“The dark dry questions are breaking heads.
And what have the red and blue to do
with that dark river in which we swim?"
And what have the red and blue to do
with that dark river in which we swim?"
- Iain Crichton Smith
In case you haven’t heard, the Scottish questions are “Why independence? Why the Union? Who needs to prove what?” People usually get fixated on just one issue – whether fear of new borders, fear of the Euro, fear of losing arms jobs, boo the monarchy, boo the expenses scandal. I've tried to get all pros and cons into view; as a result, this post stretches on. If you refuse to sit through 4000 words of amateur political analysis, please skip to the punchline here.
I was undecided before writing this. This time last year I was dead against independence, on the grounds that nationalism is 1) bullshit and 2) dangerous bullshit. That’s still true, but the first thing to notice is that supporting independence doesn't make you a nationalist. (That sounds obvious, but everyone makes this mistake all the time, e.g. Guardian here.) The second leap to make is that being for independence needn’t entail any hostility to Britain, England or the peoples thereof – just a higher opinion of Holyrood’s potential than Westminster’s. The good arguments for independence are about the state of the UK, not the nature of ‘the Scots’.
The past few weeks have revealed enormous eejits on both sides, and having eejits on your side is a very unpleasant experience. This is the price of having any political opinion (or none).
The burden of proof is on everyone. I've had a hell of a time trying to see clear the economics: both sides distort the issue. But there’s more at stake than economics! If £1000 either way is all that determines your attitude to your governance for all time, then you deserve all the abuse you get about being wee, penny-pinchin and low. Since the economics are somewhat vague, and since the ethnic and ‘historical’ cases for independence are as empty as they are repugnant, most of the question is answered on the back of your predictions about the political and cultural effects of a Yes vote.
The 'Scotland question' breaks into many: the budget question, the currency question, the debt size question, the EU membership question, the defence question, the health question, and so on. I split them further into inherent obstacles to independence (like concerns over the budget balance) and artificial obstacles (like the currency brouhaha, or the threat from Spain). The reason to put less weight on the latter is not because they can’t be very real problems, but because the alternative is to allow arbitrary threats to destroy good options, to let an antagonist pretend that failure was a consequence of the attempt to change matters. ("Look what you made me do.")
I’ve kept my eye on Scottish nationalism, watching and waiting, distrusting it, expecting it to reveal its true dark heart. But it never has. For 25 years, Scottish nationalism has been a civic, social-democratic, multicultural movement. Nationalists have opposed the wars in Iraq and Afghanistan, they opposed Trident. They have openly campaigned for more immigration. … Nationalists promote and engage with the EU. They advocate sustainable energy, land reform, arts funding… the list goes on.
- Iain Banks
Scotland is defo a distinct nation – but identity alone is a poor argument for anything. Who cares if the abstract authority 'Scotland' gets more power, or gets richer? We care about the situation of people, not ideas – and ideas are all a nation is. Rather than Nation, Polity's the thing: the aggregated will of people on the topic of their own lives. Do people living in Scotland want different things from the rUK? Less cruel policies, an actual constitution, something less tangible? There is strong reason to think so.When we had… parliament men o’ our ain, we could aye peeble them wi stanes when they werena gude bairns – but naebdy’s nails can reach the length o’ Lunnon.
- a character of Walter Scott's
- What’s wrong with the UK? A great many of the most important things, by European standards. We’re an extraordinarily unequal society, the seventh worst in the OECD, by income. (And in case you didn’t know, there's evidence that extreme inequality has a more negative effect on health and well-being than some epidemic diseases.) Third worst green energy record in Europe. Sixth–lowest pension in the entire OECD. Fourth-worst wage decline since 2010. Top quartile for size of gender pay gap. Third-highest housing costs. The tax system is stupid. We also seem to be the first country to be investigated by the UN for systematic abuse of the rights of disabled people (austerity, innit). Less straightforwardly, we also tie up billions of pounds in nukes, and punish the poor for the mistakes of the rich. Then there’s the parliamentary process, which is the root of some of this, and deserves its own box.
