Spanish Prime Minister Dan Kitwood/Getty Images

Centrifugal and Centripetal Forces on Economic Areas

The flurry of secessionist around the world today raises important questions about optimal political and economic arrangements. But if there is any clear takeaway, it is that "optimal" is a moving target: good governance entails adaptability to constantly changing circumstances and accommodation of diversity.

STANFORD – Several years ago, I predicted that there would be a tectonic shift toward devolution, secession, and independence around the world, owing to the failure of political institutions to manage economic, cultural, ethnic, and religious differences.

Supranational economic and political institutions were clearly generating a backlash, as they concentrated more power in central governments. Citizens in many countries started to feel as though their sovereignty had been eroded. And they worried that the costs of increasing immigration were too high, given the slow recovery from the Great Recession, weak productivity growth, and labor’s declining share of income.

Since then, the United Kingdom has decided to withdraw from the European Union. “Divorce” discussions are now underway to determine how much the British will pay the EU, and what future trade relations will look like. The process has not been easy, because EU negotiators are worried that if the exit terms are too generous, other member states might follow the UK out of the bloc.

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