of Euskal Herria as follows:

- The present geographical scope of the euro is maintained.

- Euskal Herria remains within a euro from which some of the weaker economies
have departed.
- Euskal Herria ends up in a monetary union together with the weaker economies.
- Euskal Herria ends up in an intermediate position in between the strongest and
the weakest economies.

The first effect for the Basque Country of being part of the eurozone has been to offer
the advantage of having more capital available to it than would probably have been the
case in a monetary system based on other, weaker economies. All in all, our country has
not significantly abused of this availability of resources. Up until the start of the 2007 crash,
our public entities had hardly got themselves into debt. Our financial entities had easy
access to foreign financing, as a result of which some bad investments were made, but
basically in foreign markets. On the whole, though, ample capital has been available to
stimulate consumption and investment.

Theoretically speaking, in the event of a reconfiguration of the European monetary

union, placing Euskal Herria in an intermediate monetary "zone" would probably be the
most appropriate thing given the present state of our economy.

Placement in a weaker monetary zone than that, which is foreseeably what would
actually happen, would result in a greater shortage of capital for productive investments
and would stunt our growth, given the increased monetary instability, even though having
a weaker currency might represent a significant advantage in the short term by making it
easier to export and harder to import competing products.

All told, then, taking into account the fiscal and budgetary discipline demonstrated by
our country over the last few decades, the structural capacity for saving and so on, it seems
fair to say that although in the short term it might be tempting to have a weaker currency to
facilitate improvement of our trade balance, in a longer perspective our economy would
definitely be better off by being part of a stronger monetary system.
 150

Having its own currency gives a region or nation some important advantages, the most
basic of which is obviously the ability to adapt monetary policy to the economic
development of one's own country or area.

There are several reasons why it can make sense to give up that autonomy and join
broader monetary unions. They range from lower costs for trade transactions to greater
ease in getting access to capital by belonging to a stronger, more stable economic bloc;
but there are also arguments to the contrary, including the greater ease in achieving a
favourable trade balance by belonging to a weaker monetary area.

One key factor when assessing different scenarios is the present setup of economic
agreements with the state. It is true that, in terms of regulation, the real tax autonomy
granted by the present economic agreements is limited. However, the self-discipline in the
management of fiscal revenue which these agreements imply is more typical of
independent states, and this is something that should not be lost sight of in a
comprehensive analysis of economic policy strategies in general and monetary policy in
particular. In this case, it also entails to a large extent giving up one of the main buffers for
so-called "asymmetrical shocks" in the midst of a monetary union. Given that a fiscal
adjustment for these shocks does not come about automatically, the drawbacks of
belonging to a broader monetary union are more evident in a situation with fiscal
sovereignty such as the Basque Country has.

Theoretically, in the hypothetical case of having its own currency, Euskal Herria would:
a) Have to pay more currency exchange costs.
b) The benefits of deciding on its own monetary policy in accordance with the state
of its economy and an intermediate position between the strong and weak
currencies of Europe, which would probably be closer to its own economic reality.

However, the question of how feasible it would be to have its own currency depends
less on momentary factors or the country's economic or industrial development than on
how capable it is to sustain its currency at a stable level and keep its own bookkeeping in
order.

It is true that until now being part of the euro has meant that the Basque Country could
benefit from the advantages of having a strong currency without having to worry about any
of its down sides until the crisis began. But considering what has been going on for the
past four years since the crash it is quite possible that this option of enjoying the benefits
without paying much of a price of a strong currency has come to an end. Everything seems
to suggest that developing political realities will either force us to choose, or leave us with
no choice, and we will find ourselves either within a strong currency or within a weaker one.

In the Basque case, for reasons already given, in the hyothetical scenario of a breakup
of the European monetary union it is even possible that a situation with our own currency
would serve us better than being part of a weak monetary zone. Provided, that is, we prove
capable of maintaining the same general level of fiscal and budgetary discipline as we have
demonstrated until now.
 151

6. RE-
RE-COMMITTING TO ENDOGENOUS DEVELOPMENT

We have reached a strategic turning point and it is now that we need to decide what kind
of approach we are going to take henceforth to economic development in this country:

a) we can opt to continue with endogenous productive development (except that in

Navarre there has been a lot of exogenous development, posing a risk for the
future); this is an approach which has worked well for us so far, giving us an
industry that is more and more productive and innovative, and a financial system
with sufficient autonomy;

b) alternatively, we can allow ourselves to be blown in the direction of the countries

of the periphery in the midst of which we are located, giving way to a progressively
weakened productive model and increasingly dependent financial systems.

As we have already said, there is nothing carved in stone. With growing doubts about
how France is going to fare from here out, we are situated at a geographical point in
between the countries making up the "centre" of Europe and those of its periphery. Our
social, employment, educational and institutional systems can also, to some degree or
other, be described as at a midpoint. If, as everything seems to indicate, the gap between
the two is getting wider, the need to decide which way we are going may become more
and more pressing, with little time to spare.

In effect, by action or inaction we have already been making decisions for months, or
even years, with long-range effects which will force us to opt for one or another of the two
socioeconomic models. Some seem to be pulling us towards a socioeconomic model that
looks like it will be that of the countries of the periphery, with debt dependency,
dependent financial sectors, weak productive sectors, deep class divisions, poor social and
institutional provisions, big social differences and little social cohesion.

The alternative option demands that we commit ourselves resolutely in society,

economy and politics to a future as a country that is open, caring for its people, with
internal cohesion, a participating civil society, a strong work ethic, and a strong collective
will to pull through, with a capacity to produce and innovate in technology, with balanced
books, limited dependence on borrowing, a reasonably autonomous financial sector and
advanced social and institutional provisions. We need to arm ourselves with political and
social valour to make the necessary decisions to make this happen.

If we renew our commitment to endogenous economic development, this also raises

the need for us to set down and implement clear policies affecting the size and ownership
of our industry. The type of company ownership and whether our industrial fabric is
composed for the most part of small companies or large ones may be decisive factors, in
the medium to long term, determining how capable we are of sustaining our model of
development.
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7. SAFEGUARDING INDUSTRY

Given the ongoing structural issues in the financial sector, the crisis continues and shows no
sign of abating in the short term. Given that the real economy of families, businesses and
government is already substantially weakened by now, its capacity to withstand further
pressures is diminished in comparison to its position in 2008.

Current analyses in a European framework of regional industrial policy are spotlighting

significant progress, mainly from the perspective of sectorial policy and policy on
specialisation and innovation.

However, the basic challenges for Basque industry in recent times, and which it will
most likely need to go on addressing, have little to do with regional industrial policy. They
involve two chief factors:

– The decrease of international demand.

– The unavailability of credit in the financial sector.

The challenge for basic policy, then, resides in the fact that the most crucial issues for
Basqe industry in the short and medium term cannot be addressed solely from the point of
view of industrial policy per se but must be taken up on a higher level, affecting banking
and monetary policy and regional, state and global macroeconomic policies.

And as we know, decisions on banking and monetary policy as a whole are not within
the province of Basque public bodies. Neither are the basic instruments that are directly or
indirectly relevant to global demand.

The big question, which requires an urgent answer, is: What can our political leaders do
about it, then?

First of all, as we have noted repeatedly, Basque political leaders may do the following
by means of regional industrial policies:

a) Make our industry more competitive to improve its ranking so that, despite the
global fall in demand and foreseeable further reductions in the future, it can retain
a larger portion of the market than other regions.
b) Help strengthen the internal finances of our companies, thereby giving them more
capacity to resist new collapses or upsets in the financial sector.

But the million-euro question is, what else can the regional governments do, apart from
create industrial policy, to address the structural problems of diminishing demand and the
drying up of credit.

It seems obvious enough that the specific measures to be taken should be different in
the Basque Country from those that might be considered for other regional political units.
For one thing, there are clear differences between the regions, in terms of their size,
economic structure, openness to foreign markets, saving capacity, and so on. For another
thing, there are essential differences between different regions with regard to their ability
to act on matters of political management affecting global demand, or in the credit market
and monetary policy.
 153

There is not much that the Basque Country's "regional" policy can do at present to
protect it from the risk of upheavals in monetary policy which may well depend on both
overall trends in the euro's stability and the standing of each region in the hypothetical
event of a breakup of the eurozone.

To address these risks of instability of the global demand, Basque industrial policy
should obviously take as its starting point the geographical location of industrial demand at
the time when it is developing regional policies of one kind or another.

In particular, fiscal policies or spending aimed at increasing demand should take into
account the proportion of consumption or investment that is allotted to products made
within the geographical area of Euskal Herria itself.

Further, it is essential to work out what proportion of foreign demand for our products
is located in stable geographical regions or, on the contrary, in areas that are at greater risk
of suffering a fall in demand. This will give us a point of departure when thinking of a good
way to approach a reorientation of export strategies.

The options for the Basque Country to protect itself against the risks of a contracting
credit market may be limited, but they should not be ignored.

We have already referred to the possibility of developing industrial policies to promote

self-finance, limiting somewhat companies' dependence on credit, although the short term
effectiveness of such policies in the present situation may be dubious.

Within the range of conventional policies, the public policies of the Baque instututions
should maintain strategies of driving forward and reinforcing structures for giving financial
coverage to small and medium sized companies, especially through reciprocal guarantee
associations and venture capital companies, including a strategic consideration of a
qualitative leap in the latter's activities.

Apart from the usual instruments, the essential basis for dealing with risks of stagnation
or collapse of the credit market is surely an analysis of the relationship between saving and
investment on the macroeconomic level in the Basque Country.

In regions where the balance is negative and the territory needs a supplement of
foreign capital to cover the deficit, regional policies can be oriented to controlling or
reducing the capital deficit. This can be done in a variety or ways:

- By limiting any speculative investments or unnecessary public investments which

may be being financed through credits or borrowing.
- By finding alternative financing or adjustment strategies for public investment or
spending which may be being financed through credits or borrowing in
anticipation of possible contractions of the credit market.
- By finding ways to supplement private savings, if necessary, with public saving
channelled towards industry by various routes.

However, in the case of countries like the Basque Country were, in theory, there exists
adequate saving capacity to finance investment, the strategic objective of public policy in
this area should be to stop the financial sector from freezing up or channelling too large a
part of internal saving, thereby provoking artificial financing deficits in industrial companies.
 154

In the middle and long term, such policies may become established in the promotion
of the activity of financial bodies with links to the territory, such as credit cooperatives,
savings banks and regional commercial banks, inasmuch as these limit the inter-territorial
flow of capital.

In the short to middle term, policies that aim to affect the level of wholesale borrowing
of credit organisations may be a good strategy for the occasion. In areas with an adequate
level of saving such as Euskal Herria, it seems to make sense to get entities with territorial
links to limit their access to foreign borrowing and their investment outside the territory.

If it is difficult to access the wholesale market now, it would become harder still if there
were a further slump in the credit market. The less we depend on foreign loans, the better
the chances of the regional banking sector maintaining a flow of capital between savers
and investors.

Likewise, apart for short-term liquid investment, investments outside Basque territory,
even if based on current "regional" capital overflows, are unlikely to be recoverable for our
territory in the event of a major collapse of the credit market.

So it probably is possible to develop strategies for safeguarding industry against the

risk of a collapse of the credit market in a place like the Basque Country with adequate
levels of saving. It may turn out to require specific regulatory tools over which Euskal Herria
already exercises power, but it would also be possible to develop public incentive
strategies, information campaigns and public relations exercises aimed at influencing the
strategies adopted by financial entities. That influence could be direct (through private
social sectors or public bodies that are represented in credit cooperatives or local or
regional savings and other banks) or indirect, through just such strategies hinging on
image, and relations with financial entities in which, together with the public institutions of
the autonomous communities, there is also involvement of local entities, chambers of
commerce, business associations and so on.

8. A LEAP FORWARD IN TECHNOLOGY

Notwithstanding the impressive, and effective, efforts by our country of recent decades to
defend its industrial fabric, we still have some significant catching up to do, and probably
the chief structural challenge we face is to move forward in our technology.

It seems clear that certain structural issues make it particularly difficult to advance in this
direction, one of which stands out in particular: the great weight of the "mature" sectors, as
they are sometimes called, in our industrial fabric. But it is our opinion that a lot more
probably could have been done than was, especially bearing in mind that, to a very large
extent, institutional factors have been responsible for impeding more resolute progress in
raising our technological standards.

What this tells us is that a faster or slower rhythm of progress depends largely on
adopting adequate policies and implementing them effectively.
 155

Therefore, we might say that we have two basic options regarding preparation for
technological innovation:

a) We can renovate our technological structures to carry out a qualitative leap

forward in our ability to innovate in industry, opting in particular for the
reinforcement of our basic capacity for technological innovation supported by the
experience and ability to develop of our existing network of centres of technology
and a better use of the public resources that are available for the purpose.

b) Or, we can carry on with our traditional lack of commitment in this area, which
derives from a failure to identify and address the serious institutional problems that
present great obstacles to our technological progress.

Making a bid for an industrial policy committed to technological advancement entails,

most particularly, the implementation of a great social pact to back the horse of innovation.
Not to underestimate the value of the effort that has been made in this respect by the
Innobasque project, we consider that this great social pact should rest upon different
premises, such as the following:

- We need to free ourselves of restraints deriving from the dominant conceptual

framework in the West in recent decades, and not waste our time confusing
spaces of technological innovation with social innovation. There is nothing wrong
with social innovation, a notion which is fundamental to the aims of EKAI Center,
but public policy on innovation in the social field should obey principles and
criteria that are clearly differentiated from technological and productive
innovation. The great social pact that we advocate should thus be clearly centred
on technological innovation.

- While continuing to defend and support initiatives already embarked upon to

promote applied research, this great social pact should be focused primarily on
the promotion of directed-basic research.

- Considerably more money must be specifically earmarked for directed-basic

research than at present, and there must be a fundamental rewriting of priorities.

- There should be a sprecification of the strategies needed for implementation of

this social pact jointly with active entities, basically with companies and research.

- We should free ourselves of the traditional institutional restraints which basically tie
down the political and higher education domains, putting our money on a new
way of managing directed-basic research through public or private structures with
enough autonomy to make resources available to the most capable research
teams for each project, focused on promoting our country's research teams but
with the capacity and the will to hire other information and research services from
other places too. The money should basically be public, but it should be for
projects of clear long-term interest from a business perspective.
 156

5. The Mondragon cooperative group and the

prospect of a Basque state.
state.

Antxo n Me ndiz aba l, Te nu red pro f es s o r o f eco no mi cs ,

Univ ers ity o f the B as q ue C o untry

This chapter presents a broad structural overview of the Mondragon Corporation

cooperative group, focusing on its strategic approach for the new millennieum, which
covers the second model of corporate management, corporate values, Mondragon
University, internationalisation, the Garaia project and the innovation system. This
qualitative survey, which discusses some good points and limitations in relation to the
building of a Basque state from the perspective of the cooperative movement,
considers structural features, some potential contributions and the particular
consequences of the socialization of property.
 157

INTRODUCTION

Everything today suggests that the creation of a Basque state, or the building of a kind of
statehood suiting our interests as a distinct community, is not something that is on the
books in the short term. The possible and the necessary do not appear to be walking hand
in hand. From the perspective of necessity, the need for a state is a basic and pressing one,
a matter of life or death for our day-to-day survival and peaceful coexistence. From the
viewpoint of possibility, the idea is surrounded by unclear issues and hurdles of
consideration.

And yet the direction is clear. The democracies forced upon our everyday life by the
Spanish state and by the French state stand in the way of our development, and tie down
our freedom in chains. The water that springs from them is unable to quench our thirst. In
consequence, we can only advance along the path of our own political self-organisation,
management of our own affairs and self-sufficiency.

We are in Europe, and it is not difficult to realise that the monetarist, liberal, neoliberal
and state-oriented design of the Europe currently being built presents serious obstacles for
a modern recovery of our Navarrese state. Statehood would be easier for us to achieve in a
context of a European peoples' and working class struggle to build a democratic, socialist,
anti-imperialist Europe. A socialist Europe at the service of the working classes and a
peoples' Europe where all the cultures and nations had the same possibilities of
development.

The subject of this chapter will be placed in this context when we talk about the
"general potential contributions" and the "potential contribution of Basque cooperativism
to the process of the socialisation of property". It is also necessary to consider the points
under "some limitations and anomalies detected in the process".

1. THE QUANTITATIVE AND QUALITATIVE DIMENSION OF THE

MONDRAGON GROUP

The Mondragon Cooperative Corporation, denominated since 2008 by the new logotype
as Mondragon Humanity at Work, is a unique experience in the world of development
through the cooperativisation of work.

1.1. Economic particularities of the process

Comparing this cooperative movement with the cooperative experience in other
countries, we can isolate a number of special characteristics of the former:

– First, these cooperatives have been based since they started on the industrial sector
and the basis and matrix of the experience have been the production cooperatives,
unlike cooperatives in other countries that are primarily or exclusively oriented to
consumption (consumer cooperatives) or credit (credit cooperatives).
– Secondly, production cooperatives in other countries are built on technologically
backwards sectors and products, and its production processes are typically work-
intensive. In Euskal Herria, we have Mondragon Group cooperatives based on
 158

technologically advanced products and sectors, and its production processes are
typically capital-intensive.
– Thirdly, production cooperatives typically face, in the course of their development, a
serious financing problem inasmuch as their members' financial resources are
insufficient to meet the needs resulting from the development of the business, so
they have to look to third parties and generally fall into a dependence on banking
entities. The Mondragon Group's historic solution to this serious problem was to
create its own cooperative bank (Caja Laboral Popular) and articulate and structure it
around this. Thus the Mondragon Group has found a way to function as an industrial
group first and as a global group later, maintaining the autonomy of each
cooperative business.

1.2. The present-

present-day reality of the Mondragon Corporation (Mondragon Humanity at
Work)
The Mondragon Corporation started out in 1956 in the Baque town of Arrasate [called
Mondragón in Spanish] as a small factory making household appliances; by the end of 2010
it provided 84,000 jobs and it is the business leader in Euskal Herria today, ranks seventh
among Spanish business enterprises, is one of the 150 largest companies in Europe and is
the largest cooperative group in the whole world. Nearly half (44%) of its jobs are located in
the four provinces of South Euskal Herria, and another 19% around the world, while the
remaining 37% are located in other parts of the Spanish state.

In organisational terms, it consists of three basic social and guiding organs:

– The Cooperative Congress, made up of 650 delegates from the cooperatives, which
lays down the strategic guidelines for the administration of the corporation through
planning and coordination of the business units.
– The Permanent Committee, delegated by the Cooperative Congress, whose task it is
to make sure the policies which the Congress adopts are implemented and
supervise their implementation.
– The General Counsel, which coordinates the policies of different divisions and
cooperatives and is in charge of the creation and implementation of corporate
strategies and objectives.

In recent years we have also seen organisational changes geared to the new area of
knowledge. The constitution of this new area founded on training and innovation brings
together research and R&D training centres, including notably the University of Mondragon
with 8,500 students. Hence the 256 member companies and bodies are integrated into a
structure with four areas, the three traditional ones of finance, industry and distribution, and
the area of knowledge.

The four areas into which Mondragon Corporation is articulated are thus:

– The Area of Finance, made up of the Caja Laboral Popular savings bank and the Lagun
Aro insurance company; these cover banking, insurance and social services.
– The Area of Industry, the group's matrix, which encompasses different subsectors for
consumer goods, equipment, industrial components, buiding and business services.
 159

– The Area of Distribution, which since it includes the Eroski supermarket group is one of
the major distribution groups of the Spanish state, with over 2600 outlets plus a chain in
the south of the French state. It also includes the Erkop business grouping for cattle
raising, vegetable farming and food services.
– The Area of Knowledge, which covers training centres and a number of research
centres.