Evidence: please see links; none of them are from nats, I think.
- What’s wrong with UK politics? Well, there’s no constitution, and this probably does allow heinous bullshit to go unchecked, not least in that Britain isn't inherently committed to any human rights beyond the Magna Carta; parts of the upper house are still medieval, with considerable feudal and religious powers; the royals can legally and covertly impede due process at will; power is still overwhelmingly concentrated in a mostly-hereditary elite; the financial background of our election campaigns is almost as mucky as America’s; the voting system is extremely conservative and props up a fairly corrupt two-party seesaw, and also makes regional balance of power impossible. The two large parties are at the same time homogenised and partisan. (For homogenous, see here for the track record of our most recent "Left" option. For "partisan", we might note that in Britain, coalition governments - the norm in world democracies - are feared and called "hung parliaments".) Westminster also has a second-order problem: the whole system is intensely resistant to change; thus we cannot make new decisions about our decision-making with less than a 30-year run-up, and even then it will fail several times.
Evidence: The above are all matters of public record.
- Does Scotland suffer a democratic deficit? Yeah, sort of. The 2010 result ("more pandas in Scotland than Tory MPs") looks more dramatic than it is (first-past-the-post returned just one Tory MP out of 59 Scottish Westminster seats – yet a Tory government has executive power. (Though let’s not dignify first-past-the-post and mention that they actually got 16% of the vote.) The electoral argument for independence is:
1) Scotland’s voting record shows it to be a distinct polity;Evidence: Mixed but on balance lately yes, 50%.
2) Distinct polities should be allowed to entirely determine their own policies,
3) therefore independence.
- Is Scotland a distinct polity, though? It's ambiguous, I'm afraid. How long does a deficit have to last before it counts? (Little known fact: in 1955, more than half of Scots votes were Tory.) Based on a sense of injustice, I'm going to say that 34 years is enough.
- Would independence make a difference? What policy powers would Holyrood actually gain? It really could change things. British politics change far more slowly than Britain does. Scotland already votes with Proportional Representation, rather than the horrendous First-past-the-Post, so one giant barrier would be overcome immediately. And we could immediately opt out of TTIP's horrendous stealth privatisation of the NHS. And there’s no reason it should suffer from Westminster’s conservatism about Westminster. And if we take the White Paper at all seriously, it says it’ll protect welfare, shift the nukes, shut Dungavel and institute universal free child care. (see below for affordability, though)
- Independence would decentralise power: would this do any good? Localism is a good, simple civic principle: the less distant an authority is from its jurisdiction, the more informed and less arbitrary it's likely to be. (Tories are generally all for decentralisation; I wonder what those cases have in common that this case lacks?)
Evidence: Not much. It makes sense, and would be nice if it were true. But when considering the overall efficiency, consider that localist regions have to duplicate departments, and maybe lose certain economies of scale. And Holyrood is already relatively powerful, and has its own class of racketeering inefficient buggers. (I should stop talking - there's just not enough data. Anyone want to run a regression of population size against Freedom House rank?)
- What will happen to the UK? (The English Scotland question.) Politically, a rightward lurch, and so a Lab-Lib coalition at best in the next election. This will be the sad result of the UK becoming horribly more democratic at the same time as Scotland does (59 fewer seats means more power for each remaining). Could inspire the Welsh nats to try and get out. Economically, energy dependence and a 6-9% cut in headline GDP – though the new gas reserves will hold it up, at the cost of yet more fracking disaster. (But note that this was happening anyway.) Some punitive action? Final thought: Scotland likely to improve, England likely to stabilise after a dark period. (For instance, Ukip's majority demographics - the old, white, uneducated - are on the way down.)
- Isn’t Holyrood just another political class? Same shit, different accent? Yes, but less so. You can compare the class background and gender balance of Westminster (23% women MPs) and Holyrood (34% women, 1.5% nonwhite MSPs) here and here. And, besides: Holyrood is easier to reform than the HoC and HoL.
