Could Vermont Survive Economically as an Independent Republic?

One of the questions asked most often about the Vermont independence movement is whether a tiny state like Vermont with a population of only 625,000 could possibly survive economically as an independent republic? We believe that the answer is decidedly yes: not only would Vermont survive, but would thrive.

With a gross state product of around $25 billion, Vermont has the smallest economy of any of the fifty states. Its per capita income of approximately $35,000 places it right in the middle of the American states. Only Wyoming has a smaller population.

Vermont’s size does not in itself pose an economic problem. Few people realize that of the 200 or so countries in the world, nearly fifty of these have populations that are smaller than Vermont’s. Some of them include Andorra, Aruba, The Bahamas, Belize, Brunei, Grenada, Kiribati, Malta, Qatar, St. Lucia, and Tonga.

Luxembourg, Liechtenstein, Bermuda, and Iceland, four of the ten richest countries in the world — each has a smaller population than Vermont and a higher per capita income. San Marino and Monaco are two other wealthy countries that are smaller than Vermont yet have comparable income levels.

Some claim that Vermont is so dependent on the federal government financially that it could never make it on its own. This simply is not true. For every $1.00 Vermonters pay to the U.S. government in taxes, they get back on average $1.08. This amounts to about $300 million annually. This is not a lot of money when you consider that many federal projects come with all sorts of strings attached and with restrictions as to how the funds may actually be used. They often oblige a state to commit its own funds to a project even though it may be of little benefit to the state. The No Child Left Behind Act is an example of such a program.

A question raised frequently by Vermonters concerning the economic implications of secession is, “What about Social Security and Medicare?” If Social Security remains intact, then the U.S. government has a contractual obligation to pay recipients according to the prevailing payment schedule, no matter where they happen to live. That is, whether you live in England or the independent republic of Vermont, you are still entitled to receive the benefits which you have earned. Of course, the long-term future of Social Security under the neocon Mafia remains somewhat unclear: there are some who believe that the aim of the neocons is to extricate the U.S. government from Social Security altogether. If that does happen, the future of Social Security benefits for Vermonters becomes a moot point.

Since there are few benefits paid by Medicare for services rendered outside the United States, Medicare recipients might be among the short-term losers if Vermont were to secede from the United States unless Vermont could compensate Medicare recipients for these lost benefits. Indeed, Vermont, like Massachusetts has recently done, would need to invent its own health care system.

Even though most Vermonters are opposed to the war in Iraq and many of the Pentagon’s policies, Vermont’s pro rata share of the annual defense budget at present levels amounts to $1.34 billion dollars. For those who oppose our policies of full spectrum dominance and imperial overstretch, this is a bitter pill to swallow.

Would an independent Vermont necessarily have to have its own standing army or defense capability? Costa Rica, for example, has survived since 1948 without any military force whatsoever. Of the four tiny, wealthy countries previously mentioned, only Luxembourg has a standing army of its own. And its army has only 900 active troops. Liechtenstein has been neutral since 1866 and has no standing army. NATO provides for the military defense of Bermuda and Iceland. If Vermont felt a need for some form of military support to protect itself from attack by the United States it could always appeal to Canada, NATO, or the United Nations for protection.

Some skeptics of Vermont independence equate secession with economic isolationism and ask, “Where will Vermont get its food and its energy, if it secedes?” Presumably from the same sources that it currently does. Extensive trade with countries outside the United States is a very important aspect of the Vermont economy. Imports amount to around $3 billion annually and exports are a little less than that amount. Per capita exports in Vermont are the third highest in the nation behind Washington and Texas. Over 600 firms export nearly twenty-five percent of Vermont’s gross state product, the value of goods and services produced in the state, which is the highest in the nation, and the rate of exports has been growing rapidly in recent years. There is no reason why this pattern should not continue after Vermont splits with the United States. While the U.S. government might try to impose a trade embargo on a seceded Vermont, it seems quite unlikely that Canada would abide by it, since Canada is Vermont’s leading trading partner. Canada never honored the American imposed embargoes on either China or Cuba.

While it is true that Vermont is not self-sufficient, few countries are. For example, the second largest economy in the world, Japan, has only limited supplies of strategic mineral resources and imports most of its food and all of its oil.

A free and independent Vermont could trade with whomever it pleased. It might belong to a trade and economic compact similar to the European Union involving other independent states. Vermont would not necessarily have to have its own currency. For example, tiny Liechtenstein uses the Swiss franc and Ecuador the U.S. dollar. Vermont could simply adopt the Canadian or the U.S. dollar or possibly the currency of Quebec or New York, if either was independent and had its own currency.