1.3. The Corporation's structure

The components and functions of the different parts of Mondragon Corporation are
summed up in the following diagram:

Organisational structure of Mondragon Corporation

Cooperative Congress

Permanent Committee

General Counsel

INDUSTRIAL GROUP
CHP Automotion
CM Automotion
Industrial Automation
Components
Finance Building Distribution
Lifting
Equipment
Domestic
Engineering and Services
Machine Tools
Industrial Systems
Tools and Systems

Knowledge

Source: Mondragon Corporation. 2010 Profile

1.4. Strategic plans

plans for the new millennium

The general lines of strategy for the nineties underwent an overhaul in the new
millennium. New elements also emerged. We shall sum up some that may be considered
of particular importance to fill out the picture and give a fuller story of the present-day
Mondragon Humanity at Work.

1.4.1. Second model of corporative management

When the initial model of corporate management of the cooperative movement was
updated, critics pointed out that the knowledge and participation models implemented in
the cooperatives were the same ones that had been developed by the transnational
companies. It was suggested that the time had come to develop an endogenous system of
participation and management based on a cooperative culture. The upshot was the
creation in 2007 of a model of participation and management founded on cooperative
principles. The new model has three chief goals: to improve employee involvement, to
standardise the system of management in participating affiliated companies, and to
 160

achieve business excellence. Thus it was hoped that a company of the highest standards41
would be built achieving social and business results adapted to the social setting.

1.4.2. Corporate values

The most fundamental new step was the creation of a widely accepted charter of
values. This process was based on the experience acquired in the creation of charters of
values by the affiliated cooperatives.42 Thus a charter of values was established that was
internalised and on which a broad consensus existed among all involved, which became
the new central reference point for the corporation. The corporate values of the
Mondragon Cooperative Corporation talk about customer satisfaction, the value of
people, the optimisation of products and services, cooperation, continual improvement
and social commitment. At the end of the first decade of the new millennium, the
company's philosophy is summed up in four great values: cooperation (owners and
protagonists), participation (commitment in management), social responsibility (fair
distribution of wealth and commitment to one's area) and innovation (perpetual renewal).

1.4.3. Development of the University of Mondragon

The original educational structure built in to the University of Mondragon was
transformed into departments of engineering, humanities and education, and business
studies. Also of note was the creation of an institute of cooperative studies (called Lanki)
which acts in lieu of a social science department for the cooperative enterprise. Fresh lines
of development being explored by the new cooperative university include reingineering of
education, bilingual education, more focus on research43, and outreach of the university
campus to other districts.44,45

1.4.4. The internationalisation process

The internationalisation process, projected in the late nineties, has turned into a shining
reality. By the end of 2009 the Mondragon Cooperative Corporation had 75 production
centres and nine regional headquarters scattered across seventeen countries and four
continents. Forty-five of its subsidiaries are in Europe, fourteen in the Americas, fifteen in
Asia and one in Africa. Contrary to the widely held belief that the aim of relocations is to go
after cheap production costs, the Mondragon Corporation has twenty-two factories in
developed countries such as the United States, Germany, the United Kingdom, France and
Italy.46 Regional headquarters are found both in the big markets and in development
centres in the US, Mexico, Brazil, Chile, India, Russia, China, Taiwan and Vietnam.

By late 2010, overseas factories had a staff of 15,930, a third of the total number of jobs
in the industrial cooperative group. The new companies are Limited Societies. Thus,

41
The list of acknowledgments, certificates and awards for quality and excellence in business received by the end of 2008 included being a
finalist for the European EFQM, a European environment award, eight "golden Q's" and 18 "silver Q's" (quality awards given out by the
Basque government), four EMAS awards, 108 ISO 9000 certificates, 54 ISO 14001 environmental certificates, 16 OHSAS certificates for
prevention of work accidents and one SA 8000 certificate for social responsibility (Yearly Report, 2009, p. 4).
42
Following an internal debate, the cooperatives jointly adopted a set of values such as confidence in one's work colleagues, giving priority
to customer satisfaction, participatory management and so on.
43
During the 2008-9 academic year, Mondragon University hosted sixteen conferences on different fields of knowledge.
44
There are at present over four thousand students in university studies at the university's Arrassate, Oñati, Eskoriatza, Markina, Goierri, Irun
and Donostia campuses.
45
Altuna Larraitz, La Experiencia Cooperativa de Mondragón, p. 168.
46
Corporate profile. Mondragon, 2010.
 161

contrary to the customary pattern, a cooperative centre is being developed with a growing,
dynamic capitalist periphery giving regular employment. Besides this new social structure,
around 20% of the total staff are hired as self-employed workers.

1.4.5. The Garaia Project

The objective of the Garaia Project is to strengthen the productive structure of the
territory where most of the cooperatives are concentrated through a network linking
companies, research centres and the university. This supports innovation in products and
processes and the creation of new companies. Such a process is essential for most
medium-sized cooperatives whose small dimensions make endogenous development
difficult, making it necessary to develop shared cooperation strategies. The idea of this
cooperative network for research is to link up the company and the university and
technology centres, creating a "circle of knowledge" for the circulation of ideas and
people. Thus the Garaia Project is a focus for innovation sharing space, infrastructure and
people, becoming an essential part of cooperatives' development. Indeed, it has turned
into a key transforming force promoting long-term research, stimulating the creation of
skilled jobs, monitoring of new companies and reinforcing the economic fabric.

1.4.6. The innovation system

Following this logic, MCC has built a system covering innovation that is structured into
four components:

– The Mondragon University Strategic Plan, which has set up knowledge groups for
sixteen strategic challenges, designed a new research model and consolidated the
circle of companies, technology centres, research teams and the university.
– The Garaia innovation project, built as a science park incorporating the university and
research centres, taking the "district" as a local development unit.
– The technology centres and company R&D units, which comprised twelve different
centres in 2009, providing 750 jobs for researchers.
– The Corporate Science and Technology Plan, which encompasses the development
of new technological projects, with 22 strategic R&D lines in which 37 cooperatives
are working, plus all the technology centres of the group and Mondragon University.
This covers issues related to new materials and manufacturing systems, information
and communication technology, energy and sustainability technologies, health
technology, company management technology and research on values and
participatory management.

2. LIMITATION
LIMITATIONS
ATIONS AND CONTRIBUTIONS TO THE PROCESS OF
BUILDING THE BASQUE STATE FROM THE PERSPECTIVE OF THE
COOPERATIVE MOVEMENT

2.1. Some limitations and anomalies observed

observed in the process
The cooperatives are integrated into a society with a capitalist system. They function
through mechanisms based on competition and their objective is for the company to make
 162

a profit. Given these facts, important consequences derive from the fact that the enterprise
has historically obeyed,47 and still obeys today, the logic of the accumulation of capital.

The model of development is a key question. The Mondragon cooperative initiative

was always an integral part of the prevalent model of capitalist development in Euskal
Herria. A representative example of this development model is seen in the valley of Leintz,
particularly in its central point, the town of Arrasate [the Spanish name for which is
Mondragón]. The characteristics of the development model in this town are quite explicit:
unfettered urban growth, ecological destruction including pollution and a drastic loss of
biodiversity, overpriced housing at levels comparable to Donostia [the main town in the
province], a large Eroski shopping mall which has done away with small businesses and
drained the blood out of the life of the town, which until recently lacked even public
transportation both within the town and between Arrasate and other towns, the wiping out
of traditional farming (and to a considerable extent, the physical elimination of the
farmhouses left standing), destruction of the town's urban heritage, and the cultural
annihilation of our prehistoric ecosystems.

Corporativism is another fundamental limitation of the development model. One sign

of this is the fact that the jobs created by the cooperatives are not for the community at
large but for the sons and daughters of their members. So in places where jobs in the
cooperatives constitute a substantial proportion of the total employment in a given area,
adoption of a capitalist business principle giving preference to children of members when
applying for jobs in the cooperatives amounts to discrimination against people who do not
belong to so-called "cooperative families".48 This has had important repercussions in
places where the cooperatives represent a significant part, or even the majority, of the
working population.

Likewise, it should be recognised that the community investment funds which the
cooperative companies are obliged to put at the service of the community in exchange for
paying lower taxes have always been invested in things that favour the reproduction of the
cooperative group's own economic, technological and social conditions, displaying no
qualitative difference from the practice of multinational companies which likewise invest in
their own education centres and technology centres for their own development. The
cooperatives should be doing more than this. Besides, logically decisions on the use of
those funds should be jointly managed by community representatives.

The same corporativist logic applies to the lack of sensitiveness with which the
corporation's internationalisation has been pursued, with a cooperative centre and a
capitalist periphery. The use of a capitalist periphery based on the development of
productive delocalisations farmed out to first and third world peripheral countries produces
a snapshot summing up the Mondragon cooperative group in which a cooperative centre

47
In the Franco era and following the stabilisation measures of 1959, the objective was to create jobs, since that was required by the Franco-
era development model. This had nothing to do with the needs of Basque society at the time but rather with the needs of Basque capital to
expand. This drive for development was so strong that it resulted in work years of more than 2000 hours, and amounted to an important
cultural aggression against their own culture with measures such as the attempt to abolish local holidays.

48
In other words, if Eroski opens in Arrasate, the families not inside the cooperative do not get access to the jobs, whereas if it is [a normal
capitalist company such as] Corte Inglés that opens a store, the opportunity for people to apply for jobs in it is much more democratic and
less discriminatory of all the young people living in the town.
 163

utilises and exploits part of its working population, hired as an unintegrated work force
which, taken as a whole, accounts for the majority of the jobs.

The employment of a large number of provisional workers who make up as much as

20% of a company's entire workforce in many places, together with the indefinite extension
of many trial periods with no specified end-date, boils down to the planned utilisation of an
army of reserve workers who are exploited, used and discarded when no longer needed,
all in the name of cooperative business efficiency.

"Non-convergence" with the people's movement, on account of the domination of

technostructure in these companies,49 limit further the political options for emancipation of
the community as a whole, by dividing the worker and people's movements and nurturing
individualists who only fight for their own capacity to consume, go on holidays, and pursue
their particular material interests within the system.

It can therefore be argued that the notion of the neutrality of the cooperatives is false,
since it results from the existing lines drawn in its interior. It may be neoliberal or self-
managing, anti-imperialist or pro-imperialist, but never neutral. Cooperativism ought to
offer Basque society a democratic project of material development committed to the
worker and people's movement, favouring self-management and internationalist.

In short, it is fair to say that, given its capacity of association, territorial extension,
capacity for social development and ability to take on the economic challenges of
globalisation, the experience of the Mondragon cooperatives offers a great deal of
potential for nation-building. However, it is impossible to ignore that this experience also
has the potential to stand in the way of the social building of Euskal Herria (as Andoni
Esparza warned in his day), creating a corporativist model, a society integrated into the
system and an individualist, uncaring middle class with no concern for the community and
the social project.

2.2. Lines of endogenous

endogenous recovery
The concern of the Permanent Committee and the 2003 Plenary Session of the
Cooperative Congress, which discussed "the existence of a move away from the essence
of cooperativism", developed into a debate over the issue in which around two thousand
people participated. The discussion culminated in a paper titled "thoughts on the meaning
of the Mondragon cooperative experience", published in December, 2006, which lays out
the blueprint for an endogenous recovery aiming to revitalise the cooperative concept.
This document outlines three areas for action.

The first area is cooperative education. This is formulated clearly as one of MCC's basic
principles. Mondragon's cooperative experience indicates that in order to promote the
implementation of the aforementioned principles it is necessary to dedicate adequate
human or economic resources to different aspects of education:

– Cooperative education, for all members, but especially those appointed for social work.

49
The lack of competence in social counsels is perhaps one of technocracy's most effective weapons for the reproduction of its
privileged class interests and domination of the work force.
 164

– Professional education, especially for members chosen for management work.

– General education, for youth, nurturing cooperative men and women who are capable
of consolidating and developing the Experience in the future.

The second is participation and cooperation, which is broken down into the
development of two basic principles of the cooperative experience:

– The sovereignty of work, which considers work as the principal factor for transforming
nature, society and the human being, and therefore:
· Rejects systematic hiring of salaried workers.
· Attributes full sovereignty to work in the organisation of the cooperative enterprise.
· Considers work the essential creditor in the distrubution of produced wealth.
· Declares its will to extend the opportunity for work to all members of society.

– Participation in managent, establishing that the democratic character of the

cooperative is not limited to the company side but involves progressive
development of self-management and hence the participation of members in the
domain of company management, which in turn entails:
· Development of suitable mechanisms and channels for participation.
· Informative transparency about the development of basic factors of management
of the cooperative.
· Practising methods of consultation and negotiation with working members and
their social representatives in economic, organisational and work decisions that
concern or affect them.
· Systematic application of schemes for members' social and professional training.
· Establishment of internal promotion as a basic route for covering positions of
greater professional responsibility.

The third concerns "social transformation". The Mondragon cooperative experience's

position on social transformation figures in the eighth principle, which expresses its desire
for transformation in solidarity with other peoples through action in the framework of
Euskal Herria in a process of expansion in cooperation with its economic and social
reconstruction and the building of a freer, fairer, more caring Basque society through:

– Reinvestment of most of the net surplus obtained, allotting a substantial amount to

community funds making it possible to create new jobs under the cooperative system.
– Support of community development initiatives, through the application of educational
funds and cooperative promotion.
– A social security policy that is in accord with the cooperative system, based on solidarity
and responsibility.
– Cooperation with other Basque economic and social institutions, especially those
supported by the Basque working class.
– Support for the revitalisation of Basque as the national language and, in general, the
characterising elements of Basque culture.

To this it should be added that social transformation forms part of the MCC's mission
document which says: "to generate wealth in society by means of business development
and the creation of jobs which should preferably be cooperative ones."
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2.3. The potential contribution of Basque cooperativism to the process of the

socialisation of property

Another great challenge for Basque cooperativism is its potential contribution to the
process of the socialisation of property, creating a new structure of types of property in the
community that comes closer to satisfying social needs. This question, which is always
relevant, acquires special strategic importance in the scenario of building Basque
statehood in a pro-socialist Europe led by the working class. Here we invoke Marxism,
specifically the law of gradual change of economic-social formations,50 which posits that
property relations express cleavage points in historical development. It is evident that the
general form of evolution of humanity through distinct socio-economic formations has not
corresponded exactly to all its particular forms.51

This poses two dilemmas. The first has to do with the need to advance in socialisation
through social structure itself. In other words, how can the present be improved to
generate the future? The second is about the need to develop systems of socialisation that
serve others as models and ensure the possibility and historical legitimacy of these new,
more socialised structures.

In this manner, the cooperative model has a function of constituting a more socialised
system that answers to ordinary people's interests both in barely industrialised or semi-
industrialised rural communities and in industrialised ones where modern technology has
found its place. In the latter case, which applies to Euskal Herria, it also acts as a model for
other approaches. This question is central in contries building socialism and opens a door
to the visualisation of social property in which, together with the empowerment or "social
appropriation"52 of public services, the confederation of cooperative companies can
represent a central core.

It is evident that here is the crux of the matter. The economic and social limiations of
state property (the state company) in productive processes will only be overcome through
a conceptual and empirical development of the notion of social ownership. This really
concerns self-managing ownership, understood as that form of property which prioritizes
social interests and seeks to make them compatible with local and particular ones.

This form of social-community ownership would be identified with a very de-centralised

form of public and/or state property, such that rights of ownership would be distributed
among different social protagonists. It would also be identified with a form of cooperative
property that recognises and articulates the existence of a right of community ownership.
In other words, it would be identified with a form of cooperative ownership over which the
community also decides, because it has the right to own that cooperative, and the right to
decide on its systems of business organisation and the use of its surplus value.

By developing social ownership, cooperative ownership would free up the productive

forces, and so become economically and socially more competitive and serve as a model
and social reference for other forms of ownership.

50
Luis Marcelo Yera, (2003): "El Quinto Tipo de Propiedad Empresarial en la Transición Socialista". Marx Ahora, 16.
16 Cuba.

51
Thus for example the Germanic and Slavic peoples and those subjected to African and Asian tributary systems, and the many nomadic
people that have existed, have not experienced the development of slavery, generally passing directly from a stage of primitive and/or tribal
community to a feudal society.

52
Here the notion of "social appropriation" appears which considers both the character of state ownership of public property and the
appropriation by workers of the means of production.
 166

2.4. Structural contributions

The process has structural contributions to consider which are certainly significant for
the process of consolidation of a hypothetical Basque state.

These are:
Capacity of association: this is shown by the evident vitality of the Mondragon Group to
implement processes of bringing together businesses in groups — business federations,
district-level groups, sectorial groups, etc. — and create services and umbrella bodies
permitting the development of economies of scale and rationalisation initiatives in areas
such as planning, management, R&D, innovation, specialisation, diversification,
commercialisation, financing, defence of common interests and so on, whereby it is
possible to overcome the limited options available to each individual business unit on its
own.

Territoriality: this is a consequence of the high degree of dispersal of share ownership in

cooperative companies of this type, making it unpractical or very awkward to pursue a
policy of territorial transfer of entire productive units, which in the case of private capital has
become such a common practice, for economic and political reasons. The employees and
executives of these businesses, and obviously those of the Mondragon Group, are by and
large men and women with roots in the region and in many cases they are also people with
a commitment to the development of their country, which is where they wish to live.

The development of social aspects is envisaged here on the basis of instruments of the
Mondragon group that are inherent to the social economy in its totality, such as the fact that
the assembly of member-employees is the highest ruling body; the incorporation into the
business world of a representative democracy in which every person has a vote; the existence
of greater remunerative democracy; the social demand for information and transparency in
management; and the strategic importance attributed in these companies to training for
member-employees. This implies the incorporation of democratic concepts into the structure
of economic development.

The historical capitalisation process: it is a known fact that self-financing of companies with
a social economy is insufficient on its own to cover the financing needs of the business cycle.
Thus the European history of new cooperative initiatives has gone hand in hand with
processes whereby such companies, unable to pay back the loans they have taken, gradually
fall under the control of the banks. The Mondragon cooperative movement has addressed
this difficulty through a special capitalisation process based fundamentally on salary austerity,
the requirement of an entry payment, a required minimum contribution from new members
entering the cooperative, and in particular, systematic capitalisation of business surpluses. The
last-named measure makes way for a self-financing policy which re-invests surplus in the
cooperative instead of using it for consumption by employees.53

Its own financial entity: capital accumulation by itself does not suffice to cover needed
investments. When a certain level of development is reached, the cooperative company
needs loans and it is easy for it to become dependent on the banks. The search for solutions

53
In the Mondragon Group there is a whole system of different "reserve funds" laid out in the statutes, and it is a rule that money payment
of "returns" is only allowed when certain economic and financial conditions are met.
 167

led to the creation of a financial entity, the Caja Laboral Popular, a savings bank which would
collect the community's savings in order to reinvest them in cooperative jobs. This was an
original solution which has brought about the relative neutralisation of the financial problem
of these cooperatives. This initiative is also at the heart of its great strategic expansion.

The development of coverage cooperatives: this was a process begun, basically, in the
sixties and which started to take hold with the creation of bodies such as the Caja Laboral
Popular, the Business Division, the Mondragon Polytechnic, Ikerlan and so on. These
coverage cooperatives guarantee financial support, technical assistance, assessment,
promotion, and in general the operativization of all the activities necessary for the cohesion
and proper working of everything.