- Is the devolved union unfair on England? Ah, cunning. Three main sources for the suspicion: 1) Scots are seen to receive more stuff (but this doesn't take into account the oil); 2) tuition fee inequality, of all things, stirred up the most popular dissent against the UK since Thatcherism; 3) our MPs can sort-of vote twice, and on some exclusively English affairs.
Evidence: How likely is it that Thatcherites would prop up something which cost them net billions? (Up-to-date discussion of the rUK's current account here.)
- Is the referendum a matter of Liberation – that is, the human right of national self-determination? (I only ask because James Kelman says so.)The classic independence argument is to gain representation and escape oppression. The UN Charter, 1:1:2: "The Purposes of the United Nations are...To develop friendly relations among nations based on respect for the principle of equal rights and self-determination of peoples..." I'm not convinced by this where no genuine oppression exists. Scotland has the right proportion of Westminster seats, an amount of policy control, and, in the last hundred years, a more than proportionate share of figureheads. So it’s not an existential or colonial thing.
Significance: Low. Who cares about nations in themselves?
- What happened to devo max? Bad things. Both politicians saw that it would win, and colluded to squash it. This may prove to be one of those great booboos in history, for Cameron - his Suez.
- When will we get our republic – actual independence? One thing at a time. Demanding everything supplies us nothing.
- Will Alex Salmond rule forever? Independence parties are often horribly long-reigning (LDPJ, ANC). But even following a Yes, the SNP has to contend with a great many Scottish people’s deep suspicion of Salmond. Most of the Yes voters I’ve talked to aren’t SNP supporters, except insofar as they are the only major party offering proper education, healthcare, anti-anti-immigration, and anti-Trident.
Evidence: Mixed, some cause for concern.
Significance: The raging contempt and fear Salmond inspires would apply to any powerful separatist, so the opinion doesn’t really have content. Witness the things Salmond has been called in mainstream outlets.
- Isn't nationalism toxic? Ethnic nationalism certainly is, and other types can be. (‘Nationalism’ means a bunch of things – 1) a sentiment of shared identity with people who have roughly the same cultural upbringing as you; 2) a political movement based on the idea that the feeling (1) is what makes States legitimate; the bullshit type 3) unreflective loyalty to your ruling state; and the irredeemably bullshit type 4) ethnic nationalism – the idea that only certain white Scots whose parents were certain white Scots are Scots, which no-one with any sense has anything to do with. Also, when you say ‘nationalism’, many people seem to hear 5) ‘supremacism’ – the idea that your people are objectively superior to all other people. But if you’ve ever met any Scots I seriously doubt you’ll be able to think supremacism is the thing at hand.)
However much I think of type 2 nationalism as an odd and creepy mistake, as an historical vehicle for positive reform, nationalism is up there with the greatest: science, organised labour, and feminism. Who would call the ANC a malign force in their country? (OK, until recently.) We call those who support independence on policy grounds civic nationalists. Some of the Yes votes will be emotional ones, born of deluded historical resentment. I think equally many will be 'No' out of deluded Unionist nostalgia - the classic British love of something merely because it is old. Has talking to one another about it grown too boring and violent?
Evidence of toxic Scottishness?: Not much. There are a couple of tiny, ridiculous ultras like Siol nan Gaidheal, but Jacobitism and blood-and-soil Celtic stuff long ago faded to cute symbolism. And, as a community, the Gàidhealtachd are mostly nice romantic lefties. Only about 50% of people even prefer Scottishness as an idea, let alone support ethnic supremacism.
Significance: Low. Even the bigots could be voting the right way for the wrong reasons.
- But I hate the SNP so much . Well, fine: there are plenty of reasons to, what with their fundamentally opportunistic grab-bag of policies, the cuts to corporation tax, helping to shoot down devo max, their proposed monetary union to a volatile toy of speculators, cutting flight tax, their giving in to the UK's shoddy financial regulation. But unlike literally everyone else in power, they're not privatising the health service, education, or the arts, nor have they given in to nasty anti-immigration paranoia. Allowing for the risk of a couple of triumphal terms in office as the public’s reward to them; their share of the electorate will decrease upon independence, because their only distinctive platform will have been served, and Scotland’s voting system makes small parties and regional concerns much more relevant. (That's the idea behind a new political culture: we make the SNP one among several ok options).