With the end of federal taxation in Vermont and the corresponding loss of federal services, of course state income, property, sales, and gasoline taxes will have to be adjusted. But if Montpelier’s tiny state bureaucracy turns out to be more efficient than Washington’s, and it is hard to see how it could fail to be more efficient, even after it grows to fill the needs formerly supplied by federal officials, then the net loss of federal revenue may prove to be a wash.

While those Vermonters who are currently employed by the U.S. government of are dependent on government grants and social welfare payments may incur some temporary inconvenience as Vermont makes the transition to an independent republic, these are short run problems which can easily be addressed by a small and responsive Montpelier based government located less than 150 miles from any place in the entire state. Montpelier is no Washington, D.C.

A free and independent Vermont could also create its own business rules and regulations. If Vermonters grew weary of seeing Wal-Mart drive small, local merchants out of business, they could tell Wal-Mart to pack up and ship out. They could also limit the number of McDonald’s and other fast food restaurants allowed to operate in the state. And to Virginia-based Gannett, Vermont could say that it is simply unacceptable for the state’s largest newspaper to be owned by a megachain located in the suburbs of Washington, D.C.

Total employment in Vermont amounts to about 340,000. However, employment in the three most important sectors of the Vermont economy is relatively evenly balanced with 36,000 employees in manufacturing, 34,000 in tourism, and 32,000 in agriculture.

The family farm still represents the very essence of the Vermont mystique. Not surprisingly, the statue atop the Vermont State House is that of Ceres, the patroness of agriculture, rather than either Vulcan, the patron of manufacturing, or Mercury, who might be loosely construed to be the patron of tourism.

Although Vermont farm income is $650 million dollars, total agri-business income including ice cream, cheese, chocolates, specialty meats, maple sugar houses, and farm tours is estimated to be close to $3 billion. Over 50,000 people are employed in agri-business.

However, there are now only 6,000 farms left in Vermont, of which only 1,000 or so are dairy farms, whereas in 1950 there were over 11,000 dairy farms alone. Globalization, reduced federal milk subsidies, bovine growth hormones, giant corporate farms out West, oversupply, and the rising cost of technology have driven hundreds of Vermont dairy farmers off the land.

Although Vermont farms are small and fairly few in number, they still provide the glue which makes the whole state work. Their importance to the future of Vermont cannot be overstated.

Vermont’s $4 billion tourist industry is strongly influenced by visual images of the countryside sprinkled with red barns, rolling meadows, sugar maples, and black-and-white Holsteins. Values such as independence, self-sufficiency, democracy, resourcefulness, hard work, perseverance, and a strong sense of community can be traced directly to the family farm. Without these values there would be no Vermont.

With the recent spate of manufacturing layoffs in Vermont, some politicians are calling for lower taxes and fewer government regulations affecting business. But, unless Vermont were to reinvent itself as a severely underdeveloped country, within ten years IBM, GE, General Dynamics, and Bombardier will in any case have fled to Alabama or Mississippi, or to some other country such as Brazil, China, Indonesia, or Mexico. Once there are no more tax breaks or business concessions to be had in Vermont, the transnational megacompanies will vanish.

During the post 9/11 recession the Vermont economy fared much better than that of most other states. In part, this is the result of a strategy to make its institutions, environment, and culture more sustainable and less dependent on Washington, corporate America, and global markets. Such a strategy calls for the production of more high-quality, high-value products that can be sold at high prices to upscale, out-of-state customers whose demand is not influenced by the ebb and flow of the global economy. The strategy trades unabashedly on the Vermont mystique, Vermont’s image as a state that is green and clean and produces premium-quality healthy products. For Vermont to survive economically after it achieves independence, it should just keep on doing what it’s been doing so well, just being Vermont.

Physicians Computer Company in Winooski, which sells software to physicians worldwide employs such a strategy quite successfully. So too does Orwell dairy farmer Diane St. Clair, who ships 44 pounds of butter weekly to the nation’s No. 1 restaurant, The French Laundry, located in the Napa Valley, for which she receives $10 a pound. And then there is the Strafford Organic creamery whose premium-quality ice cream costs more than Ben & Jerry’s. Vermont’s 260 certified organic farmers represent more of the same. Custom-made jazz guitars crafted by Brys Instruments under the hardware store in Shelburne sell for between $4,500 and $10,000.

Green Mountain Coffee Roasters is a profitable, human-scale, socially responsible business which walks the talk in terms of environmental integrity and pays its Third World coffee suppliers fair-trade prices to assure a continuous supply of organic coffees. The company’s slogan is “The taste of a better world.” Other premium-quality Vermont products with upscale prices include free-range turkeys, non-plastic tomatoes, drug-free beef, maple syrup, and a variety of specialty products. In recent years, an even-greater number of locally produced quality items have appeared. Many of these products are available at the Shelburne Supermarket and the City Market in Burlington.