Inter-cooperation: the constitution of the Caja Laboral Popular also establishes the
blueprint for a gradual associative process which was to progress at a healthy rate towards a
situation where the various cooperatives work together as a "business group", while
maintaining the autonomy of each individual cooperative. This is how the principle of inter-
cooperation got started. This came to the fore with the crisis in the seventies. The
cooperatives had to deal with a situation characterised by widespread job losses and
closures; they met the challenge with a variety of measures, among which the creation of
Cooperative Groups is of particular note.54 Thus the new district groups now
institutionalised55 cooperation between industrial cooperatives, with the object of adopting
shared, effective responses to the crisis,56 addressing social difficulties as a group and
implementing common strategies. Subsequently the sectorial groups were created; these
operate within a single sector of industry. Their creation was based on criteria of technological
convergence and commercial convergence.

A new structure for financing: the creation of the Fund System consisted of the conversion
of profits, the central inter-cooperation fund, the fund for education and inter-cooperative
promotion, MCC, investments, the MCC Foundation, MCC Development, the job assistance
fund and so on, which consolidated the capacity for self-financing, setting up a financing
structure based on the group's own rules and regulations.

The model of corporate management: the main thing here is the attempt to develop an
endogenous system of participation and management based on cooperative culture. Thus
the creation of a model of participation and management in 2007 based on cooperative
principles and centred around "teamwork" has three fundamental goals: to improve worker
involvement, homogenize the management system in participating subsidiaries, and achieve
business excellence. In its most powerful form, it opens the door to a model that places
ownership, results and strategic decisions in the workers' hands.

Mondragon University: this provides an educational structure consisting of an engineering

department, a humanities and education department and a business science department,
with the fundamental objective of bringing about teaching and research to meet the needs of
reproduction of the social and business experience of the cooperative group.

54
Actually there had already been some tangible experience with the cooperative group since 1964, with shared services and
intercooperative arrangements. This was the Ularco Cooperative Industrial Comlex, which grouped together industrial cooperatives in one
district and served as a point of reference when the Cooperative Groups were set up.
55
In the late seventies and the beginning of the eighties, around fourteen district groups were set up each located in a different valley.
56
Their main contributions were the relocation of surplus workers and new rules for the redistribution of profits.
 168

The Garaia Project: This recently created project aims to strengthen the productive
structure of the territory where the cooperatives are concentrated through the linking into a
network of companies, research centres and the university. This process is essential for most
of the medium-sized cooperatives whose small dimensions make it difficult for them to
pursue their own development and requires them to develop common strategies through
cooperation.

Innovation system: structured through the joint participation of Mondragon University's

Strategic Plan, the Garaia innovation centre, the companies' technology centres and R&D
units and the Corporate Science and Technology Plan. Taken together, the idea of this system
is to provide coverage for innovation ensuring the ability of the Cooperative Group to adapt
to new challenges arising from new advances in technology and the globalisation process.

The multi-sectorial structure of the Mondragon Group and its interrelationship with the
world of education and research represents, as a whole, an enormous potentiality for "a
different development" in Euskal Herria.

2.5. Potential contributions

contributions

Several "potential" contributions to the process of building a more democratic and

social Basque state are worth pointing out.

First, an attempt should be made to make sure that the cooperative movement and the
social economy generally are really an instrument of promotion of the working class, which
thus becomes the protagonist in the economic area (production, distribution, services and
education), basing this protagonism on the workers, both in technological and productive
processes and in business.

In this sense, the workers' project of the self-managing Cooperative Group is not
limited to the struggle for control of its different areas, but extends to the design of society
and civilisation which is built interrelatedly with other productive units. This requires the
articulation of companies of the cooperative group in a network capable of being
integrated into the socio-political project of the people's movement.

Within this integrating model, the cooperative economy appears as a collection of

companies and alternative projects which set out to articulate the relationship between the
struggle for participation and self-management within the productive units and the
struggle for democratic and participatory management in society as a whole.

A potential contribution of considerable significance is that which refers to community

development. This is generated here out of a policy which makes use of a part of the
surplus value produced in order to finance a complete industrial, educational, assistential
and research development (among other things) controlled by the membership, which
makes it possible to make an impact on the specific community in the form of economic
growth, development of self-management, democratisation of community structures and
material, social, political and cultural promotion.

Another great potential contribution concerns participation, without which there can be
no real democracy. To put this another way, it is important to generate a dynamic which
 169

will transform formal ownership into real ownership. This requires us to address such
essential issues as social relations and production techniques, the subject of transparency
in power, the subject of authority and submission, the subject of knowledge and decisions
and the subject of control by the membership and dimension. Based on these democratic
and self-managing coordinates, it is also necessary to fight for a world that gives back to
the Basque community ownership and contol over our nation.

It is also well known that with the introduction of new technologies and globalisation,
the management of knowledge becomes a central part of survival and development of
productive processes. It is necessary to involve intelligence and human experience in
productive processes, for which a sense of ownership is vital. Now unlike ordinary
businesses, in cooperative companies this sense of ownership is based on the new
relationship between member and worker that is characteristic of these companies. Thus,
the workers/entrepreneurs of the Cooperative Group acquire this sense of ownership as a
matter of course, and in consequence have a consderable advantage in this respect.

Another basic potential contribution in the present context concerns building a

"different internationalisation process" that accords better with the cooperative character
of the Mondragon Group and differentiates it from other companies by neutralising the
logic of the present-day internationalisation process and demanding that the social and
worker demands of the International Labour Organization are met; challenges the trend to
decapitalise and financially exploit third countries; gives workers in those countries access
to ownership of the companies; and questions the distribution of knowledge within
internationalisation processes.

Thus the different nature of the cooperative economy has the potential to intervene in
important aspects of industrial policy with regard to the choice of new productive activities,
in order to adapt them to social necessities; the use of technology in such a way that in
addition to ensuring social and productive efficiency, it also makes it possible to improve
the humanisation of people; the promotion of training, giving it a more all-round,
interactive and self-managing content; and favouring a more active, social and innovative
technological option which allows the development of new forms of synergy between
social innovations and technical innovations.

In conclusion, it is possible to consider that in the process of building the Basque state,
the cooperative experience of Mondragon can offer Basque society a project of material
development based on technical and scientific, democratic, Basque advances that is
committed to the worker and people's movement, self-management and even
internationalism.
 170

6. The need for a Basque state in a labour relations

and social protection perspective

Aito r B engo etx ea A lko rta, D o cto r o f L aw , pro f es s o r, Univ ers ity o f th e
B as que C o untry

The Basque state is the legitimate aspiration of an ancient country, both in the modern
world and historically. It is also a necessity from the viewpoint of labour relations and
social protection. This chapter claims that the present setup, subject to the Spanish
and French states, is one that denies to Basques the opportunity to develop their own
model responding to their culture and their particular socioeconomic circumstances.

The chapter opens with a snapshot of the current legal powers of the European Union,
France and Spain as member states, and the Basque Country, and of the policy of
labour relations and social protection that ensues from those powers.

The rest of the chapter discusses options for the development of a specifically Basque
model of development that would be available to an independent Basque state.
 171

INTRODUCTION
Does it make any sense at all to talk about building a new Basque state in the twenty-first
century? A lot of people believe that in the present era of globalisation it is necessary to seek
integration, and that the creation of a new state would be contrary to the direction of history.

But it is a very curious thing that those same people who say that the state is an obsolete
idea never think of renouncing their own state. Within the European Union the pace of
integration is very slow, and now and again there are quarrels and expressions of state
nationalism, especially on the part of those states with a strong collective conscience of
political or economic power or imperial nostalgia of some kind, such as Germany, the United
Kingdom, France or Spain. The president of Spain, for example, does not tire of stating that
"we are a great nation" when rallying his citizens in speeches.

So what about Euskal Herria? As a country in the twenty-first century with its own national
identity and national consciousness which has been passed from generation to generation
over millennia on both sides of the Pyrenees, with its Baque language, its own culture,
customs, economy and laws, why shouldn't it have its own state? Does not every nation have
a right to its own state, first as an infrastructure (the body) and secondly as a superstructure
(the clothing)?

The Spanish state has often moved to disqualify Basque aspirations to self-government,
accusing the Basques of economic selfishness. The political point is concealed: a people's
legitimate present and historical demand for a political identity is dismissed as nothing more
than the egotism and lack of solidarity of a group of people who are simply Spaniards at the
end of the day. The grain of truth in this is that various socioeconomic indicators do show, as
will be seen in the course of this chapter, that South Euskal Herria is in some ways a leader for
Spain, with more favourable poverty rates, Gini wealth-distribution ratings, unemployment
figures and so on. To bely the accusation it may be argued that the hunger for independence
in Euskal Herria predates these economic variables and exists (and always existed) over and
above them.

This chapter examines the need for a Basque state from a particular standpoint: that of
labour relations and social protection. Although we talk about the whole of Euskal Herria and
are aware of the full picture, there will be few references to North Euskal Herria, among other
reasons because it has had very scanty development of its own in the matters here
considered.

We shall begin by attempting to delimit the object of study: what do we mean when we
talk about labour relations and social protection?

Next we shall examine the state of affairs in this area as of today, looking at the powers
pertaining to the European Union and to France and Spain as two of its member states, and
the policies they follow in the application of those powers in the fields of labour relations and
social protection.

Lastly we shall discuss the options for a hypothetical Basque state regarding developing
its own model in social affairs.

1. LABOUR RELATIONS AND SOCIAL PROTECTION

These days, labour relations and social protection are mentioned as an area of demands. In
order to define these concepts, we shall distinguish three parts: employment policies,
labour relations and social protection.
 172

1.1. Employment policies

When labour relations and social protection are mentioned, employment policy
deserves a place of its own among them. To define the object well, it is better to make a
distinction between employment and labour relations. We may think of getting a job and
losing one's job as the moments which bring about the beginning and end of labour
relations.

Within emloyment policy it is usual to make a distinction between active employment

policy and passive employment policy. Basically, active policies aim to create and/or
preserve jobs, while passive policies directly address the protection of the unemployed.

Employment policies consist of a range of measures. Since its objective is the job
market, some measures focus on putting the two components of that market in touch with
each other and finding people jobs. The basic point is to facilitate contact between the
unemployed person seeking a job and the company offering employment, acting as an
intermediary through a data base that records the characterstics of companies and job-
seekers.

Another part of employment policy is addressed to unemployed people or, in order to

maintain jobs, employed people. Basically the unemployed must be given information and
guidance about the situation of the job market and people's options, creating an
individualized roadmap to finding a job. There should be an evaluation of whether people
need work training as a way to make them more employable: work training for
unemployed people and further training for those who have a job.

In addition to a policy for employees, an active employment policy also needs to

address the case of self-employeed workers. This in turn divides into two areas: self-
employed individuals who work alone, and collective self-employment through social and
economic options such as the cooperatives and work associations.

Another part of employment policy consists of measures addressed to the company

owners who hire workers. Here, for one thing there are different kinds of work contracts;
the law determines what kinds of work contract can be used and their characteristics:
permanent or provisional, temporary, full-time or part-time, and so on. In some cases
public grants are applicable for hiring a certain kind of worker or aimed at encouraging
certain kinds of work contract (e.g. permanent contracts). The system of termination of
employment is concerned, not with the creation of contracts, but with the way in which they
come to an end, and this again concerns the company owner: free dismissal or for a
reason, severance pay and so on.

A passive employment policy, on the contrary, aims to protect the unemployed. It

focuses on providing the jobless with economic means to ensure an income, in
combination with passive employment policy measures, such as information, guidance and
training, to help them to return to work as soon as possible. The concept of "jobless"
implies a desire to work, an ability (i.e. skills) to do so and the lack of a job. Thus, through a
combination of passive and active employment policies, the idea is to assist the jobless
person economically but with the intention of returning to work as soon as possible.

1.2. Labour relations

Technicaly, the concept of labour relations is clear. When somebody voluntarily works
for a firm from which they take orders in exchange for wages, there is a labour-relationship
between the worker and the company and work legislation is applicable to that relationship
between them.
 173

Thus an individual labour relation is that between a company and an employee, and
the legal category of the relationship between them is determined by a work contract.
From that point onwards, work conditions are developed out of the work contract,
including salary, working hours, holidays, functional mobility (changes of function),
geographical mobility (changing the place of work), interruption of the contract
(suspension, redundancy, leave) and so on.

Apart from this there is the subject of collective labour relations. Employees have
collective representatives to defend their rights, whence the trade unions, workers'
delegates, company committees and assemblies. In collective labour relations one side is
represented by these workers' representatives and the other by the company
management. These relations take shape chiefly through collective negotiation, strikes and
collective action.

1.3. Social protection

Social protection covers a large area. A basic classification might divide it into three
parts: social assistance, social security and additional social protection.

Social assistance is the fundamental level, the purpose of which is to provide help to
people who have no other source of support and find themselves in difficult economic
circumstances. It is financed by money from public funds, and aims chiefly to provide
economic assistance to people who are in a situation of social exclusion or who risk falling
into such a situation.

Social security, on the other hand, is a compulsory public insurance system to which
people are obliged to contribute. This form of social protection is financed from legally
obligatory contributions by companies and employees through social security payments
and attends to the economic needs of working people in accordance with the law,
covering such things as retirement, illness, disability, maternity, accidents and so on.

Finally we have the additional forms of social protection. This level is voluntary, and
pertains to the field of private insurance57, such as pension plans and pension funds,
collective insurance contracts, and mutual funds for social assistance. Since it is voluntary,
this level of assistance is additional to that provided by public, compulsory social security.

2. THE PRESENT SITUATION

Let us see what the present situation looks like in Euskal Herria in matters of labour
relations and social protection. We shall look at the legal division of powers in the
European Union, Spain and France, and what each of these is basically doing.

The main objective of the European Union is undoubtedly economic: a single

European market. Therefore, European "hard law" which overrides the power of the states
is concerned with ensuring the free circulation of the elements of the single market:
workers and capital (the factors of production), together with wealth and services (the
things produced).

The subjects of labour relations and social protection belong to a lower level of
legislation in the European Union, so-called soft law, which leaves the matter largely in the

57
A level that is voluntary, additional and public is very uncommon but not impossible.
 174

hands of the individual states. In this area the European Union moves within a form of legal
power based on subsidiarity or delegation of authority.

In the case of the French state, things are quite straightforward. The main point is that
employment policy, labour relations and social protection are controlled by state
legislation, given that Article 34 of the French constitution charges the legal system with
establishing the basic rules of labour law and social security, and in France the legal system
pertains exclusively to the state.

North Euskal Herria has no public legal status of its own at the present time, but forms
part of the department of Pyrénées-Atlantiques which also includes Bearn, within the larger
Aquitaine region. In any case, departments and regions have no say in labour relations and
social protection, so North Euskal Herria has no chance of a say of its own in the matter. In
what follows we shall concentrate on South Euskal Herria.

2.1. Employment policy

In the area of employment policy, the European Union's system is based on a
coordinated employment strategy.58 The basic idea here is that the EU gives general
guidelines on employment policy for the member states to design and implement their
own employment policies. EU guidelines are not binding, and if a member state fails to
follow them there may be political consequences may not legal ones.59

The European Union employs a key concept in employment policy that it asks the
member states to implement, called flexicurity.60 By combining flexibility for employers with
security for employees, the flexicurity formula is meant to be a win-win approach for all
concerned. There are two kinds of flexicurity: internal and external. In the internal kind, the
company has flexibility to change working conditions (salary, hours, functions etc.), in
exchange for which the employee has job security (i.e. a permanent job; temporary
contracts are only allowed when there is a reason, and there is no dismissal without
compensation). Comparative law accepts this system as normal. In the external variety,
employment is itself flexible (contracts may be temporary and employees may be
dismissed at will), and there is no job security, but there is security in the job market. That
means that although it is easy to lose one's job, workers will soon return to work through
active employment policies (thanks to guidance, work training and so on), and in the
meantime they will have enough money to get by thanks to passive policies (through
economic assistance in lieu of a salary).

This external flexicurity approach has been particularly successful in Denmark. but we
should bear in mind that Denmark's employment setup is rather unusual, with generous
funds spent on active and passive employment policies, a strong work culture and good
relations between trade unions and management. Extending this formula throughout
Europe could be a risky business, because in the Spanish state (among other places) job
security is not guaranteed in exchange for the high level of flexibility, periods of
unemployment can be very long, active policies are few, and the existing unemployment
safety net is inadequate.

Thus employment policy is primarily the state's legal responsibility. In the case of the
Spanish state, powers in the area of employment are not included in the constitution.

58
Treaty on the Functioning of the European Union, Article 9.
59
At present the core of the employment policy of the European Union may be found in the Europe 2020 strategy and the 2010-2014
guidelines for states' employment policy. Developing these, the French and Spanish states have created their national reform programs.
60
The main document on flexicurity is European Commission, COM(2007) 359 of the 27th of June. Thereafter the European Union
has systematically insisted on the idea of flexicurity: see Europe 2020, states' employment policy guidelines (2010-14) etc.
 175

However, indirectly it is clear that the constitution attributes powers over employment
policy to the state. The state has the function of setting the objectives of economic policy
(in Art. 149.1.13 of the Spanish Constitution), which includes employmenet policy; the state
has exclusive power to pass labour laws which affect the hiring of employees (Art. 149.1.7);
and in the matter of passive employment policy, unemployment payments come within the
social security system and basic legislation and social security is an exclusive power of the
state, as is its economic regulation (Art. 149.1.13).

All that the autonomous communities of South Euskal Herria are able to do in matters
of employment policy is to work within the area where the state has decided to let them.
Namely, in the area of active employment policy, as long as it stays within the limits of the
state's economic policy61 and the labour legislation of the state.62 In the area of social
security which is the passive part of employment policy, on the other hand, apart from
economic regulations,63 the autonomous communities must enforce basic state legislation.

According to the distribution of powers under Spain's Law of Employment, the

execution of active employment policy is the job of the autonomous communities, through
the autonomous public employment services, namely Lanbide in the BAC and the
Navarrese Employment Service in Navarre.64 The state has retained for itself power over
passive employment policy, which is where the public employment service (formely INEM)
is situated.

According to this distribution of powers, the Spanish state develops its own
employment policy, following European guidelines. At the present time, the so-called
Spanish Employment Strategy is in operation65 as a development of Europe 2020.

The Spanish state has by far the worst unemployment index in the Europe of the 27.
The EU average is 10%; the Spanish state has 23.2%, while France has 9.9% and Euskal
Herria has 11.3866. It is to be noted that the BAC and (High) Navarre have the two lowest
indices within the Spanish state.67

Given this extremely high unemployment rate, the Spanish state has made an effort
recently to improve its active employment policy,68 but the public employment services leave
a great deal to be desired, and the cuts on account of the crisis, far from helping to furnish
such services with good professionals and suitable material, have the very opposite effect.

In passive employment policy, there are three levels of unemployment payment:

unemployment payments on the level of contributions, assistance-level "dole" money, and
active income for getting a job. In addition, in order to cope with the growing wave of
unemployment on account of the crsis that began in 2008, there is temporary
supplementary assistance for the great many people who, because of prolonged
unemployment, have exhausted their regular assistance and have no income whatsoever.69

See Art. 10.25 of the Statute of the Basque Autonomous Community (henceforth SBAC) and Art. 56.1.a of the Statute of the
61

Autonomous Community of Navarre (SACN).