Evidence: Your feels.
- But borders are bad, man! In this day and age we should be coming together rather than putting up walls! Very wise-sounding. However, this particular political border will have no reason to limit movement of people - (Scotland needs immigration) - and is actively seeking a stronger EU. Take heart.
- What will happen if we vote no? There have been a number of tasty pledges from the No camp recently (increasing in precise proportion with the Yes share of the polls, duh.) One of the stronger arguments for independence has nothing to do with the merits of the Yes case. It’s just the very simple point that, in the event of a No vote – that is, another 25+ years until the next referendum, and with only one seat in the entire country – the Tories will have absolutely no reason not to pummel Scotland with cuts.
Significance: Save yourself, you fools.
So the real question stands revealed as "Will independence be good for people?" (Not just Scottish people.) Adding up the points marked as ‘medium to highly' significant up there, we get a strong case for independence. (All the Yes campaign needs to argue is that independence is more likely to improve governance than the compromised parties and self-perpetuating institutions of the union are. After that, well, change stimulates change.)
If the aim was total self-determination, then the independence we're offered – same monarchy, same currency, same NATO, same speculative finance – is very far from that. But it might well be a step forward: this means that 1 in 12 British people will have a chance to improve their lot, with little probable loss for the other 92%, except of course loss of face.
(Some melodrama for you: A German friend listened patiently to a rough version of the above, and said, "You really think they will let you secede?" I blustered a little – saying that this is Western Europe! we have the Edinburgh agreement! and all. He replied simply: "Tell that to Ireland.")
- Will the UK drop out of the EU next year? Is that bad? Thanks to protest voters setting the Tories’ agenda, there is a serious risk of it. It would be very bad; Scotland relies on an easy flow of European investment, and gains a lot from the EU. (As does the whole UK, actually, but there’s no reasoning with some people.) More: the departure of Scotland's MPs would make the remaining rUK MPs more likely to leave the EU. (This is the best argument against independence.)
Evidence: Medium-high. UKIP’s startling EU success hasn't subsided much, as was expected all summer up until about yesterday.
Significance: Very high.
- What will happen to Scotland and the EU? Accession or Amendment? There’s actually no precedent for what will happen; both cases require the invention of legal instruments to deal with iScotland. Supposedly Spain would drag their feet so as not to encourage Catalunyan independence, but they have to say that (just as the Westminster parties have to say that they’d reject a Sterling monetary union).
Best case: Rather than invent laws on expelling EU citizens, Scottish membership is fast-tracked via “treaty amendment”. (The main thing putting pressure towards this case is that the EU has to ensuring the status of the ~158,000 foreign EU citizens in Scotland makes me incline to Amendment scenario.) When you combine that pressure with the fact that the post-Yes talks should be Important legal backing for this detailed here.
Worst case: France, Spain, or Belgium block Accession unconditionally (membership votes must be unanimous).
Meh case: A new Accession application is demanded. (Average length: 4 years - though 3 years for already-compliant states, and note the small sample size in that link.) Vetoes from the anti-separatists have to be bought, at some underhand cost or other. Scotland stays in the Union until then. (Depending on how the domestic post-Yes talks go, we might place the date of separation from the UK at the same time as the EU join date.)
A nicer consequence: Scotland should gain twice the MEPs afterward; Scotland has 6 where Ireland has 12, with the same population.
Evidence: Basically none, because all we have is the non-binding, non-legal word of politicians.
Significance: Very high.
- Given globalisation, is there even any such thing as national independence anymore? Ooh, look at you reading a book from the 90s. There is less, but still lots if you have a decent tax base, food security, and energy independence. (Scotland has that last one three times over, incidentally.) All the Scottish parties are for "IndependenceinEurope". So Scotland would integrate hard into Europe. God knows if that'd be enough, or what terms the EU would demand.