The Vermont Department of Agriculture has found that the word “Vermont” on a product’s label yields ten percent greater sales than would otherwise be the case. A product which has been given the so-called “Vermont Seal of Quality” will on average experience yet an additional ten percent sales increase. No one trades more heavily on the Vermont mystique than Ben & Jerry’s.

Why couldn’t Burlington, with its plethora of live music venues and recording studios, become the recorded music capital of New England, attracting regional artists as well as those from Quebec and the Atlantic provinces of Canada? Charles Eller’s recording studio already attracts world-class artists to Vermont. The Northeast Kingdom could become even more of a haven for artists and writers than it already is.

The University of Vermont is well positioned with its new leadership to develop state-of-the-art programs in the management of small farms, small businesses, small towns, small schools, and small hospitals. It could team up with the Vermont Law School to capitalize on the State’s green image.

Many small Vermont companies have a high degree of environmental integrity, engage in participatory management practices, and maintain a high level of social consciousness. These are companies you would not mind having in your own backyard.

The elimination of all federal government rules and regulations affecting business could easily free up a groundswell of entrepreneurial energy precipitating an unprecedented economic boom in Vermont.

According to James Howard Kunstler in The Long Emergency, the American Empire could be on the brink of implosion because of the end of cheap oil. The only way to survive the cheap oil endgame is by becoming “increasingly and intensely local and smaller in scale. As the cost of petrochemical products soars we will be forced to “down-scale and re-scale virtually everything we do and how we do it, from the kind of communities we physically inhabit to the way we grow our food to the way we work and trade the products of our work,” says Kunstler. We will have no other choice than to simplify, downshift, and decentralize our lives and return to small towns, small businesses, small schools, and small communities.

With its small, clean, green, sustainable, socially responsible towns, farms, businesses, and schools, as well as its strong sense of community, tiny Vermont will be uniquely situated not only to survive the cheap oil endgame, but to thrive.

How Washington responds to a Vermont declaration of independence may depend in large part on how Vermont proposes to deal with four economic issues.

First, there is the question of compensation to the United States for government-owned property within the state including land, highways, buildings, and other physical facilities. The federal government might reasonably expect to be compensated for such property by Vermont.

Second, if Vermont decides to leave the Union, some people may prefer not to remain in Vermont. They may opt to move to Florida or some other state which remains in the Union and expect Vermont to pay for their relocation expenses.

Third, there is the question of Vermont’s share of the national debt. For each $5 trillion in federal debt, Vermont’s pro forma share would amount to over $10 billion. Currently the federal debt is approximately $10 trillion. At first blush this number would appear to be quite intimidating, enough to make even the most ardent secessionist step back. If a state were obliged to pay its full share of the national debt as part of its secession price, then how could a state choose the secession option? By allowing the federal debt to grow without limits, have we not created the illusion that secession is completely unaffordable? Sadly, our national debt appears to be part of the glue that holds our nation together.

Fourth, as a crucial counterbalancing factor to the national debt share, a seceding state is not without major bargaining power, since it has a legitimate pro rata claim on all of the assets of the federal government, including land, forests, mineral reserves, waterways, highways, buildings, military bases, military hardware, gold reserves, foreign currency reserves, U.S. government loans, etc. Assuming that the combined assets of the United States have a value in excess of the national debt, which is quite likely, the claim that a state must cover its share of the national debt becomes moot, if giving up its share of assets is seen as an equal trade-off.

Indeed, for bargaining purposes a departing state might actually file a claim for a rebate from the federal government for its share of the positive net worth. The rebate, it could be argued, would cover the cost of the national debt and the costs of government property plus any relocation costs as well. Thus the settlement costs for a departing Vermont might actually be deemed to be zero. But that economic argument would certainly be a delicate one that would need to be made in a careful and rational way.

We believe that it is high time Vermont’s governor and its Legislature assume more responsibility for what is about to happen to our state. The American Empire is going down, and it’s going to drag Vermont kicking and screaming with it. Our nation has embarked on a path of immoral, illegal dominance, death, and destruction. It has become ungovernable, unsustainable, and unfixable.

Whether the result of peak oil, climate change, imperial overstretch, aging infrastructure, an unstable dollar, skyrocketing health care costs, or a highly inequitable distribution of income and wealth, the endgame is imminent. The ship of state is taking on water very fast. Do we go down with the Titanic or do we consider going it alone as an independent republic?

The governor and the Legislature should immediately commission a serious, in-depth study to examine the economic feasibility of Vermont once again becoming an independent republic. The study should address all of the issues raised in this piece but special attention should be devoted to currency, social security, health care, postal service, education, highways, peak oil, energy efficiency, and climate change. The sense of urgency associated with such a study cannot possibly be over emphasized.

Thomas H. Naylor
February 15, 2008