62
SBAC Art. 12.2 and SACN Art. 58.1.b.
63
SBAC Art. 18.2 a); SACN Art. 54.
However, an attempt to create a different model in the realm of ongoing professional training that developed through the
64

HOBETUZ foundation was not allowed, thereby showing where the real limits are where executive power is concerned.
65
EAO, 2011-11-19.
66
According to 2011 data (Eurostat; Gaindegia 2011).
67
Followed by Cantabria 15.9%, Aragon 168% and Castilla y León 17.1%. At the other extreme is the south of Spain, with
Andalucia 31.2%, Canary Islands 30.9% and Ceuta 29.1%. (Active Population Survey, EPA, last quarter of 2011).
68
That is the purpose of Royal Decree-Law 3/2011, Feb. 18.
69
The most recent of these which was in force until the 15th of February, 2013, Roya Decree-Law 23/2012 of the 24th of August, gave
unemployed people without any unemployment payment 400 euros per month for a maximum of six months.
 176

When work contracts are drawn up, formally an ordinary contract is of indefinite
duration, and limited-time contracts can only be entered into when there is a justifying
reason. The principle of permanent employment was an important achievement of the
workers' movement at the end of World War II, based on the simple logic that the
(indefinite) duration of any work contract ought to coincide with the lifetime of the hiring
company or business. If in the course of time a justifying reason should emerge (for
example, that the business is in trouble, or that the employee is not fulfilling his or her
obligations as set out in the contract), the employee may be dismissed.

In reality a great deal of cheating goes on, especially in the use of contracts for jobs or
services and accumulative work contracts. Many companies prefer temporary contracts in
order to practise fraud, because the labour relation will end automatically when the period
of the contract is over without having to sack the worker, thereby reducing the company's
costs. A recent figure is eloquent in this regard: on paper, 92.1% of new contracts are
temporary contracts,70 which of course does not correspond to reality at all, that is to say,
that there should be a reason for issuing such contracts: to be sure the economic situation
is unpredictable, but not that unpredictable. The figures for the BAC (93.7%) and the
Autonomous Community of Navarre (93.3%) are very similar.

But if instead of looking at new contracts in the past month we consider the overall job
market in the Spanish state, the proportion changes strikingly: 25.3% of all contracts
currently in force are temporary, so the other 74.7% are permanent contracts. This contrasts
with the French state where 15.2% of contracts are temporary,71 and also with the BAC with
20.2% and High Navarre with 26.2.72

What this seems to show is that as time passes, employees eventually manage to get
permanent contracts, and that the highest rate of temporary contracts is that of young
people starting out.

In Spanish legislation it is becoming progressively easier and cheaper to sack

employees. The most recent chapter in this story is the 2012 law of labour reform.73

Before, in mass redundancies a redundancy plan used to have to be presented to the

appropriate administration and approved by it. Now, the only thing the law requires of
company owners is negotiation with workers' representatives to agree on the measures to
be taken to cope with the crisis. If the negotiations do not lead to an agreement, the
company may decide unilaterally to proceed with a mass redundancy, without
administrative permission. Moreover, now with the 2012 changes, in cases of an unjustified
dismissal the damages due to workers have come down from the equivalent of 45 days'
wages per year of employment to 33 days.

In the Basque Autonomous Community the autonomous government adopted the

Basque Employment Strategy 2011-2014 as its active employment policy as a part of the
Europe 2020 strategy. The Navarrese government, the federation of Navarrese businesses
and the trade unions UGT and Comisiones Obreras adopted the Navarre Employment
Plan 2009-2012 which contains the main elements of High Navarre's employment policy.

The employment services Lanbide, in the BAC, and the Navarrese Employment
Service, in Navarre, through their active employment policies, offer mediation, information,
guidance, training courses, money grants to companies for hiring and to working people
for undertaking self-employment initiatives, among other things.74

70
For September, 2012 (www.sepe.es).
71
In 2011 statistics, the average for the EU is 14.1%. Only Poland has a worse index than Spain, with a 26.9% rate for temporary contracts (Eurostat).
72
In South Euskal Herria, according to 2011 figures from Eustat and the Navarre Statistics Institute.
73
Law 3/2012 of the 6th of July.
74
<www.lanbide.net> and <www.navarra.es>.
 177

In the BAC, the Basque government, the business federation Confebask and the main
trade unions (ELA, Comisiones Obreras, LAB and UGT) jointly signed a trilateral agreement
on continuous training in 1995, and out of that agreement came the Hobetuz foundation.
In Navarre, this area is the responsibility of the Institute for Training, Recycling and
Employment,75 jointly with the Navarre Employment Service. The Institute was founded
through an agreement between the federation of Navarrese businessmen CEN and the
trade unions UGT and Comisiones Obreras in 2001.

2.2. Labour relations

Strictly speaking, the European Union leaves labour legislation concerning labour
relations up to the member states, while encouraging cooperation and coordination
between states through the nudging, non-binding technique of soft law (exchange of best
practices, etc.).76 The European Union expressly refrains from entering into the main issues,
such as salaries, trade unions, strikes or lockouts.

There are some rules to back up basic principles: in particular, there must be equality
and non-discrimination77 and employees must have freedom of circulation.78 Beyond that,
states establish the minimum objectives to be achieved in different areas such as
employees' right to be informed and consulted,79 working hours,80 part-time contracts,81
health and safety at work,82 protection of employees in cases of layoffs83 or companies' lack
of solvency,84 and temporary businesses.85

Thus in South Euskal Herria it is the Spanish state which has the power to create labour
laws (Constitution, Article 149.1.7), while the BAC or Navarre may only enforce the laws and
regulations established by the state (Statute of the BAC Art. 12.2, Statute of Navarrese
Autonomy Art. 58.1.b).

So, the state determines both the terms (salary, working hours, the system of
occupational categories, rules of functional mobility and so on) of individual labour
relations and the legal rules regarding collective labour relations (covering unions,
collective bargaining or strikes).

It falls to the autonomous communities to implement and enforce the labour legislation
that the state has created, covering the registry of collective agreements, minimum services
in cases of strike, settlement of disputes over employment regulations and so on.

However, subjects' collective regulatory autonomy in collective labour relations should

be emphasised. In the whole area of South Euskal Herria (or in any territorial unit within
South Euskal Herria), companies' representatives and trade unions have combined power
to create rules on labour issues (collective agreements).

75
Instituto Navarro para la Formación, el Reciclaje y el Empleo (INAFRE).
76
See Article X of the Treaty on the Functioning of the European Union on social policy.
77
2006/54, Directive of the European Parliament and Council, 5th of July, on gender; 2000/43, Directive of the European Parliament and
Council, 29th of June on racism; 2000/78, Directive of the European Parliament and Council, 27th of November, on reasons for opposing
discrimination such as religion or beliefs, disability, age or sexual orientation.
78
492/2011, Regulation of the European Parliament and Council, 5th of April.
79
2009/38, Directive of the European Parliament and Council, 6th of May.
80
2003/88, Directive of the European Parliament and Council, 4th of November.
81
97/81, Directive of the European Parliament and Council, 15th of December.
82
Note in particular 2009/104, Directive of the European Parliament and Council, 16th of September, on minimum safety and health measures
for the use of equipment at work. However, there are many directives about different areas of health and safety.
83
98/59, Council Directive, 20th of July.
84
2008/94, Directive of the European Parliament and Council, 22nd of November.
85
2000/104, Directive of the European Parliament and Council, 19th of November.
 178

This is a particularly powerful tool whereby, within the limits established by the
regulations of the European Union and the Spanish state, companies and employees of
South Euskal Herria are able to define the work conditions of Basque workers, such as
wages, working hours, functional mobility and so on, through collective agreements.

This is of great socioeconomic importance, and the figures show that thanks to
collective agreements we in South Euskal Herria have, by and large, the best indices of the
whole of the Spanish state in salaries and working conditions (special mention might be
made here of the collective agreement in the metal sector of Gipuzkoa).

It is therefore particularly worrying that there have recently been changes in the
Workers' Statute in Spain (Workers' Statute, Article 84 — a new article) to introduce
individualisation and centralisation.

Individualisation, because legal priority is given to a company agreement over and

above the sectorial agreement, thus overriding the priority of collective autonomy in major
issues such as salaries, working hours and so on. This will notably undermine the position of
employees in small businesses by removing protection for the sector-level agreement.

And centralisation, because prior to the latest change any sector's collective agreement
(especially in provinces with a long tradition) took precedence over another agreement
covering a larger territorial unit (such as that of the state). Now, on the contrary, the only
way to take precedence over the state-level agreement is to have an agreement on the
level of the autonomous community.

In the autonomous units of South Euskal Herria, a variety of regional labour-relations

organisations have sprung up. In collective conflicts, there is the BAC's autonomous-
community-level Interprofessional Agreement on Voluntary Procedures to Resolve Labour
Conflicts, or PRECO. The objective of this agreement is to encourage a peaceful solution
when collective conflicts arise over labour relations without resorting to a strike, through
the use of good will and friendly arbitration.86 In Navarre, the Navarre Labour Tribunal
foundation was created in 1996 for the same purpose.87

For work health and safety the BAC has the autonomous-community-level organisation
Osalan.88 Its main objective is promote health and safety in the work place, ensuring
application of the pertinent legislation. In Navarre, the same purpose is served by the
Navarrese Institute for Work Health, within the Navarrese government.89

We should also mention that according to the BAC's powers of self-government (see
Art. 148.1.1 of the Spanish Constitution and Art. 10.2 of the Statute of the Basque
Autonomous Community), two public bodies have been created: The Council of Labour
Relations (CRL)90 and the Committee for Economic and Social Affairs (CES).91 In Navarre
another Committee for Economic and Social Affairs (CES) has been created.92

86
This is a three-way agreement between the Basque government, the business community represented by Confebask and the main trade
unions ELA, Comisiones Obreras, LAB and UGT.
87
Subscribed to by the federation of Navarrese company owners CEN and the trade unions UGT and Comisiones Obreras. Its complete
name is Navarrese Tribunal for the Resolution of Labour Conflicts (www.tlnavarra.es).
88
Law 7/1993 of the 21st of December.
89
Foral Decree 16/2006 of the 10th of April.
90
The council of labour relations is an equivalent organ made up of representatives of the company owners of the BAC (in Confebask) and
union representatives (among whom the unions ELA, LAB, Comisiones Obreras and UGT have a right to be represented). This organ has
two main functions: to act as a forum for ongoing discussion between the unions and owners, and to act as an organ for consultation of
the Basque parliament and government on social and labour-related matters (as established by the Law of the Labour Relations Council,
4/2012, of the 23rd of February.
 179

2.3. Social protection

In the area of social protection there are three sections to be differentiated, as we have
already said: social assistance, social security and supplementary social protection.

In social assistance, addressing the need for assistance for those in a situation of need
who are not covered by the social security system, the European Union leaves the matter
up to the states, and only appears in a supporting role, promoting cooperation and
coordination between states.93 In the case of the Spanish state, social assistance is a
competence that may be taken over by the autonomous communities (see the Spanish
constitution, Art. 148.1.20). On that basis, the BAC and High Navarre have taken this route
accepting exclusive responsibility for the administration of social assistance in their
respective territories.94

In South Euskal Herria, the BAC and Navarrese governments have developed their own
social policy for social assistance. In the BAC different services are provided to ensure
monetary income and in the so-called Basque socialization programme.95 A range of
services are likewise provided by the Navarrese government.96

But within the Spanish state's social security, apart from the contributing level there is
also the non-contributing level (particularly retirement and permanent disability pensions).
The nature of this is that of social assistance (not of an insurance, because there is no need
to pay beforehand), but since it is part of the social security system it is a competence of
the state.

Within the area of social security, the European Union promotes coordination between
states.97 On this matter the main concern is that social security should not constitute an
obstacle to the free circulation of labour because of a risk of losing the provisions of one's
original state. To avoid that risk, services that are due are guaranteed no matter where the
state's social security needs to send them to, and in the case of services that are in the
process of becoming due the contributions made in different states are added up and then
states will pay out these "international" services proportionally.

In the case of the Spanish state, Article 149.1.17 of the Spanish constitution mentions
basic economic legislation and regulations on social security within the list of exclusive
powers of the Spanish state, without excluding the execution of services by the
autonomous communities.

91
The Committee for Economic and Social Affairs (CES) is an institution constituted by a variety of representatives, not only of trade unions
and owners but also of the chambers of commerce, industry and shipping, banks and financial institutions, cooperatives, limited companies,
guilds of fishermen and farmers, consumer organisations and organisations of the third sector of social action. The main function of this
committee is to act as a consulting organ of the Basque parliament and government in socioeconomic matters (by Law 8/2012 of the 17th of
May on the Committee for Economic and Social Affairs.
92
Its members are representatives of the following organisations and associations: the Government of Navarre and the Federation of
Navarrese Municipalities and Councils (7 members), the trade unions (UGT, Comiones Obreras, ELA and LAB (7 members altogether), the
confederation of Navarrese company owners (7 members), representatives of the social economy (cooperatives and work organisations),
Navarrese farmers and cattle raisers (2 members), ecologist groups, the Public University of Navarre, consumers and users. Its main function
is to act as a consulting organ for the Navarrese parliament and government in matters in the socioeconomic area. In particlar, it must be
consulted about the preliminary project of law of the general budget of Navarre.
93
Within Article X of the Treaty on the Functioning of the European Union.
94
Article 10.12 of the Statute of the BAC and 44.17 of the Navarrese statute.
95
Law 18/2008 of the 23rd of December. Two kinds of help are distingished within the income-ensuring provisions: one is the Basic Income
for Socialization and Social Protection (for those who have no income derived from work) and the Supplementary Income to Supplement
Work Revenue (for those who earn only a little). There is also a Supplementary Provision for Housing Expenses and Assistance for Social
Emergencies.
96
Foral Decree 69/2008 of the 17th of June. Note in particular the Basic Income (income to socialise the excluded), Assistance for Family
Integration and Socialisation (accommodation and maintenance for people suffering acute social exclusion), and Protected Social
Employment Assistance (to encourage the hiring of people suffering social exclusion).
97
Article X of the Treaty on the Functioning of the European Union and Regulation 883/2004 of the European Parliament and Council of the
29th of April.
 180

For social security the biggest financial issue is the aging population. Since the
financing system is distibutive in both North and South Euskal Herria, the amount collected
each year from contributions is used to pay for that year's services. The trouble is that there
are more and more retired people receiving pensions and fewer and fewer younger
people who are working and contributing to the pension fund. What is more, the amount
of contributions is dwindling owing to unemployment and poor-quality jobs. Given this
situation, the Spanish state recently raised the retirement age from 65 to 67, as of the 1st of
January 2013.

The legislative development and enforcement of the state's basic laws by the BAC and
Navarre are based on Article 149.1.17 of the Spanish constitution, except for the rules of
economic regulation,98 as is administration of the economic regulations of social security.99
This is connected to the "single till" issue, where all social security funds must be placed in
a single state organ which is to be in charge of its administration. At the present time that
organ is the General Treasury of the Social Security or TGSS.100

In this respect the constitutional court has ruled that Article 149.1.17 of the Spanish
constitution cannot be understood as restricting to the state the regulatory capacity in the
economic regulation of social security alone. The court said that the unity of social security
is in question and that to ensure that unity the single till (the General Treasury of the Social
Security) is an essential instrument. In the same ruling, it is emphasised that the owner of
the money of the social security is the state, in order to ensure unity. Thus the constitution
aims to avoid allowing the autonomous communities to develop different regional social
security policies. So the administration of the economic regulations is an exclusive
competence of the state, through the TGSS, in order to preserve the single fund of the
social security (Constitutional Court Ruling 124/1989, 7th of July).101

The issue of administration of social security cannot be considered wrapped up by

Constitutional Court Ruling 124/1989. In the way Constitutional Court Ruling 124/1989 is
expressed in particular votes, the unity of the social security system is guararanteed by the
state's regulatory capacity, and administration by the autonomous communities does not
put that unity in doubt. Therefore it can be argued that the autonomous communities, in
cases where their statutes allow it (as in the cases of the BAC and Navarre statutes), may
perform the administration of the economic regulations, which basically means collection
of contributions and payment of services.

Article 149.1.17 of the Spanish constitution says that the autonomous communities may
take charge of the execution of services of social security. Neither the statute of the BAC
nor that of Navarre makes any specific mention of the execution of services.

Today, in practice the only service that is executed by the autonomous communities in
the area of social security is the declaration and payment of pensions that are not for
retirement or disability. In the case of the BAC, the provincial governments perform that
service. There is no doubt that these pensions pertain to social security, and the state
transfers money to the Autonomous Community of Navarre and the provincial
governments of Gipuzka, Bizkaia and Araba, so that the payments are made by the state
because the pensions are part of the state's competence.

98
Statute of the BAC, Art. 18.2 a); Navarrese statute, Art. 54.
99
Statute of the BAC, Art. 18.2 b); Navarrese statute, Art. 54.
100
Tesorería General de la Seguridad Social.
101
The Constitutional Court has ruled that the state (i.e. the GSDN) has the following powers: inscription of companies; affiliation of
employees; sick leaves and reincorporations; collection of contributions; extension of deadlines in the collection of contributions and
payment instalments; and ordering for the payment of services.
 181

In the case of supplementary social protection, we are in the area of private insurance,
so given the principle of freedom of services, the European Union is competent in this
matter.102

In the case of the Spanish state, in the distribution of competences in the area of
private insurance, the basic powers for organising insurance are within the exclusive
competence of the state (by Article 149.1.11 of the Spanish constitution). Therefore the
state has produced basic legislation applicable to three formulae for social protection.103
But the statutes of the BAC and Navarre take social welfare mutual funds as an exclusive
competence of these autonomous communities in accordance with the general
commercial legislation.104

On the matter of social welfare mutuality funds, in the BAC there is Law 5/2012 of the
23rd of February on Voluntary Social Welfare Entities. This law establishes the legal rules
over mutual funds in the BAC.

The policy that is being developed by the authorities is obvious, encouraging

contributions to the Voluntary Social Welfare Entities through tax deductions on VAT by
the provincial governments of the BAC, the government of Navarre and the Spanish
government too.

3. THE BASQUE STATE: A CHANCE TO DEVELOP OUR OWN MODEL

OF LABOUR RELATIONS AND SOCIAL
SOCI AL PROTECTION

Let's imagine an independent, sovereign Euskal Herria of the seven provinces with its own
state which is a member of the European Union. There would be a distribution of powers
between the European Union and the states, hence between the EU and Euskal Herria.

3.1. Employment policy

In employment policy the European Union would provide general guidelines105 and
Euskal Herria's employment policy would have to be developed within those coordinates.

Now the EU guidelines are quite vague on employment policy. For example, the
current guideline 7 concerns "increasing labour market participation of women and men,
reducing structural unemployment and promoting job quality". But different approaches
may be taken to achieve this goal, and Euskal Herria would be able to develop its own
employment policy. Where the EU encourages flexicurity, a Basque employment ministry,
with its own policy, would be able to promote agreement between trade unions and
employers (rather than the present-day situation of strained relations in social dialogue)
and develop its own policy.

Internal flexicurity would be developed (that is, job security in exchange for flexible
working conditions). External flexicurity is more difficult to achieve because it does not

Article IV, chapter 3 of the Treaty on the Functioning of the European Union, and Directive 2009/138 of the European Parliament and
102

Council of the 25th of November.