- But won’t the UK lose its place on the world stage? For that to be an argument against independence, you have to show that Britain is in general a good force in the world. I leave it to you to judge whether the lethal blessings of Korea '50, Falklands '82, Iraq '91, Kosovo ’99, Sierra Leone ’00, and
Libya ’11* are enough to make Britain losing power projection a bad thing, given Vietnam '45, Mau Mau '52, Iran '53, Suez '56, Lumumba '60, Aden '63, Ireland 4eva, Pinochet 4eva, the handling of Bosnia ’95, Afghanistan '01, and the gigantic atrocity Iraq ’03. (Also basically all of our wars before 1939 (except Napoleon?)? On balance, slightly defanging Britain is a good thing (though that move dishonestly relies on NATO keeping Russia checked).
Evidence: List of modern British conflicts. Though perhaps this is more relevant.
* I have since been convinced that the humanitarian case for bombing was largely fabricated, and that intervention has had a plethora of very bad medium-term effects.
Scotland’s greatest natural resource is, of course, not being near to Russia. (By land.)
- Would Scotland be able to maintain current public spending? So much marsh gas! Like most developed countries at the moment, Scotland runs a budget deficit (that is, that the state spends more than it makes in tax. (The Yes people sometimes say we're really slightly in surplus, citing the oil, and pointing to Scotland's very high per-capita GDP, in a fairly dishonest non-sequitur - deficits depend on the difference in spending vs tax, rather than wealth level alone.) The stats are a little speculative; annual oil revenue does vary a lot. I use the most reliable publication, the Government Expenditure Review Scotland (GERS). Here we go:
- Scottish public spending (2012-3): £65.2bn.
- Actual Scottish tax receipts 2012-3 (if you include 84% of oil revenue): £53.1bn.*
- Prima facie deficit: £12.1bn
- Why this isn't the actual deficit: 1) Last year's oil tax yield was £2bn less than the recent average**; 2) Scotland seems to subsidise UK defence by £0.5-£1.5bn (based on what it spent and what the table at the bottom of this Parliamentary report suggests about what actually accrued to Scottish defence: from 2002 to 2008, £8.26bn of benefit for £15.8bn of contributions. Corroborated in a few sources; p.14 here, the Telegraph here). Not sure if this includes the £400m unwilling contribution for Trident); 3) Scotland's share of border controls is about 0.13bn. They make much of the scrapping the marriage tax-cut, and how inefficient Whitehall is, and how expensive border controls are, but these couldn't amount to more than £1bn. Most of all, though: the UK's debt servicing has sapped around £2bn a year from Scottish taxes (and actually £4bn last year). What is it, then? Well, all those savings but the oil and defence are wholly speculative, but something around £8bn*** could easily be true, and would place Scotland.
* Though 2012 was a bad year for oil prices. Figure should have an error bar of plus or minus £6bn, if you're using it for any other year; oil fluctuates a lot. (Oil tax revenue in 2008-9: between £11.5bn and £12.5bn. 2011-2: £5.5bn to £7.5bn. Again, though, this isn't a dealbreaker because oil is only 15%-20% of tax revenue, and because the fluctuations have never taken Scotland's per-capita revenue below another UK country's in the last 34 years.)
** From BBC chart: (£5bn + 9.3 + 9 + 7.8 + 12.2 + 6 + 8.2 + 11.3 + 6.3bn / 9 = average of £8.3bn per year, and so a £2bn shortfall in 2012-3).
***(£12bn deficit, minus £2bn for an average year's oil yield, minus £1bn for UK defence underspend, minus say £1bn for disproportionate debt servicing. Let's leave out the other interesting claims to be safe.)
- Actual deficit: Doesn't really exist as an object of analysis yet; ask again in two years.
Last point: Scotland's deficit is persistently smaller than the rUK's, and will probably remain so, after the short term; it's just scaremongering to assume that deficits are instantly destructive, or destructive of small countries in particular.
Estimates for the overall initial situation: McCrone (yes but at risk); IFS (no, and a 1% deeper deficit after independence), CIPFA (yes given good fiscal manouevring).
Significance: Very high.
- Scottish public spending (2012-3): £65.2bn.
- Could Scotland afford the SNP's childcare, pension and immigration pledges? Answer is the same as ever: not without decent taxation, of course. (Also assuming we save on guns by entering a strong military union with someone or other.)
- Universal childcare: The SNP didn't actually say any figure, but e.g. Sweden's amazing one costs £11.2bn ("2% of GDP"), or £1150 per capita = £6.1bn for Scotland. (Though note the arguable economic surplus from such programmes.)
- Pensions: SNP ;
- Immigration: False dichotomy, since immigration controls impose extra costs relative to the economic benefits.
- How does Scotland make money? Oil (volatile but only 15% of tax income), finance (a liability built on the American model), whisky (owned by Diageo and Campari), tourism.
- How much oil is left? This is the most obfuscated, but also the most legitimately uncertain question. There's actually a full order of magnitude of uncertainty around what's left (remaining revenue "£120bn to £1.5tn" - geology, innit) but a prudent interval for 'years of oil left' might be 30-40 years (OBR figures, cited here). After that: Scotland has a ridiculous amount of renewables potential, which obviously isn't as marketable, but would be fine if the world gets its finger out about a carbon tax.
- What should we use as money? Sterling formally, Sterling on the sly, the euro, or a New Quid? Frankly, the options aren't great; with the first three, you lose control of monetary issue (and so gain a default risk); with a new Scots pound you have to swallow a largegilt rate hike to get investors interested and leads to either low growth or an import price hike.
- But even if you get Sterling, you'll immediately have lost independence! I actually don't think Sterling union is best, but assertions about that union precluding independence "in any meaningful sense of the word" simply doesn't follow. Even given likely fiscal concessions, Holyrood would still gain full control of taxation, immigration, EU relations, industrial policy, and still opt out of TTIP's NHS marketization. More importantly, it'd be free of Westminster's life-sapping party-seesaw and centuries of accumulated cruft. In the self-same vein: to say "ruled by Brussels" as a necessary consequence of Eurozone membership is melodrama.
- How much debt would we be in? If the UK’s total debt (£1.4tn) were split per capita, we'd take home about minus £115bn, a 78% of Scotch GDP*. This would entail an annual servicing burden of about £3.4bn, assuming interest rates don't freak out for any length of time. (The SNP’s threat to just ignore the national debt was a retaliation over the pound embargo; in practice it would only be funny for a very wee while, because it could make Scotland’s future borrowing expensive. (Though note that markets have since mostly forgiven Iceland, after they failed to honour foreign credit.)
* Scottish GDP (2014): £148bn. (£115bn debt / £148bn GDP = 77.7% debt.)
- How much more will borrowing money cost? New countries never get the highest creditworthiness ratings, because track record. The rest depends largely on the currency we opt for. The 'Big Three' global credit rating agencies disagree: Moody's indicated an "A1" rating as an estimate for iScotland's initial rating, two grades below the UK's current "Aa1" rating. This translates to very roughly a 1% hike which I think translates to a big £1.2bn extra on the annual debt service**. S&P were reticent, but state that AAA* is achievable - i.e. one grade higher than the rUK (p.3 in that link -though if you dig in you'll see they assume a formal Sterling union for that) . As far as I can tell, Fitch haven't published anything, except to say "it won't be AAA".
Evidence: Good; those three agencies have serious performative power in setting markets' disposition toward things.
- AAAAA! The markets! Won't somebody think of the markets! First of all: the market skittishness is another reason to think it'll be too politically expensive for Westminster to reisist a formal Sterling union. But over and above all that mere tactics: it is a seriously bad shout to base your politics on the conservative hysterics of markets. (Example: Iceland wasn't doomed as a result of Icesave; it had a couple of years of unrest.) Fine, we've no choice but to exploit them, good policy will very often not serve them. Sterlingisation (rather than independence) is scaring the market. You know what else scares markets? Proper taxation, regulation, competition, refusal to marketise basic goods - i.e the basis of any government worth the name.