103
1/2002 EDL for pension plans and pension funds; 6/2004 EDL and 1588/1999 ED for collective insurance; 6/2004 EDL for mutual funds.
104
Article 10.23 of the BAC Statute and Article 44.27 of the Navarre Statute. In an attempt to clarify the distribution of powers between the
state and the autonomous communities, the constitutional court has ruled the organisation of mutual funds and the regulation of their
functions to be the exclusive competence of the autonomous communities, but that in the performance of the mutual funds as insurance
bodies it is compulsory to observe the state's basic legislation on insurance (Ruling of the Constitutional Court 86/1989).
105
Currently, the Europe 2020 strategy and 2010-2014 guidelines for states' employent strategy.
 182

guarantee employment. However, if a Basque government were to create an effective

active employment policy as in Denmark (involving enough people and material resources)
and passive policies guaranteeing economic security, there would perhaps be a different
playing field. What other issues would be covered by our own employment policy? For
example: the development of a mediation system for the labour market (through public
and private agencies and on-line job portals), the field and legal rules of temporary job
companies, types of work contract (with temporary contracts only where justified, or with
some sort of permission), grants to incentivize work contracts (the present system is coming
under increasing criticism for cheapening contracts that are decided ahead of time and
even without grants, while not encouraging hiring), the layoff system (whether there can be
dismissal without compensation, reasons for dismissal, redundancy compensation and so
on), how to provide employees with information and guidance (through government and
private agencies and on line), and a particular model of employment services (pursuing
synergies between the school system, the ministry of employment, trade unions, company
owners' federations, the public sector and the private sector).

In addition to promoting jobs and self-employment, we also need to talk about the
home-grown option of developing cooperatives which have quite a history in Euskal Herria.
The area known as social economy, which is that of the cooperative movement, could be
promoted (with companies in the form of work associations partly owned by the
employees, socieites, foundations, special companies for people with disabilities,
employment initiatives, mutual insurance groups and so on).

Employment policy is only one part of the picture of joblessness, not the whole story.
As Professor Juan Antonio Sagardoy puts it metaphorically, if the economy were water and
employment were a sailing boat, employment legislation would be the sails. Thus the main
thing is economic activity because it leads to employment as the water holds up the boat.

That is why, applying the same set of laws, unemployment rates may vary greatly
depending on the underlying economic reality. Within the Spanish state, the average for
South Euskal Herria is nearly half of that for the Spanish state (as we saw above, 22.8% in
the Spanish state; 13.2% in South Euskal Herria (the average of the rates of the Basque
Autonomous Community and the Autonomous Community of Navarre). The explanation is
economic activity: the law does not so much create employment as channel it, through
types of contract, the system of layoffs and so on.

The influence of the law is more noticeable in rates of job insecurity or temporary
contracts, according to the legal rules of contracting. Therefore, as we saw above, there is
not a great deal of difference between the state average (24.9%) and the figure for South
Euskal Herria (20.2% in the BAC and 26.2% in High Navarre). In France the rate is 15%.

This proves that legal rules have a big impact in this area, and that by developing a
legal policy that is stricter about the use of temporary contracts Euskal Herria could come
closer to the EU figure of 14%.

3.2. Labour relations

There is no power to design a legal framework of labour relations in the seven
provinces of Euskal Herria at this time. Since the European Union has very little say in this
matter — basically a few guidelines establishing minimum objectives — if Euskal Herria
had its own state that would leave the door wide open for developing its own model of
labour relations.

With regard to individual labour relations, Euskal Herria would have power over some
questions of great importance: setting the minimum wage, maximum working hours, the
system for relating work activities to those of one's personal life, occupational categories,
 183

functional and geographical mobility, suspension of contracts and many other things which
are currently regulated. The European Union leaves these things up to the individual states,
so Euskal Herria would have the legal ability to design and develop its own model.

With regard to collective labour relations, the centralisation process that we discussed
earlier is very worrying right now, and furthermore the Basque nationalist trade unions'
relations with the public authorities are all but broken off because they are completely
critical of the socioeconomic policy of the governments of the BAC and Navarre.

If Euskal Herria were a state we would have to see what kind of social and economic
policy the government had, and what relations would be like between Basque company
owners and the trade unions in consequence. Anything would be possible, from good
relations and cooperation to distrust, confrontation or refusal to talk to each other.

In a state of Euskal Herria, it would make sense for company owners across Euskal
Herria to form a single association. The nationalist trade unions are already on their way to
doing the same; other unions would have some catching up to do. The government of
Euskal Herria could reach a legislative pact with both sides which would lead to a new
model and a way of working that seems all but impossible to us today.

In the area of collective labour relations, the law would have to decide on the system of
collective bargaining, the area and status of collective agreements, ways to settle collective
conflict, strikes, lockouts and so on.

3.3. Social protection

In the area of social protection, it is again a good idea to distinguish between social
assistance, social security and supplementary social protection.

Social assistance is going through a hard time at the moment given the policy of cuts
being implemented by the states around us. The problem here is that public money is
used to help the people who are in dire straits economically.

A Basque state can develop its own model of social assistance; the European Union will
not stand in the way, provided the state does not overstep the macroeconomic indices
established by Europe on inflation and public debt. Without surpassing those limits there
are a variety of options ranging from a restrictive to an expansive policy of social assistance.

In the last resort, of course, overall revenues and spending in the public accounts have
to be balanced. Behind those accounts there are big decisions about economic policy, and
that is where it has to be decided how much money to spend on social assistance, as a
political decision, given that all forms of revenue and spending are variable.

Apart from the overall amount of money, a Basque state would work out its own model
when designing a system of social assistance regarding who receives assistance, maximum
income, how long they have been resident in the area, requirements for immigrants, the
amount of aid given, how long for, and so on.

The only way the European Union would directly affect the question of social security
would be on the level of coordination, that is, once emigrants from Euskal Herria obtained
the right to receive a service in the place where they are located, how this would be sent,
and payment to those who receive the service on the basis of their contributions in
different EU states of the part for which they contributed in Euskal Herria.
 184

Beyond that, the most delicate matter would be that of retirement pensions. Given the
aging of the population (which is very considerable in Euskal Herria), looking ahead, the
ratio between contributors and pensioners is predictably going to grow worse. Again, the
key is to balance up the revenue (contributions) and spending (pensions) through a
thoroughgoing overhaul of the pension system.

There are many ways to achieve that balance, analysing different financial sources,
raising contributions, pushing back the retirement age and so on. The Basque state would
have to choose without outside interference.

It doesn't look as though there are plans underway in these parts to privatise the
compulsory public pension systems, as has happened in many South American countries
(with Chile leading the way). Putting the public pension system in the hands of private
financial institutions, putting legally obligatory contributions in the hands of the banks, can
hardly be seen as compatible with a system that defends "social security", because after
that money from contributions is invested by the banks its varying returns cannot offer
security for the pensions of the future.

However, the law requires the state to pay the legally established amounts in legally
established conditions, and in that case we can speak of security, because a state is unlikely
to go bankrupt.

Apart from financial questions, the Basque state should have complete freedom to
decide what events would be covered by Basque social security and under what
conditions, such as temporary disability, permanent disability, maternity, paternity, risk
during pregnancy, family assistance for having children, retirement, unemployment, health
care covered by social security, or having an autonomous system (as in the case today of
Osakidetza, the BAC health service, or Osasaunbide, the Navarrese system).

In the case of supplementary social protection, the law of the European Union ensures
the freedom to provide services throughout the EU. Therefore the government of Euskal
Herria would have to guarantee that any EU company in Euskal Herria had a chance to
provide private insurance in the area of supplementary social protection, such as private
retirement plans, life insurance and so on.

Beyond that, the law of the Basque state would be able to choose among different
formulae when regulating supplementary social protection. Besides the public level of
compulsory social security, there may be an additional, supplementary, private level
managed by private banks and financial bodies (the present system in South Euskal Herria)
or jointly by the trade union and the company. The supplementary level may also be public
and managed by the public administration. Or it may be individual (decided voluntary by
oneself) or collective (created through a collective agreement with contributions from
companies and workers).

From the perspective of socioeconomic policy, the Basque state would also have to
decide whether it supports supplementary social protection through tax deductions, and
to what extent; or whether it prefers not to support it, prioritising instead the use of tax
deductions to support spending for other kinds of protection of public interest, such as
having children, housing and so on.
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4. CONCLUSIONS

Independent legal powers

As we have seen, according to the present-day legal structure, in the areas of employment
policy, labour relations and social protection, it is the state that runs the show. The
European Union is playing a strong hand in the establishment of economic conditions to
ensure a single market (with free circulation of workers, capital, goods and services), but in
matters of labour relations and social protection it is left to the different states to determine
their own legal frameworks. As a result, the Spanish and French states now hold the key to
establishing the framework in social issues for Euskal Herria.

Thus, as we have seen, a Basque state would acquire the many powers now held by the
Spanish and French states over employment policy within the broad guidelines coming
from the European Union, with regard to the mediation system in the job market, types of
contract, grants for hiring, rules for dismissals, the provision of information and guidance
for the unemployed, worker training and so forth.

In the case of labour relations, the Basque state would also have a free hand to design
and develop its own model of labour relations within the objectives laid out by Europe's
general guidelines, with participation of all parts of society (especially the trade unions and
company owners). Therefore, the Basque state would make its own decisions about the
minimum wage (currently set at €1,425.67 in North Euskal Herria and under half that,
€641.40, in the south). The state would also decide on its entire legislation over working
conditions, establishing a model of its own, taking into account the lessons to be learnt in
comparative law on matters such as salaries, working hours, functional mobility and so on.

We would also have an opportunity to have our own model in collective labour
relations, in the collective bargaining system, in the legislation on strikes, company lockouts
and other matters.

In all forms of social protection, there would also be a chance to set up our own system.
For social assistance, this would mean an opportunity to create a system of assistance
towards social integration for citizens in a situation of dire necessity, to fight economic
poverty and social exclusion, addressing unemployment, housing, education and health
issues.

In the area of social security, there exist today a variety of options for choosing our own
system of compulsory public insurance for social protection. A choice would have to be
made in social security between a social perspective or a predominantly economic one in
the retirement system (involving age, contribution requirements, amount of the pension
and so on); and furthermore, what should go into social security and the legal framework:
inability to work (temporary and permanent), maternity, paternity, risk during pregnancy,
unemployment, family assistance, widowhood pensions and so on.

We could set up our own framework of voluntary supplementary systems for

supplementary social protection choosing among many variables: whether to encourage
contributions through tax deductions or not to provide any such incentives, getting rid of
the current fiscal incentives, public or private management of funds, limits on contributions,
regulation of services and so on.

The law and socioeconomic reality

Although the laws in South Euskal Herria are the same as for the whole of the Spanish
state, its socioeconomic indicators are markedly better than the Spanish averages.
 186

Consider the unemployment rate: compared to the European Union average of 9%,
there is 11% unemployment in Euskal Herria, 9% in the French state, while in the Spanish
state the unemployment rate is at 22%, double the Basque rate. The poverty index for
South Euskal Herria is the lowest of anywhere in the state. The Basque Country does much
better than the Spanish state in the index for distribution of wealth; the Basque
Autonomous Community stands among the places with the fairest wealth distribution in
the whole world according to the Gini index.106

These are very important points on account of which, by applying the same legal
provisions everywhere, the socioeconomic reality implied is very different. This gives some
food for thought. Euskal Herria has its own characteristics in economic structure, social
relations, culture, worker movement and so on, and consequently although the same legal
system is applied that holds throughout the Spanish state, the socioeconomic indicators
paint a very different picture.

If we were to apply a legal framework different from the present one to our own real
situation by having a sovereign Basque state, it is fair to say that very different
socioeconomic indices would emerge as a result.

From the legal point of view, given that the main responsibility belongs to the public
authorities, especially in matters of labour relations and social protection, it is essential that
there should be a good "connection" between social bodies. Today, the communication
channels between the Basque nationalist unions, the business federations and the public
administrations are broken. With our own state we could break this impasse, and broaden
the dialogue to include many other social entities (the cooperative movement and
representatives of the social economy in general, farming and fishing interests, consumer
associations and so on), and would have a chance to build and develop our own model of
labour relations and social protection with complete independence, in a way that is fully
adapted to our characteristics and wishes. We need a garment fitted to our own
measurements. We need a Basque state.

106
The Gini index indicates the distrubution iof income in a society on a scale from 0 (completely equal distribution) to 100 (completely
unequal distribution). The BAC gets a score of 25 points (comparable to Denmark and Japan, which are between 23 and 25); Spain gets 31.2.
At the other extreme there are countries like Brazil, Namibia and the Central African Republic which have scores between 58 and 70 points.
In the Third Integration Plan for Basque Society (2011-2015) emphasis is placed on poverty rates and the Gini index.
 187

REFERENCES

Aparicio Tovar, J. (2011): “Políticas de empleo y Comunidades Autónomas”, in Various, Los nuevos
marcos de relaciones laborales en el renovado Estado de las autonomías, XXI Congreso
Nacional de Derecho del Trabajo y de la Seguridad Social, Tirant lo Blanch, Valencia.
Bengoetxea Alkorta, A. (2011): "Eskualdea eta lan-harremanak", Eleria, 21.
Kaiero Uria, A. (2004): Organizaciones sindicales y empresariales, negociación colectiva, y marco vasco
de relaciones laborales, Manu Robles-Arangiz Institutua.
López Cumbre, L. (2011): “Protección Social y Comunidades Autónomas”, in Various, Los nuevos
marcos de relaciones laborales en el renovado Estado de las autonomías, XXI Congreso
Nacional de Derecho del Trabajo y de la Seguridad Social, Tirant lo Blanch, Valencia.
López López, J. (1993): Marcos autonómicos de relaciones laborales y de protección social, Marcial
Pons.
Martínez Moreno, C. (2011): “Relaciones laborales y Comunidades Autónomas”, in Various, Los nuevos
marcos de relaciones laborales en el renovado Estado de las autonomías, XXI Congreso
Nacional de Derecho del Trabajo y de la Seguridad Social, Tirant lo Blanch, Valencia.
Molina Navarrete (2006): “Los nuevos estatutos de autonomía y el reparto constitucional en las
«materias» de «empleo», «trabajo» y «protección social»”, RTSS-CEF, 283.
Ojeda Avilés, A. (2003): “Sobre el concepto de asistencia social y el principio de caja única en la
distribución de competencias en materia de protección social”, Revista Foro de Seguridad
Social, 8-9.
Palomeque López, M.C. (2008): “La dimensión competencial: el posible «reparto de competencias» en
el Estado autonómico”, in J.L. Monereo Pérez; C. Molina Navarrete & M.N. Moreno Vida, La
Seguridad Social a la luz de sus reformas pasadas, presentes y futuras, Comares.
Palomo Balda, E. (2003): “Descentralización de la protección social en España: pensiones y
prestaciones de desempleo”, Revista Foro de Seguridad Social, 8-9.
Rojo Torrecilla, E. (2011): “Los nuevos marcos de relaciones laborales en el renovado Estado de las
autonomías”, in Batzuen Artean, Los nuevos marcos de relaciones laborales en el renovado
Estado de las autonomías, XXI Congreso Nacional de Derecho del Trabajo y de la
Seguridad Social, Tirant lo Blanch, Valencia.
Suárez Corujo, B. (2006): La Protección social en el Estado de las autonomías, Iustel.
Unanue Letamendi, J.M. (2002): Las relaciones laborales en Euskal Herria, Manu Robles-Arangiz
Institutua.
 188

7. Building a (Basque) nation from the world of work.

work.

Fra ncis co L etam en dia B el z unc e, pro f es s o r o f po litic al s ci en ce,

Univ ers ity o f the B as q ue C o untry

With the so-called “markets” closing the door on the nation as a nexus between
different social groups within states that are subjected to market logic, the possibility
arises of constructing a social nation of stateless peoples.

In the Basque Country the actors in this scenario are the Basque trade unions and non-
mainstream agrarian organisations, together with social movements and political
forces seeking self-government and socialism. The interactions between these forces
comprise a mixture of cooperation and conflict in equal measure.

Such construction must be non-sectarian, and be articulated by territories, bottom-up

starting at the level of the local district, these being the socioeconomic units of the
confederation of valleys that will make up Euskal Herria. This will lead the way towards
a form of state of a more permeable type, open to different alliances, and quite
distinct from the older model.
 189

1. FORDISM, STATE AND NATION

The aim of Fordism, a capitalist theory in vogue for three decades following World War II, was
to attenuate the superproduction crisis that had brought the world to its knees in the thirties
and early forties by means of a Keynesian welfare state. How? By increasing the purchasing
power of workers and people generally, generating a strong demand for goods and services,
and encouraging a three-way understanding between union leaders (forced to moderate their
demands), business leaders and the rulers of the state. The result was a type of centralised state
— nations without a state counted for nothing — that backed reform, consumerism and a
certain "nation" of the state, a community of interests shared by capital and labour.

This system entered a period of crisis in the mid-seventies when the markets began to be
global and the economy became a world economy, giving rise to the Post-Fordist era. Yet
although its mystifying discourse exalts the self-organised, creative worker of quality circles, the
reality of Post-Fordism boiled down to a brutal dualisation of the work force. The pyramid of
workers now consisted of a small elite at the top consisting of stable, versatile, male, native,
middle-aged employees sitting on a large base of groups lacking security including women,
young people and workers from outside the EU. The unions were no longer needed, and were
only tolerated if they transformed themselves into elite worker agencies.

The Keynesian state beat a retreat, unconditionally taking the side of the businesses to help
them achieve rises in productivity and niches of excellence in the world market. And virtually all
the political parties across the board, from right to so-called left, played along with this.

This welfare crisis, however, had an indirect consequence: the potential to open up a
window of opportunity for oppressed nations. The state had ceased to be the chief agent
regulating the capitalist system, its powers being progressively absorbed upwards (by the
European Union and entities managing global neoliberalism), but also downwards. If the
regions were gradually turning into increasingly relevant agents of regulation, why not stateless
nations too? Thus Post-Fordist capitalism began to open up, unintentionally, a route for the
latter to create their own state, a model of state very different from the ones that had existed
previously, more permeable and open to alliances with progressive movements on other scales,
but when all is said and done, still a state.

Since 2007 and 2008, however, Post-Fordism has turned even more predatory, through the
absolute domination of financial capital over manufacturing capitalism. The disciplinary action
to which states are subjected by the bank trusts at the expense of their citizens makes
parliaments and governments superfluous, making a mockery of democracy.

Capital has driven states into debt by demanding that they provide subsidies and cheap
labour without paying taxes, sucking them dry and pushing them towards bankruptcy. In
Europe, the debt of the so-called PIGS countries (sometimes used by economists to refer to
Portugal, Ireland, Greece and Spain) has risen dramatically in the last few years, producing
huge economic gains for the financial trusts which are referred to euphemistically as "the
markets". When they are doubtful of the economic solvency of governments, they charge them
high risk premiums which result in an unsustainable burden which may drive governments into
bankruptcy or make it necessary for them to be bailed out by Europe using public funds. The
cuts and austerity measures implemented by the pale-faced ghosts into which almost all
present-day states have been transformed, reducing people's purchasing power to the bare
minimum, far from solving the problem or even attenuating it, escalate the superproduction
crisis to an even more desperate level.

This phase of Post-Fordism has taken the weakening of the national element in the nation-
states to the extreme. From the start Post-Fordism did away with the link between capital and
labour by dynamiting the compact labour force of the former days of Fordism through an entire
repertory of varying kinds of insecure working arrangements, and by provoking an exclusion
 190

crisis in the form of a great mass of casualties, people who were isolated and permanently
barred from the nation.