- What will it cost to set up the 'new' government? Contrary to the Treasury’s recent outright lie, about £220m. (Dunleavy says £150m-200m, but notice his report has no mentions of the planning fallacy, nor "overspend", "overshoot", so I'm hedging.)
Evidence: The Dunleavy report.
- Will Scottish businesses flee? Meh? A couple have moved headquarters, and since risk-aversity of this sort always shows its face early, they're likely to be the worst of it. (I imagine this is the logic behind the SNP’s tax cut plan.)
- What about transactions costs? (“The United Kingdom forms a single market of over 60 million people. There are no borders, customs checks, administrative or accounting procedures on the movement of labour, goods or services. ”) This – the new tariffs, customs, quotas – is the main route that retribution from the rUK could flow. The Treasury has estimated the annual costs to UK (iScotland + rUK) at as much as £500m. Luckily, though, an often-overlooked fact about cut-throat economics comes in here: it is just very bad for a country to have an economically depressed neighbour. Rich neighbours visit you, buy your stuff, and don’t export (all that many) violent young men; the UK has an inalienable interest in Scotland succeeding. So things probably won’t become too bad, unless the rUK electorate demand blood. And, again, note that these costs would be self-inflicted economic damage, and so comes well under the "artificial obstacles" rubric.
- Would Scotland tackle inequality any better the UK does? Hard to see how we could do any worse, short of blowing up the HMRC.
Significance: Very high.
- If it had its own currency, could Scotland even bail out its own banks? No - liabilities are 13 times GDP - but nor could the UK, since the combined liabilities of all UK banks is 17 times the whole country's GDP, well beyond any precedented IMF or private liquidity intervention. However, other small countries with their own currencies get by fine, just by regulating their banks properly. The EU will offer some stability, and ideally there would be an oil fund too.
- Could Scotland afford an oil fund? Not at first.
- You’re messing with a system you don’t fully understand! A good general rule – one of the few economics has ever come up with: don't mess with an economy unless you have very good reason and a good idea of what your intervention will do ten steps down the line. But as it happens, we do have good reason; the reasons above; and I think I've shown that the costs will be limited.
A small country may sometimes do better economically if it is independent than as a region of a larger state. Until the recent financial crisis, from which it still suffers, the Republic of Ireland illustrated this. Back in the 1950s Ireland's GDP per head was only about half the UK average; yet by the end of the century it had fully caught up. The ability to tailor economic policies closely to its needs can give a small country a better chance of success than the one-size-fits-all strategies of a larger state. Even if fiscal, monetary and exchange rate policies are constrained by the need to have regard to what is being done in neighbouring states, there is much more freedom to use these policies than is available to a regional economy in a larger state.
- Gavin McCrone
A Sterling monetary union:Finance really isn’t my field, but if my estimate by eye is right, I actually recommend the Euro. That said, I at last understand the cleverness of the SNP's "say 'informal Sterling' over and over unlike they crack" strategy. Westminster may have to cave on currency union, because the political cost of refusing monetary union will be high, due to 1) the market panic over the idea; as Krugman* says, informal union would be terrible for the rUK too, as this week's markets suggest, and 2) the transactions costs ("£500m", when the Treasury are spinning them up) will surely be viewed as self-inflicted economic damage by the likes of the CBI, who quite often get what they want.
- Pros: No setup cost, no transactions costs with rUK (saving £200-500m annually), no gilt hike, and it puts a bound on the volatility of the borrowing and trading price. Some representation in the BoE, so some power. A BoE safety net, with some qualification.
- Cons: Monetary policy will still serve London! The safety net would be limited (English taxpayers would only agree to the one-sided bailouts when the bank failure looked contagious). Price still volatile (since Sterling is a toy for speculators), financial regulation wouldn’t change (since the hefty measures all go through the central bank). Undermines independence from the start - Mark Carney's warning is not at all just spin and despair.