The latter is in reality vanishing in the various kinds of Post-Fordist state. The neoliberal states,
which are nodes in the worldwide globalisation network, are being overrun by social conflicts
which they have no wish to manage but only to suppress or keep under control. In the (ex)-social-
democratic states, agreement has been drowned out by the fireworks of a micro-agreement
between partnered institutions and companies in which what is conspicuous about organised
labour is its systematic absence.

The social nation does not exist in either, if by this we understand the nexus between different
classes; there are two "nations", that of the rich and that of the poor. The opposition to the
"other" turns into the only cement gluing together the citizens on this phantom plane around a
common national cause: hence the anti-immigrant, anti-minority, anti-Islamic, antiterrorist states.

In the gap that has been opened by the legitimacy crisis of the big families of Western parties,
there is an opportunity for the xenophobic right-wing extremist parties and the green parties to
grow strong; but also for the regional and nationalist parties of the stateless peoples.

2. OPPORTUNITIES FOR THE STATELESS NATIONS

Does Post-Fordism, by its inherent tendency to weaken the nation-state, open up new
opportunities for the stateless nations to conquer statehood? In theory yes, but we need to
distinguish between different nation-building processes that can be lined up along a left-to-right
continuum.

At one extreme there is "market nation-building", the fruit of an alliance between local
economic groups wishing to get into global markets and territorial institutions that think the same
way. The Post-Fordist nation is conceived of as a node in the world network of decision centres of
the global economy, which would make it possible to escape state control. The public-private
partnership would not extend to organised labour; nor will it take the form of becoming a state.

The weaknesses of this approach are self-evident. The participants in alliances on the global
level are generally neoliberals and this makes for a fragile nation-building and a weakened self-
government. The multinationals, having been courted to get them to set up in the national space,
practise delocalisation if it is in their interest; and both they and the financial centres and global
neoliberal bodies stay away from political turmoil, preferring the stability of the nation-states "that
really exist", at least as far as the Atlantic region is concerned.

At the opposite extreme is the left-wing model of nation-building: building the social nation.
This would be the fruit of a hegemonic alliance between popular sectors and workers through
trade unions, alternative social movements, critical communication media and left-wing parties,
with a progressive and emancipatory orientation, with the objective of putting an end to job
insecurity and exclusion. Consensual agreements would be made between economic and social
actors with everybody's participation and from the bottom up, with strict controls of international
groups and large companies through an explicitly anti-neoliberal policy.

3. THE TERRITORY OF THE SOCIAL NATION IN POST-

POST-FORDISM
Each capitalist regime has a specific geography; the transition from one regime to another is
accompanied by a round of creative destruction and reconstruction of this space. This is
evident in the transition from the Fordist to the Post-Fordist regime, with its corrollary, well
 191

known in our country, of the vertical disintegration of companies and the emergence of diverse
industrial districts.

Fordist industries massed together in certain areas of North America and Western Europe
(including the Basque Atlantic seaboard) generating accelerated urban development. In
consequence of "international division of labour", certain third-world countries, especially in
southeast Asia, developed their own neo-Tayloristic development programmes which
contributed to the weakening of Fordism. In the west, the new Asian competition led to
relocations and closures of factories, particularly in industrial areas specialising in traditional
activities such as mining, shipbuilding and steelworks. The old industrial regions began to
disintegrate, and its geography pertains to the Fordist crisis.

In a parallel development, there was a process of industrial reterritorialisation. Some saw a

possible way out from the world crisis in the paradigm of "flexible" industrial districts,
supposedly made up of communities of small and medium-sized companies interconnected in
relations of cooperation and conflict. Over the past quarter of a century certain regions of
Europe and the US, rich in technology, infrastructure and "flexible" economic activity, have
replaced the old industrial areas. New centres of production have thus arisen that are very
different from the former ones: intensive handcrafting industries in clothing design, furniture,
precision metal working, machine tools in the Third Italy and the south of Germany; high-tech
areas near large American cities such as Orange County and Silicon Valley.

Some writers have taken their inspiration from these processes to construct a model of
regional development, according to which the objective of regional cooperation is to provide
companies with "input" that they cannot obtain alone in the market: skilled workers, cheap
financing, commercial information and so on; to share costs of research and development,
marketing and investment that would be beyond the reach of the companies if they had to go
it alone.

According to this line of thinking, flexible specialisation emphasises the need to build
regional autonomy in order to promote cooperation between industry, organised labour and
local public bodies. A regional economic policy is advocated which does not limit itself to
manufacturing but also includes health, education and appropriate employment policies.

In this view, the present world is a global mosaic of regional economies. Can "national" be
substituted for "regional" in this formulation, with the projection of a process of national
construction for stateless peoples based on territory and work, which uses for its purposes
certain "virtuous" characteristics of Post-Fordism in order to attain statehood?

The answer is unclear, because Post-Fordism combines reterritorialisation with

delocalisation. Communication technology and computers have freed the economy from
localisation; in theory a virtual company could work in the Himalayas thanks to computer
technology. All the capital equipment that would be needed would be a few telephone lines
and a couple of PC terminals forming a local network with the modems necessary for
communication.

Moreover, the providers or consumers of these services constitute nodes in a

communication network in which only the global centres have a substantial stock of hardware,
which is absent in the lower nodes. The quest for agglomeration economies leads to a
concentration of administrative and strategic services related to high-level management and
central governance, which requires face-to-face interaction. The importance of these contacts is
the necessity of keeping up to date with new developments which results in concentration in a
few global urban centres such as Frankfurt, London, Tokyo, Paris, New York, Shanghai or São
Paulo.
 192

4. THE RELEVANCE OF THE

T HE DISTRICT
In any case, it is clear that under Post-Fordism the district has come to the fore as a unit, in both
economics and for union purposes. Occupying an intermediate position on the geographic
scale between the narrow local unit of the town and the region, districts have become the
preferred arena for collective in situ bargaining and trade union action, whether resonding to
the consequences of industrial conversion in a particular area, or forging local alliances with
social movements, be they ecologists or pacifists, feminists or alter-globalists.

The Employment Zone, a concept recognised by Eurostat since 1992, refers to a particular
space and territory with its own economic and industrial organisation. The Employment Zone is
a neutral concept, and each such zone has its own characteristics regarding such things as
activity and employment rates, inclusion of women in the work market, job security or the
proportion of industrial jobs.

The number of employment zones in the Basque Autonomous Community varies between
fifteen and twenty depending on which official body's classification we use. Pradales analysed
the characteristics of three such areas in 2005 whose status is indisputable: the Left Bank of the
Estuary of Bilbao, the Deba Garaia (High Deba) district which includes Bergara and Arrasate
(Mondragón), and the Plain of Araba (i.e. Vitoria-Gasteiz). The Left Bank, an erstwhile major hub
of industry, finance and employment for the entire country, is going through its worst period
ever with regard to availability of jobs on account of the crisis in the traditional industries: steel,
capital goods and shipbuilding. Improvements in job and activity ratios in the Plain of Araba
have turned this into one of the main centres of Basque development today. Deba Garaia is in
a rather unique position because of the cooperative movement and the specially high
proportion of industrial jobs.

These three examples taken together are suggestive of how the Basque Country is
configured, within its own national space (the more so when we think of Euskal Herria as a
whole), as a mosaic of contrasting regions.

5. PLAYERS IN THE BASQUE SOCIAL NATION (1): THE UNIONS

The best place to start an overview of the main players in Basque nation building from work
and territory is with the trade unions.

5.1. South Euskal Herria

In the south of the Basque Country the Franco regime persecuted equally both the Basque
workers' union ELA (Basque Workers' Solidarity) and UGT (the General Workers' Union), the
union arm of the Spanish socialist party. Between 1960 and 1975 ELA broke free of both its
Christian links and the historical Basque Nationalist Party. Within the Basque nationalist Left
LAB (Nationalist Workers' Committees) emerged in 1975 in the heat of the worker counsel
movement of the late Franco period; its initial objective was to create assembly-based workers'
committees of Basque workers who were meant to be the Basque answer to Comisiones
Obreras, the union organisation that was close to the Spanish communist party.

Thus on the eve of the change of regimes after Franco died in 1975, there were four trade
unions in Euskal Herria. The Basque unions stood at loggerheads, though for different reasons,
both to the strategy of social accords initiated by Madrid's Moncloa Pacts and to the
centralised structure of collective bargaining aimed at by the Workers' Statute that was written
between 1979 and 1980.
 193

Industrial conversion had a traumatic effect on the country's metal, shipbuilding and capital
goods industries, which resulted in an all-round shut-down and desertion of industry from the
Bilbao estuary and other parts of the country. Contrasting approaches from the Basque unions
and those identified with the Spanish state led to a dramatic change in the power balance
which translated into electoral figures in the results in the 1995 polls: ELA 40.0%, LAB 15.5%,
Comisiones Obreras 17.5%, UGT 15.9%.

The joint percentage of delegates from nationalist unions in the Basque Autonomous
Community rose from just 33% in 1980 to 57% in 1995; the proportion of non-nationalist
delegates fell from 36.8% in 1980 to 34.4% in 1995. This pattern has remained stable, with
hardly any variation, until the present, as witnessed by the 2009 union elections where ELA got
40.2%, LAB 16.7%, Comisiones Obreras 20.2%, UGT 13.1%.

In Navarre the power balance is the mirror image of this. In 1995 the results were ELA
20.7%, LAB 11.3%, Comisiones Obreras 20.5%, UGT 31.9%. The results of the 2009 trade union
elections were: ELA 21.37%, LAB 12.33%, Comisiones Obreras 25%, UGT 30.89%. The joint
totals for the two blocks has also remained stable between 1995 and 2009, when the nationalist
vote was 33.70% of the total, and the non-nationalist vote 55.89%.

Following the three-way union split between ELA, UGT and Comisiones Obreras which
lasted between the general strike of 1988 until 1993, ELA moved away from a Fordist pacting
and "autonomy of the parts" strategy towards an "anti-establishment" (kontra-boterea,
contrapoder) one, defining as such the conjunction of union power with social power from a
national perspective, which included united action with LAB and the fight for self-government.
This strategy lasted from 1993 to 1999. In the spring of 1995, a joint declaration by ELA and LAB
for Aberri Eguna, the Basque national day, proclaimed the Basque people's right to self-
determination, uniting national and social construction.

ELA and LAB were active members of the Lizarra-Garazi Agremeent in September, 1998
which preceded the ETA ceasefire. The agreement's breakdown at the end of 1999 weakened
their unity of action, and a series of breakups and makeups ensued; they are still going on
today.

Meanwhile, the Spain-supporting block made up of UGT and Comisiones Obreras, which
opposes the trade union majority in Euskal Herria, was consolidated in 1995. Their opposition
revolves around several issues. The 1992 National Agreement on Continuous Training, at the
level of the Spanish state, put large amounts of money into the hands of the Spanish unions,
UGT and Comisiones Obreras, and of the Spanish business association CEOE; the Basque
nationalist unions were concerned over the likelihood of these funds being channelled towards
internal financing of the recipient unions. The new Basque agreement on continuous training
signed by the four unions and Confebask in 1995 did not heal the wounds: ELA and LAB's
opposition to the Spanish agreement was cited as a reason for excluding Navarre from the
institutional arrangement.

With the arrival in power of the Spanish conservatives of Partido Popular (PP) in 1997,
centralisation of labour relations was reinforced. in 2000 Comisiones Obreras and UGT
approved the agreement between PP and PSOE, the two main Spanish political parties, "for
freedom and against terrorism", which sought to cast over the entirety of Basque nationalism a
shadow of suspicion of complicity with ETA violence.

Points of agreement between the Basque nationalist unions and successive Basque
governments have been few and far between. ELA and LAB have accused one BAC
government after another, whether controlled by Basque nationalists or not, of implementing
neoliberal policies in questions of income redistribution and employment policy, also
condemning the policies of the Navarrese governments for conceding exclusive patronage to
the Spanish trade unions.
 194

Following the start of the major world economic crisis that began in 2007 and 2008, the
neoliberal direction taken by the Spanish socialist party and its policy of welfare cuts brought to
a head new clashes between the two big blocks of unions in the Basque Country. In 2009 and
2010, ELA and LAB called for general strikes to protest against the neoliberal economic policies
and wage cuts. On the 27th of January, 2011, the same day on which Comisiones and UGT
signed a social pact with the Spanish government, ELA and LAB, in conjunction with the
Basque sectorial unions STEE-EILAS, HIRU and the farming union EHNE, called for a general
strike to protest over pension cuts.

The return to power in Madrid of the right-wing Partido Popular at the end of 2011 led the
way to a labour reform in March, 2012, which carries the tyranny of the markets to hitherto
unseen extremes, making layoffs easier and cheaper, undermining the right to collective
bargaining, increasing job flexibility and insecurity, while at the same time introducing austerity
in budgets through radical welfare and social service cuts. The general strike of the 29th of
March, 2012, announced by the majority unions, brought the country to a standstill and was
seconded by the non-nationalist unions, not only here but all over the Spanish state.

5.2. North Euskal Herria

The French unions operating in North Euskal Herria, CGT, CFDT, CFTC and CGT-Force
Ouvrière (there is also an alternative union movement, the Union Syndicale Solidaires, which
includes SUD), all have a republican structure based on the French department (département)
not conducive to autonomous union action in North Euskal Herria, which in this setup figures as
the Basque half of the department of Pyrénés Atlantiques. The relative exception to this is the
CFDT whose Aquitaine Interprofessional Regional Union is split up into six district one of which
is the Basque district.

Comisiones Obreras is the union corresponding to the CGT, and UGT to the CFDT. But the
local "Basque" CFDT is more pro-Basque than the Basque UGT, and acted as an observer of
the Lizarra-Garazi process.

It is impossible to know the results of elections of staff delegates and company committees
in the Basque Country. What we do know is the results of elections to the Conseil de
Prud'hommes, which in December, 2002 were as follows: CFDT 32.61% (with 11 counsellors),
CGT 27.43% (7 counsellors), FO 16.92% (5 counsellors), LAB 8.53% (1 counsellor en the
Commerce section). In the 2008 elections CGT got 6,308 votes (which is 28%), CFDT 5,292
(24%), LAB 2,763 (13.50%).

Created in April, 2000, LAB is the only representative of Basque nationalist trade unionism.
The relationship with the French unions was not easy at first. The Spanish Comisiones Obreras
and UGT initially proposed to CFDT, CGT, FO and UNAS that they should sign a declaration
including the unions in the Spanish "anti-terrorist pact". Point 4 of this declaration condemned
"cooperation with unions and political and social organisations within the ambit of ETA" (an
obvious reference to LAB). This caused internal conflicts: Basque leaders of the CGT warned of
"the risk of mixing up our condemnation of terrorism with the demands for their own identity
and culture of men and women of the Basque Country on either side of the border".

However, LAB's participation in workers' and citizens' mobilisations and the sharp rise of its
membership have led to normalisation of the relations between LAB and the French union
federations.
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6. PLAYERS IN THE BASQUE SOCIAL NATION (2): FARMING

FARM ING UNIONS
Post-Fordism has opened up a profound gap between the organisations that farm for large-
scale production and those that organise small farmers who run communal or family farms
anywhere in the world, both in the North and the South. For the last few decades it has been
the North that has exported heavily subsidised food products to the countries of the South at
prices below the cost of production, bringing about hunger and misery for the masses of
peasants all over the world. The winners are the big cereal-producing businesses and food-
producing multinationals which patent and trade in seeds and genetically-modified crops. Both
receive support from the managing bodies of the neoliberal world and the European Union's
Common Agricultural Policy (CAP).

Meanwhile this community policy, focused on exports, has led to the closure in Europe of
roughly 200,000 small farms each year, bringing production under the control of just a few.

The Coordination Paysanne Européenne (CPE), created in 1987, and the worldwide Vía
Campesina, created in 1993, which brings together twenty-two critical farming organisations in
Europe, including two Basque ones, share a set of ideas about food sovereignty. This concept
defends the right of peoples to set their own farming policies, to give priority to their home
markets, to have access to natural resources such as water, land, seeds, and the loans needed
to acquire them, and to decide what to eat, who produces it, how, in a way compatible with the
specific cultural conditions of each country.

This agenda is also shared by the two Basque farming associations mentioned: the Union of
Basque Farmers (Euskal Herriko Laborarien Batasuna, ELB) in North Euskal Herria, and the
Basque Farmers' Association (Euskal Herriko Nekazarien Elkartasuna, EHNE) in South Euskal
Herria.

6.1. Euskal Herriko Laborarien Batasuna, ELB

ELB, the Basque farmers' movement in the North, learnt the ropes of unionism as part of
FNSEA (the French National Federation of Agricultural Holders' Unions), organised by
departments, which adopted the principles of the European Community on concentration and
productivism in the sixties and seventies. Founded in 1982, ELB defined the characteristics of its
members in 1984 as farmers in the Basque Country and members of the international
community.

The core issue for the ELB is farming, and this has resulted in an increase in membership
which rose from 29% in 1993 to 51.5% in the 2001 elections to the Chamber of Agriculture.

6.2. Euskal Herriko Nekazarien Elkartasuna, EHNE

EHNE, the Basque Farmers' Association (or Basque Farmers' Solidarity) was set up in 1980
with four brances in its first decade, for the provinces of Gipuzkoa, Bizkaia and Araba, and from
1985 on also in Navarre. Unlike ELB, in South Euskal Herria EHNE is virtually the only farming
union. It currently has about 6,500 members.

Although partly modelled on ELB, the issues faced by EHNE are different. There are two
historical tensions, the territorial issue and a social tension with regard to the farming model:
since it is the only union, not all its members agree about rejecting the productivist model.

6.3. The Basque Chamber of Agriculture: an alternative model in a Basque frame of reference
The Chambres d'Agriculture are public bodies that play an important role in French rural
politics. Run by an Assembly of professionals elected through universal suffrage, they control
important public resources. But the Chamber of Agriculture of the department of Pyrénés
 196

Atlantiques supports productivist community policies; furthermore, the decisions made in Pau
affecting Basque rural life are "remote" in three ways: geographically, politically and culturally.

Thus arose the demand, in 1995, for a Chamber of Agriculture specifically for the Basque
Country. It met great resistance in France; but the ELB demonstrated great skill in the way it
went about garnering support. In 2001 it started a campaign all across the country, and 70% of
Basque mayors (113 of them) and over half of the general and regional counsellors backed a
motion in its favour. A coalition of old and new social movements also stood behind the move:
from professional unions, socioeconomic entities or cultural organisations to consumer and
environmentalist groups.

At first the public bodies who opposed the idea stuck to their guns, but finally, in January
2005, the Basque chamber of agriculture came into being, not as a state institution because the
way was blocked, but as a civil association. Its name is Euskal Herriko Laborantza Ganbara, with
no French translation. Despite pressures from the Prefect, mayors of all political leanings voted
to grant subsidies to the association. A variety of reasons account for the support it has
received: farmers had their professional reasons, the ecologists recognised in it a model of
greater respect for nature, while for the nationalists this is the first step towards institutional
recognition of Euskal Herria.

7. ALLIANCES AND STRATEGIE

STRATEGI ES IN THE CONSTRUCTION OF A BASQUE
SOCIAL NATION
The construction of the Basque social nation puts on the agenda the question of alliances for the
organisations described above. The theory of pillars explains that the unions have not worked
alone, historically. To stand up against the hostility of the state and the bosses and overcome
ideological rivalries, they formed pillars: social networks in which there was interdependence
among cooperatives, work pools, mass organisations and political parties. The power balance
between parties and unions was subject to fluctuation.

The diversity of pillars was a response to the plurality of party and ideological divisions.
Between 1920 and 1970 there crystalised four sets of party/union pillars: the labour pillar, the
social-democratic one, the communist one and the Christian one. The pillar could be complex: in
South Euskal Herria, for instance, corresponding to the PSOE-UGT socialist pillar there arose
Solidaridad de Obreros Vascos, the future ELA, with a double Basque-nationalist and Catholic
orientation.

A variety of factors in western Europe removed the pillars from the unions starting in the
nineteen-seventies: factors such as the lack of job security, an identity shift away from the
collective level towards the individual, the Church's loss of influence and the ideological
weaknesses of the historical left-wing parties. The unions UGT and Comisiones Obreras lost their
respective pillar-links to the Spanish socialist and communist parties (the PSOE and the PCE)
during the eighties. ELA had already gone through this process in the sixties and seventies,
breaking off its ties to the Basque nationalist party (PNV) and the Catholic Church.

The breakdown of the pillars has moved the unions, now without problems, to the new social
movements: feminism, youth movements, the movement of movements against neoliberal
economic globalisation. Unlike the situation at the height of the pillar era, now there are no stable
links, only a multitude of changing nexuses. But it is a fragile process and it is in its beginnings.

And there are exceptions to the rule. What happens in societies where there are notable
national-type identity processes underway, as has been the case in the Basque Country, Galicia or
Corsica, for example? In the seventies a new strong pillar emerged in the form of the Basque
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nationalist Left, which was part of the new union LAB until the nineties. For a number of years
united action by ELA and LAB and the strong identity component in Basque national and social
resistance to the system made it possible for Basque labour activism to free itself of the restraints
on Spain's state-level union movement.

The end of armed activity by ETA has opened a new window of opportunity for building the
Basque social nation from the world of work, and means that we can return with renewed vigour
to the spirit of the nineties, retaining the things that worked, changing the things that were
problematic back then and taking on new challenges that had not yet been thought of.

These challenges force us to rethink certain things, such as anti-establishment politics and
unity of action, which most in the unions had been taking for granted because any differences that
had emerged in that respect had not been subjected to serious analysis.

In the nineties the view was that anti-establishment politics consisted of the combination of
union power with social power from a national perspective, which called for unity of action
between ELA and LAB in the perspective of the fight for self-government. But this approach had
been born out of an imbalance between labour and political viewpoints: the two nationalist trade
unions made up the majority in their area of action but the left-wing nationalist political forces
were a minority in theirs.

The situation is changing in the Basque political scene and greater change yet seems to be
coming. Left-wing political nationalism is a force to be incorporated into the anti-establishment
movement insofar as it is fighting for self-government. Given its necessarily inter-class character,
one of the objectives of the majority in the trade and farming unions must be to give it critical
leadership, in accordance with its objectives.

For being anti-establishment in a stateless nation makes no sense as the instrument of a single
union, but makes none as a unit of action exclusive to the unions either, unless the aim is to lose
needed alliances in the national fight for self-government.

It is both absurd and useless to try to bring back the party-union pillar in the old style, not just
because there exist several unions in the country and a range of political parties. Yet we can think
about a return to a pillar arrangement in a new way, in accordance with the model of a world
without a centre, of pluralistic inspiration. This would be the resujlt of a clustering of unions,
farming organisations, social movements, and naturally also the political forces that defend self-
government and socialism, with a complex set of interactions that are a balanced mix of both
cooperation and conflict, where what is coordinatable is coordinated, and what is criticisable is
criticised.

In South Euskal Herria there is already a sufficient critical mass for this social conjunction to
work; now it is time for the unions to put aside the attitudes of purists who are reluctant to
become contaminated with non-worker elements.

But this broad network of different actors should be permeable and thought of more as a
means to national construction than nationalist construction; and this also leads us to revise our
existing idea of unity of action. We should welcome (provided it is consistent) a rapprochement of
the Basque sections of the Spanish unions to the Basque majority unions, notwithstanding the
criticism that has been fired at them historically, and for good reason, accusing them of practising
collaboration. Today, when the infernal logic of the markets is gutting the nations of the states,
only leaving them to confront and fight the nations without a state, there is nothing to be lost and
much to be gained from such a rapprochement.

The Basque unions should win over to their positions (not necessarily to their structures) the
great majority of Basque workers, whatever their national orientation. Besides, this is only
 198

common sense. Although the density of Basque unionisation doubles the Spanish average, it still
falls short of 30% of the working population, which is well below the level in many European
countries. Notwithstanding its proven capacity to mobilise, this fact ought to lead the main unions
to adopt attitudes of tact and common sense. Unity of action, certainly; but for that very reason,
open to all who wish to join in, as long as it is in a spirit of mutual respect.

Perhaps the time has also come to venture into an area where the Basque union movement
has until now refused to tread, out of a fear of getting trapped in the nets of the class enemy. I am
thinking of proposals for relaunching the economy in and from the territory that the "virtuous"
characteristics of Post-Fordism would make possible, and which the present anti-production
position of the markets makes quasi-obligatory.

Euskal Herria is, to a large extent, a federation of valleys which coincide with historical districts.
To make specific proposals for development focusing on each of these amounts to developing
open participatory fora where such initiatives will be debated, worked out and implemented. This
is a task pending for the trade unions — the farming unions have made more headway in this area
— to be done in conjunction with the town councils which act as bridges linking the national to
the social — of which there are fortunately many now — and with a rainbow alliance of social
movements, grassroots organisations, the critical press and others. But those who really speak for
such proposals and hence the potential members who will have to put them in practice are, and
can only be, the small and medium-sized companies in each district, the local R&D centres and
the capital risk entities.

There can be no concessions on this ground. Worker and farmer involvement in matters of
development cannot happen without demanding quality jobs with stable employment, job
security and equitable wages. Such demands make conflict inevitable given opposed class
interests which can only be resolved if cooperation produces a positive sum in which everyone
wins, and most particularly the community of the area. Here local institutions would come into
their own as the suppliers of input that businesses and farms cannot obtain by themselves, such as
R&D, market knowledge or modern technology. By providing professional training and industrial
land, they would at last become true managers of local welfare linked to the territory, extending
this to services such as transport, health and education.

But here there is no room for naivety; there is no such thing, and certainly not in Euskal Herria,
as an area where there are only purely industrial districts made up exclusively of autonomous
small and medium-sized companies. Unions, farming organisations and other social entities
should carry out in-depth research to find out which are the real small and medium-sized
businesses and which are companies at the end of a command chain, run through remote control
by larger groups, and whether the latter are of Basque, Spanish or global origin. This is necessary
in order to be prepared for possible delocalisation maneouvres when those groups hit hard times
or see new localisation opportunities that interest them.

Of course Basque nation building is much, much more than the sum of economic and social
development of its individual districts; not to mention the significance of acquiring the form of a
state. But although I have not discussed this matter directly, since it is covered by other chapters
in this book, the construction of one of the two elements of the nation-state, the (social) nation, is
undoubtedly an important way of contributing to the task. Therefore this approach, hitherto
unrehearsed in Euskal Herria, may form part of the drive towards that larger objective. It is a job
full of risks, highly complex and problematic — but what job isn't?
 199

REFERENCES
Aurrekoetxea, M. (2003): De Solidaridad de Obreros Vascos a Euskal Langileen Alkartasuna, 1911-2001.
Notas para una crónica de 90 años, in Manu Robles Institutua, Bilbao.
Bengoa, V. (1997): De SOV a ELA. Historia, organización, representatividad. Apuntes Inéditos.
Borja, A. & Gómez Uranga, M. (2006): “Qué futuro para la economía en Iparralde”, en Letamendia, F. (ed.),
Acción colectiva Hegoalde-Iparralde, Editorial Fundamentos, Madrid
Ibarra, P. (1987): El movimiento obrero en Vizcaya: 1967-1977: ideología, organización, conflictividad.
Servicio Editorial de la UPV. Leioa.
Kaiero, A. (1999): “Sindicatos y marco vasco de relaciones laborales”, en Revista Internacional de Estudios
Vascos, 44, 1.
Köhler, H.-D. (2001): El movimiento sindical en España : transición democrática, regionalismo,
modernización económica, Ed. Fundamentos, Madrid.
Letamendia, F. (2004): ELA 1976-2003. Sindicalismo de contra-poder, Manu Robles Arangiz Institutua,
Bilbao, 2004.
–––––––––– (2006): “Sindicatos y organizaciones agrarias: relaciones Hegoalde-Iparralde”, in Acción
colectiva Hegoalde-Iparralde, Editorial Fundamentos, Madrid.
–––––––––– (2009): Estructura política del mundo del trabajo: fordismo y posfordismo”, Tecnos, Madrid.
Majuelo, E. (2000): Historia del sindicato LAB, Editorial Txalaparta, Zangotza.
Solange, M. (2002): Ipar Euskal Herriko egoera ekonomikoa, azken hogei urten hauetan, Manu Robles
Arangiz Institutua, Bilbao
Unanue Letamendi, J. M. (2002), Las relaciones laborales en Euskal Herria. Apuntes históricos y análisis de su
evolución desde la transición política, in Manu Robles Institutua, Bilbao.
Verberkmoes, J. (1996): “The politics of ideological diversity in France”, in P. Pasture, J. Verberkmoes, & H.
De Witte, (eds.): The lost perspective? (vol I), Avebury, Ashgate Publishing Limited, Aldershot,
England.
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8. Class interests in the building of a Basque state.

state.

I ñak i G il d e S an Vi ce nt e L ar r a ñag a, me mber o f G I T E - I P E S

(So cia l R es e arc h Ins tit ute)

Imperialism developed three strategies in the twentieth century for adapting the form
of the state to its needs for expansion, the third of these being the Washington
Consensus. This has reached the point where even formally free countries which have
internationally recognised states may be, and indeed are being, dominated and
administered from without. Oppressed nations such as ours, which lacks its own state,
need to understand that the achievement of one will entail, first of all, a knowledge of
the goals and means of imperialism, in order to overcome them; secondly, taking our
history and strengths as a starting point, that is, our distinctive framework of class
struggle; thirdly, anticipating our own model of a state already in the present, as far as
possible; and fourthly, at the same time defining the collective subject that will bring
this aspiration to fruition: the working people.
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1. MORE MARKET, LESS STATE

One of the great defeats that humanity has recently suffered has been its acceptance, almost
without theoretical resistance, of the thesis that states are no longer necessary for peoples.
We were made to believe that capitalism had undergone such change over the second half
of the twentieth century that the "old states" were not only becoming obsolete but had
turned into an obstacle to the rapid expansion of the civilising benefits of the so-called "world
market". We were told that anything that slowed down that expansion would stand in the
way of so-called world democratic "governance", a new form of administration based on
"permanent dialogue" between international institutions, between the "great agencies" and,
to cut a long story short, between the "democratic forces of world civil society".

In the nineties, the idea of "going beyond the state" was reinforced by the politicalised
media industry through the cosmopolitan mindset and the "citizen of the world" cliché which
was swallowed by part of the anti-globalisation movement. The USRR had imploded, the
People's Republic or China was turning to capitalism, the "war of civilisations" made it urgent
to "unite the West", cradle and guardian of the democratic values threatened by "Islamic
terrorism", while "humanitarian interventions" with the UN's seal of approval in defence of
"human rights" in other countries were a further argument in support of the thesis that the
states had run out of steam and it was urgent to establish world "governance" once and for
all.

A part of the Left never fully believed this explanation but accepted it in part, in the belief
that a "democratic European Union" would serve as a counterbalance to the US's "excesses"
and develop a policy that respected human rights. Thus the myth was spread about of a
"supra-state" that would assimilate the best traditions of the old ones and develop new ones
capable of controlling the risks of "financial globalisation" and enhancing its benefits. Many
reformist organisations of the weaker European states and even of nationally oppressed
peoples found here both a justification of their silent or public surrender of a growing portion
of their economic and political sovereignty, accepting a reduction of their state's formal
independence; and, in the case of stateless nations, the surrender of the right to
independence and to their own state since, or so it was said, "European integration" meant
having a mini-state forming part of a larger state that respected minorities.

The real problem is qualitatively more brutal, namely, the chaotic velocity of the laws of
equalisation payments, centralisation and concentration of capital within a world context
characterised by a crisis of excess superproduction and a fall in the average rate of profits,
especially in the primary sector or production of the means of production because the world
purchasing capacity was able to absorb less and less manufactured goods on a massive scale.
Under the pressure of this inherent contradiction of the capitalist system, the huge amounts
of surplus excess capital, much of it from petrodollars, from debts paid by impoverished
countries, from the growing submerged economy, from narco-capitalism, not to mention
capital no longer willing to invest in traditional industry and its corresponding services; this
immense and growing mass of money took up once more its traditional route, throwing itself
into a frenzy of financial speculation in the quest for quick profits.

2. TEN GOLDEN RULES OF IMPERIALISM

The imperialist states played a key role in facilitating this traditional route. We can sum it up
as the imposition of the ten points of the Washington Consensus developed at the end of
1989 and re-adapted in 1993. For these ten golden rules to work perfectly, it was essential
that small and medium-sized states should admit to their inability to surf the world market
and also for the big states to carry out fargoing internal reforms:
 202

1) No more deficits in public spending, with the state refraining from attempting to run
the economy beyond the absolutely necessary, giving preference to private profit. 2) No
more deficits in spending on basic social services, which should be privatised. 3) Revert
progressive changes in the tax system, to benefit the bourgeoisie. 4) No state control over
interest rates to give complete freedom to financial interests. 5) Establish exchange rates
that favour freedom of the markets. 6) Less state protection of trade, by eliminating
customs controls. 7) Liberalization of foreign investment. 8) Privatization of state
monopolies and public enterprises. 9) Deregulation of markets. 10) Protection of bourgeois
property.

The ten golden rules imply the de facto subordination of weak, impoverished states to
the imperialist ones, with medium-sized states surrendering control of their portion of
political and economic sovereignty to the big ones. They also entail fargoing changes in
four classical areas of the form of state that was predominant up until the late twentieth
century, and these changes explain the fact that the thesis of de facto subordination, drawn
from the Marxist critique of the bourgeois economy, is applicable to the effect of
imperialism on impoverished and weakened states which choose not to stand up to the big
states because their ruling classes are not interested in getting involved in anti-imperialist
wars of resistance. These are:

2) No more public services paid for by the state — services which ensure the
reproduction of the work force in accordance with the needs of the "national bourgeoisie"
and some degree of control over and integration of the exploited classes to mollify their
exploitation. 2) No more financial and budgetary sovereignty, which was one of the
strategic demands of every bourgeois revolution and one of the decisive gains upon which
their military independence depended. 3) No more economic sovereignty based on a
state-level scope for production and accumulation, now to be done away with by free
entry, exit and plundering by foreign capital. 4) No more specific independence of the
state as such, which is forced to privatise its own resources which underpin its viability, such
as state monopolies and public enterprises.

This four-pronged destruction of the classical form of the state affects the latter's two
historically defining elements. One of these consists of the economic borders which stake
out the state's accumulation space and the national currency issued by the state which
expresses, both materially and symbolically, the fusion of capital and territory in the
concept of bourgeois nationalism entertained by the ruling class and the block of society
which supports it. With the virtual disappearance of economic borders except for a few
aspects of secondary importance comes the demise of one of the historical foundations of
this form of state. The other is territorial military independence, which evaporates once the
"national armed forces" have been subordinated to other forces of higher rank — NATO
— and a drastic watering down of the state's independent industrial and military capability,
given the privatization of its monopolies in the industrial-military complex. These two
concessions do away with the traditional economic and military kernel of national
independence and bring about integration of the old states into a new and stronger higher
form of state which swallows them whole, turning them into its subordinate parts.

3. STRENGTHENING THE BOURGEOIS STATE

The Washington Consensus represented a watershed, not just in the viability of
impoverished, dependent states but in the so-called "national problem" itself. Never
before had western imperialism expressed its approach to this in such a straightforward
way, with a policy aimed at consolidating its long-term world domination, like that
 203

espoused at Bretton Wood at the end of WW2, and still earlier in Woodrow Wilson's
Fourteen Points in 1918.

Thus a crucial question remains with regard to imperialism's strengthening of the

attributes of the state, with all its shortcomings. This is the last of the ten golden rules: the
protection of private property, i.e. an increase of state violence in all its forms, not just
physical force but also psychological, cultural or pre-emptive forms, among others. The
effectiveness of the imperialist strategy summed up in these ten points depends in the last
resort on thorough application of this tenth point.

Since the summer of 2007 if not earlier, this point has become the single basis of
imperialist policy to protect its property at the expense of the weakest parts of the states'
bourgeoisies, those which have been most debilitated, and basically of all working people,
with special forfeits for oppressed peoples, those of us who lack a state of our own with
which to defend ourselves by means of a different kind of socioeconomic policy.

But the very gravity of the crisis is provoking some secondary state bourgeoisies to
resort to forms of protectionism that come into partial conflict with the Washington
Consensus, and there is a gradual increase of alternative international relations that are
different from those which have existed since 1944-46 when the US set going the Bretton
Wood strategy. One of the contradictions that is being exacerbated more than any other is
the one that is coming to a head between the imperialist insistence on weakening the
states and trying to stop new states from coming into being other than instrumental states,
and the growing trend of the peoples in the double sense of strengthening their states by
reducing the power of their ruling classes and the trend of oppressed nations to create
their own states at long last.

Instrumental states are those that are supported by imperialism using the old
precapitalist tactic of creating buffer states, allied states or something of that sort which
serve as military bases in order to be prepared for possible wars. These were, and are,
dependent, colonised states, with no prospect for the future unless a force emerges from
within them which advances towards independence, overthrowing imperialism and its
"inside people". The instrumental states have no axe to grind with the Washington
Consensus, for which they are useful as regional reinforcements for the protection of
bourgeois property. This is not the first time in history that the hegemonic powers
manipulate and twist peoples' complex, subjective universes so as to force the creation of
artificial states in order to sidetrack, paralyse and/or annihilate demands that are
unacceptable to the ruling blocks. Anthropology is a "social science" that lends itself
particularly well to the justification of these and other devious manoeuvres.

We the working nations who are denied our state need to be aware of the wide range
and versatility of the tactics of imperialism to strengthen its power, even going so far as to
create puppet states if need be. But in the Basque state, this option would meet with head-
on resistance from the Spanish and French states, and this would generate anti-imperialist
contradictions the discussion of which would lie outside our scope here. Moreover, we
cannot sit around with our arms folded hoping that that will be the solution to our
problems, repeating the collaborationist passivity of the Basque bourgeoisie under Franco.

4. AUTONOMOUS FRAMEWORK OF CLASS STRUGGLE

Capitalist globalisation has gradually generated more and more national resistance, often
leading to failures, yet weak states and peoples have had no option but to adapt to the
demands for concentration and centralisation of capital or to resist, affirming their
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sovereignty or their struggle for independence. With the increased pressure on national
rights, the response tended to adopt more radical forms of expression, progressing from
the defence of rights to a fight for independence which is no longer led by a part of the
propertied classes but comes to be supported by a large proportion of the whole
population, perhaps including the peasants at first and later the broad masses within which
the working class comes to play an ever greater role.

In the qualitative transformation from a mobilisation for a general, democratic right into
a struggle for satisfaction of a need for independence through the achievement of a state
of one's own, this dialectic of right and need is a response to increased imperialist pressure
and the abandonment of consistent defence of the nation by part of the propertied classes
who end up entering into some kind of collaboration with imperialism. Operating at the
bottom of this qualitative transformation of right into need is the people's attainment of an
awareness that its struggle takes place within something that is defined as an autonomous
framework of class struggle, that is, in a different historical context, in content and form, to
that of the state which oppresses it as a nation.

The attainment of national awareness and a clear theoretical vision of the need for
one's own state is also crystalised in the discovery that this struggle takes place within a
different context from others, in a material and symbolic, linguistic and cultural, political
and socioeconomic framework which displays qualitative differences from that of the
dominant state. It is referred to as the autonomous framework of class struggle which is
differentiated from others by the following contents and forms:

1) National oppression and the non-existence of one's own state of the local
bourgeoisie which exploits the working people in that autonomous framework, which
means that it must depend on the occupying state. The lack of a state in tune with a
national consciousness that has been proven as an objective force creates a reality that
stands in full view of anybody studying that people.

2) The historical practice not only of national resistence to outside attacks but also its
capacity to organise itself to resist them in the harshest of conditions, particularly and most
importantly its ability to create from scratch truly operative working states which have
enjoyed majority popular support and have only disappeared after a foreign military
invasion. The contrast between a remote past in which there existed some form of state
and the present in which that right is forbidden by force is proof of the existence of a
differentiated historical reality.

3) The existence, proven by the struggle of generations, that this people has different
rhythms, forms and contents of self-organisation and resistence from those that exist in the
occupying state. Those contents, forms and rhythms derive from a collective memory of
self-organisation formed over generations, which has penetrated folk culture and is
manifested in a myriad ways in a people's collective life, in its holidays, in it markets, in the
way people work and the way they defend their rights.

4) The long-demonstrated ability to bring together different social sectors and forces
around basic common demands related to a feeling of nationhood, such as language and
culture, amnesty for political prisoners or democratic rights, feminism, ecology, sports etc.,
that is, the so-called "grassroots movements". That is to say, there exists a fundamental
popular identity which takes on certain elementary demands independently of social,
cultural and political differences which make sense in any capitalist society.

5) The existence of a broad workers' and trade union movement which takes on the
defence of national rights as something inseparable from union action and class struggle.
The existence of a self-awareness of the working people in which national identity is a
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defining component is a decisive factor in the material foundation of the autonomous

framework of the class struggle. The mere existence of a self-awareness of the working
class per se does not prove this because it does not necessarily imply the decisive
subjective factor, i.e. the sociopolitical and national awareness which sustains in theory and
practice the need for independence.

6) The existence of international recognition that this oppressed people is different

from others, with plainly visible marks of identity and a clearly-defined consciousness that
has been demonstrated through decades, nay centuries, of self-affirmation. The
international community, and especially its educated, progressive and left-wing elements,
acknowledge the existence of a people with self-awareness when they learn of its history
and its present.

This is not a complete list and the order in which the items are listed need not be
assigned a strict significance, because each specific people requires its own analysis, but I
think it gives a general idea with at least some validity. The fusion of the six points takes
place in the collective practice of the oppressed nation and in each period of its life some
of them take on more importance than the others, depending on the situation. But a
glance at history shows that there are two basic things: the key importance of a people's
self-awareness, and the bearing of such an awareness, always, on a belief in the need for its
own national power, the most coherent expression of which is an independent state.

The need for a Basque state is explained by a double but internally integrated
argument: for one thing, as the right and need to survive as a people in the present phase
of capitalism; and for another, as the real outcome of the internal logic of the autonomous
framework of class struggle. This is a single argument divided into two complementary
reasons because both converge on the same target of a Basque state, coming from two
different spheres of the same character of an oppressed people. The right and need that
Euskal Herria possesses and is subject to as a nation is a general, abstract need of all
oppressed peoples regardless of whether they wish to exercise it or not. Furthermore, the
socioeconomic, political and cultural (etc.) realization of that general right and need in
Basque conditions is the historically demonstrated fact that Euskal Herria is a specific
context of national liberation struggle, an autonomous framework of class struggle.

The general right to self-determination pertains to a certain level of abstraction, but

without socioeconomic or political content, which can only be produced by the need felt
by a working people for it to build its state itself. If we limit our response to the first part of
the argument, the general and abstract part, we will be unable to fill out the pro-
independence project with content by cancelling it out as a specific, reasoned, viable
argument capable of convincing broad sectors and bringing together the democratic and
progressive forces necessary to make the leap from need to freedom. But if we limit
ourselves to the second, we shall not activate the mobilising and legitimising potential that
it has as such, the right of any people to self-determination and national independence if it
freely decides that it wishes it.

5. REVOLUTION AND/OR REFORM

Any oppressed nation needing to achieve independent statehood to survive in a world of
global capitalism is immediately confronted by a unified strategy which, although facing
increasing resistance, is not getting any weaker, but on the contrary becomes stronger and
tougher as time goes by, as is evidenced by the intense process of centralisation and the
concentration of economic and political power that is taking place in the European Union
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with the excuse of the crisis of the euro, where the imperialist ten golden rules are being
applied in the way that suits the hegemonic powers.

Situated where we are in our immediate context and situation, primarily Spain's and
Europe's economic crisis, we must affirm that there cannot be a Basque state without fiscal
independence and without safeguarding its rights and the control of its economy. I have
dwelt on the Washington Consensus strategy as much as I have because it tells us what we
should not accept, it pins down the imperialist premises that we must not bow down to
because if we do, we will be a controlled state without sufficient resources of our own to
develop progressive policies in all aspects, basically those aimed at strengthening the
hegemony of the working people.

Once we know what we must not under any pretext give in on, the next step is to know
how to get started right now building a pre-statehood strategy, in present-day conditions,
fully conscious that the socioeconomic crisis is going to get worse; the decadence of the
Spanish state within the imperialist pecking order is going to carry on and its oppressive
nationalism will grow in virulence to try to compensate for its loss of ground; the French
state, while not hit by such a serious crisis as Spain, has its own internal problems, on
account of which both states are going to mobilise their resources of all kinds in Euskal
Herria.

What we are looking at here is the need to move forward in practical and theoretical
conquests, trying things out and anticipating in the present what our life could be like if we
get a Basque state. We must make it clear from the very start that such advances are always
going to be full of uncertainties and vulnerable to attack, subjected to growing opposition
and aggression by the Spanish state and enemies at home. I insist that the survival of these
conquests will depend on a struggle that will have to go on escalating in breadth and
intensity, without respite, with no wavering, never halting in its progress, and if we ever start
to believe the promises of the Spanish state then we will be done for.

At this point we need to keep in mind the dialectic between revolution and reform, and
the antagonism between reform or revolution. The former explains that we always advance
and look towards revolution, towards socialism, and that the steps we take in the small
reforms that we conquer are shaky advances the only purpose of which is to broaden the
emancipating forces, their legitimacy and roots, teaching by example, through the material
and moral improvement obtained by means of that particular conquest. The dialectic
between revolution and reform shows that the most important thing is to encompass
radical reforms in the experience of socialism, of revolution. By radical reform I mean
reform which, in its specific area, whatever that may be, makes it possible to get to the root
cause of the oppression to which we are subjected and from which we suffer in that
particular area, whether it is a business, a university, a town or whatever it may be, where it
is possible to increase the emancipating force by knowing how to turn the legal space that
has been conquered against the powers that be, opening up new expectations and
aspirations, new advances, but always through struggle and oriented to the final victory.

On the other hand, the antagonism between reform or revolution refers to the idea
that the gains made are achieved with the intention of stopping there rather than allowing
them to become a springboard towards new conquests, that they should not be radical
reforms that challenge the system but normalising ones which serve to demonstrate that
the existing system can be reformed from within, through its laws, given patience. Thus in
practice reform becomes the end of the struggle, the end of the process of raising
consciousness, which cannot advance any further because once its objective is achieved
the fight ends and the mobilisation comes to a halt, content merely to defend the ground
that has been taken, and to do so only by means of the laws allowed by the power of the
exploiting party.
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6. PREFIGURING THE BASQUE STATE

Anticipation of the nature of the future state must begin at the present time when radical
conquests are being made through at least four major areas: recovery of rights and
freedoms, Basque culture and identity, the socioeconomic field, and media of
communication and awareness building. There is a synergy and interaction between all
four which cannot be analysed here.

Regarding national and democratic rights and freedoms, the spaces of power
conquered should promote and demand the return to Euskal Herria of people who have
been forced into exile by repression, the final step in the resolution of violent conflict and
all-round demilitarisation, including the municipal police forces which should be civil
entities in every sense of the word. For the sake of democratic "hygiene", the so-called
"private security" business should also be outlawed. Torture and mistreatment of people in
custody, police "abuse" and corruption must be forbidden and strictly penalised. We also
need to think about the court system and the prisons, and how to create a justice system
subject to being revoked by the people in a democratic manner. This overall policy must
clearly anticipate the future policy of democratic rights to be guaranteed and practised by
the future Basque state.

At the same time, we must demand the reinstatement of all the rights and freedoms
that have been curtailed by the ruling power, and organise debates and mobilisations
about the need to move forward towards socialist democracy in Euskal Herria, with
emphasis on the relationship between democracy and state, between people's direct
action and socialist law, between popular, trade union and social movements, as a power
of the masses ensuring from the outside that the state fulfils and defends the popular will,
and most importantly, doesn't start to cut itself off, becoming isolated, separated and
bureaucratic. It is urgent to table the issue of the state being "like glass": transparent and
cheap in every aspect except for the essential tasks of Basque national security, guaranteed
by a people armed. And without a doubt in these collective contemplations the question
that comes first and last must always be present, the question of the nature of property as
given by the answer to the question: Who does Euskal Herria belong to, to the working
people or to Franco-Spanish imperialism?

As regards the cultural and language policy that prefigures the future, the conquered
spaces of power must advance in a Basque, pro-Basque-language "cultural revolution"
insofar as that is possible in the present circumstances, consisting of understanding that
popular culture is the production and administration of material and symbolic values freely
produced by the people; regarding their gradual demercantilisation and
depatriarcalisation; regarding the step-by-step reunification of intellectual and manual
work; regarding the importance of historical and military memory in the progressive
components of popular culture; regarding the living traditions in popular culture of
everything connected with "common property" and pre-bougeois democratic practices,
community work, the assembly, the commune, the council, mutual aid, cooperation, the
elizate, and the adaptation of these traditions to present conditions.

The present (re)construction of a progressive, popular Basque national identity is

inseparable form the prefiguration of the state for one indisputable reason: history shows
that each national identity is different, each (re)constructs itself or dies out by playing out
the people's internal contradictions and the external pressures and attacks to which it is
subjected; and history also shows that in this permanent creative or destructive tension it is
vital for the people to dispose of some form of state which either supports or obstructs
such (re)construction of the collective identity, divided as long as there exists internal social
exploitation and always threatened by external invasions as long as there exists some form
of imperialism. For a people without a centralised and centralising power — without a state
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— it is very difficult to enrich its identity and above all to resist the pressures of those who
do have such support from their own state apparatuses.

The limitations of all kinds that this "cultural revolution" will have to overcome little by
little in the present context will not only originate from the French and Spanish states and
the Basque reactionary and conservative forces, but from irrational resistances in the
population and also from a large part of the pro-independence, socialist militants. Likewise,
the "authoritarian chains" that tie us to the past will also stand in the way of much of the
(re)construction of identity based on updating the progressive components of our popular
culture. The reactionary, chauvinist, sexist or religious (inter alia) components and
resistance of different kinds to the "cultural revolution" can only be overcome through the
so-called "pleasure of subversion" which consists of the vital gratification that is obtained
day by day when one senses how life tends to get better through every kind of praxis and
conquests within a context that remains exploitative and unjust.

The constant awareness that today's achievements are a small but valid basis for our
future independence as a state, our socialism to come; this presence of our tomorrow in
our today multiplies the "pleasure of subversion", most particularly when, starting from the
conquered powers, one practises a pedagogical task of "politicisation of privacy". We
must keep up the progress in overcoming "invisible" oppressions and exploitations in the
patriarchal, bourgeois family, in sentimental, affective and/or sexual relations, in labour
relations, making available to whovever desires them the means for beginning to change
the way we live, encouraging spaces of coexistence, communes or other family relations
than the patriarchal and bourgeois, other sexualities, encouraging artistic and intellectual
creation within urban design in order to facilitate collective and interpersonal
communication if wished, getting rid of selfish, repressed and repressive individualilsm. The
"politicisation of privacy" is one of the best ways to prefigure a non-bourgeois state.

With respect to socioeconomic prefiguration one must begin by demanding that those
economically and politically responsible for the present crisis should be investigated, tried
and imprisoned. With this massively supported demand, we are giving an idea, in the here
and now, of what laws in the future Basque state should be like. This example allows us to
move on to other matters directly related to the crisis and its effects such as, for example,
laws for democratic control of the banks and financial engineering, laws on worker control
of companies, laws on control of the flight of capital and submerged and criminal
economies, and so on, so that those engaged in bourgeois piracy begin to realise that
their impunity is nearing its end.

But these and other examples should be based on real conquests which accelerate
radical reforms such as encouragement through public funds of alternative forms of
production, producer and consumer cooperatives, social and public work pools, reduction
of working hours so that everyone can work, sabbaticals and voluntary rotation of jobs,
swap marts and fair markets, time banks and land banks, or promotion of other publicly
backed forms of currency. The goal is a rapid reduction of the unemployment rate, job
insecurity and work exploitation time in order to increase free time which can be used for
political and cultural action.

It is also necessary to promote the recovery of company premises and of homes that
stand abandoned or closed to create a public pool of publicly backed low-rent homes and
premises, and expropriation policies for buildings and living units whose owners refuse to
put them to public use, as part of a necessary strategy of socialisation of the land, doing
away with private land ownership. To push forward with these and other measures,
progressive, direct fiscal reforms must be implemented to expand public services and
companies with official funding, laws that strengthen social and union rights and diminish
those of the bourgeoisie, investment in research and development, subsidies for the petit-
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bourgeoisie to assist innovation and hiring, promotion of endogenous development and

the green economy, a search for alternative international markets, international relations
based on reciprocity and disconnection, and many other things besides.

Finally, communication policy must be characterised, based on the thesis of

prefiguration of the state that we need, by acknowledgment of a qualitative difference
from the bougeois idea of communication which claims to be neutral and impartial,
objective and unbiased, when it is everything but that. For national liberation in an
autonomous framework of class struggle communication must incorporate critical training,
contextualised information and means of popular response and interactivity so that people
can contribute their own decisive, enriching experiences. To do this, the conquered spaces
of power, the radical reforms, must create information, training and discussion networks
that are horizontal and open.

One of the features of this system should be that it allows free access to the real state
of public accounts, the bank system and companies, the state apparatus and all the
institutions connected with production, public spending, subsidies and aid, the financial
system, politics etc.; these institutions will have an obligation to be transparent. What we
are seeking is for the people to have access to knowledge, free of bureaucratic limitations
or tricks, about the real state of public affairs, the res publica. Defending the popular right
and need for transparency and knowledge and prohibiting the bourgeois right to practice
fraud, double or triple accounting and bureaucratic secret, is a decisive step towards a
state that will be open to the people.

7. ALL-
ALL -ROUND SOCIAL SELF-
SELF- MANAGEMENT
I must point out that these and other practices are not socialist in and of themselves but
they do prefigure some of the basic characteristics of a socialist state, although the decisive
question of the nature of property — capitalist or socialist — will remain unresolved
because we have not advanced qualitatively in the revolutionary process. It should be
borne in mind that the conquests referred to above should be made while still within the
framework of bourgeois, French/Spanish domination. For this reason they will be
conquests that are still subject to more or less desperate counter-offensives by the Basque
ruling class and the states by which it is protected.

Thus we are talking about the class struggle's tendency towards radicalisation within
Euskal Herria and the liberation struggle against the two states, that is, the increasing
importance of the autonomous framework of class struggle as we have seen above, hence
the growing popularity of the demand for a Basque state. To the extent that the working
people see and feel that they can improve their daily life by increasing their spaces of
counter-power, double power and people's power, to that extent the people will wonder
why it is not advancing further in that direction, why those conquests are not extended to
the whole of Basque society. The experience acquired will progressively sharpen the
awareness of the right to and need for a state, especially if the Basque national Left acts
within the people as an organised force facilitating the rapid passage from awareness-in-
oneself to awareness-for-oneself.

Here three debates emerge that are vitally connected to the prefiguration of the state:
the definition of the revolutionary subject, in our case the working people; their relationship
to the nationalist Left as a vanguard organisation; and hence, the popular hegemony
necessary to include the petit-bourgeoisie and other sectors in the building of the Basque
state. A triple debate which has being going on since the first half of the nineteenth century
and which, in Euskal Herria, is insoluble when separated from the theory of the
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autonomous framework of class struggle. All attempts to solve it by applying bookish

dogmatism mechanically imported from foreign processes, with no critical adaptation to
the Basque situation, have met with failure. The Basque nationalist Left updated the
concept of the working people to our conditions, maintaining its valid essence and
adapting its form to Basque capitalism and our liberation struggle.

The concept of the working people is what is defined as a "flexible concept" at the
basic centre of which the working class appears just as it exists in present-day capitalism;
with a clear tendency towards growing class national feeling and its awareness-for-itself.
Next, in a second, intermediate sphere, the exploited masses act: those aware of the
insecurity in their lives, the fringes of society and the so-called impoverished middle
classes, with various degrees of class national consciousness, with pro-independence, pro-
sovereignty and democratic feelings, with a tendency to be radicalized by the effect of the
crisis. Lastly, in the outer sphere, are the broad sectors of the people, self-exploited,
members of the liberal professions and the petit-bourgeoisie on the brink of proletarisation
who, even though they exploit a small number of employees, have an inter-class national
consciousness, not a reactionary one.

They, and no one else, are the subject of the liberation struggle, who gradually learn
the basic methods of all-round social planning and management, without whose
contribution it is impossible to create a non-bourgeois, workers', people's state. And within
this self-aware collective subject the pro-independence socialist Basque Left, which was
born of and lives within them, plays an essential internal part. This is also where those who
deny the autonomous framework of class struggle get it hopelessly wrong, as do those
who formally accept it but interpret it in terms of their dogmatic thesis outside the realm of
Basque reality.

The concept of "hegemony" admits different interpretations depending on one's

political strategy. Hegemony is a process of agglutination of democratic, progressive and
pro-sovereignty forces that come to understand, on the basis of events, in the course of
their struggle, that the independence movement of the working people and their model of
state are the only alternative for Euskal Herria and that it is therefore necessary to carry
further and develop more fully a convergence of forces aimed towards this end. Under the
devastating crisis, the petit-bourgeoisie, the liberal professions, the "middle classes" and
so on are being subjected to socioeconomic aggression by the measures of the big
bourgeoisie. The hegemony of the working people must offer them alternatives permitting
local, regional and national integration, depending on the state of progress of the
liberation process, but always within a democratically planned system that is essential for
socialism.

While this is important, the real key point of these experiences of progress towards a
state is collectively learning about social self-management of the working people, learning
in practice how to plan socioeconomically, politically, culturally, in ways ranging from small
and medium-size radical reforms oriented to the creation of the state and progress towards
socialist independence. All-round social self-management will come with socialism and it
will be the practice of the masses that knows how to administer the state in an affordable,
effective, anti-bureaucratic, horizontal way, preparing for their ultimate conscious self-
extinction. Self-management must be learnt in practice, there is no alternative, and the
methods and the conquests proposed are the only existing learning method, in
conjunction, always, with that of the extension of democracy and the radical reduction of
exploited, waged working time.