A Scots pound:
- Pros: Sovereignty: actually appropriate monetary policy for the first time ever. (Also, some mad neoliberals reckon a non-currency Quid would be 'free' of meddling monetary policy, and think this would be good.)
- Cons: New currencies trade badly, so Scots borrowing costs rise. The Scotch financial industry would take a hit, because a systemic failure like 2009 couldn’t be bailed out by the state. Still pegged to Sterling, in all probability.
- Pros: No transactions costs with Eurozone. A German safety net (with fiscal strings attached).
- Cons: Loss of macroeconomic control. Bit more volatile than Sterling, safe only as long as the Eurozone grows. Very unpopular among people who only read newspapers.
Sterling without monetary union
- Pros: No setup cost, transactions costs.
- Cons: JESUS NO. No safety net, we hand Westminster enormous economic leverage. There is some suggestion that EU member states can’t use currencies informally, anyway.
* He's right enough on the macroeconomics - but he misses the game theory side (the SNP counter-bluff) entirely.
** My "£3.4bn" debt servicing figure from above assumes the same interest rate as the wider UK (about 3%): £115bn debt times 0.03 a year. If Moody's is right, we might be paying £115bn * 0.04 = £4.6bn.
Evidence: Good, against it being a grave problem.
In heated pub debates, people sometimes try and make a Historical case for independence – “wir bought and sold for English gold” – but if this is phrased as anything other than a moot legal case study, the argument is just dumbass tribalism. There is evidence of some corruption in the original union – but the origins of the thing are irrelevant; we’re talking about what’s wrong now. And what’s wrong now (q.v.) is very different from then (national bankruptcy, outright bribery, military threat, the Alien Act).What is our ‘culture’ made of? Sporranry, alcoholism, and the ludicrous appropriation of the remains of Scotland’s Celtic fringe as national symbol… a sickening militarism… these are the pathetic symbols of an inarticulate people, unable to forge valid correlates of their different experience.
- Tom Nairn
- But I like Britain! Well, it's not going anywhere. It's the UK we propose to leave.
- Will independence ‘give Scotland confidence’? What on earth does it mean to live in a confident country? Will our diplomats make eye contact at last? Will our TV presenters refuse to speak standard English for American guests? Will our capercaillies dance longer? Sure there’d be a short-lived collective buzz, but to base a vote on a more extensive boost reeks of wishful thinking. But! it will give policy-makers confidence; the psychic gains will come, if they come, from better policy, particularly as goes squashing inequalities. But that takes years, and receives no thanks.
Significance: Psychologically, after year one? I've no idea. Politically, legislatively? Absolutely significant.
Evidence: The placebo of National hope has not been much studied, as far as I can tell.
Evidence: None whatsoever; it already is. (Sorry National Collective!) Look what happened to the Scottish novel and poetry after ’79, when there was no Parliament, when Thatcherism was on the march, when the SNP was tiny and ridiculous! It’s just as likely that the loss of “socio-cultural tension” would make art go limp. (“People sang the Ballads not because they were Scottish, but because they were fun. If they still are, they will still be sung”)
Significance: Probably low.
One real opportunity to mature: in an independent country, Scots won't be able to blame the English for their problems any more. (Assuming no retribution...)
**************************************************************Scotland is full of resources, institutionally dense, and culturally defibrillated. All you need to add to that for a half-decent nation-state is popular will. And on that matter we'll soon see. (I suppose it is nationalistic to hope that our nationalism be less venal and destructive than other people’s?)
Once upon a time... the wan green island was split inty twa kingdoms. But no' equal kingdoms, naebdy in their richt mind would insist on that. For the northern kingdom wis cauld and sma'. And the people were low-statured and ignorant and feart o' their lords and poor.
- Liz Lochhead's Corbie
To be frank, the dominant factor in how independent Scotland will do, at first, is whether other countries punish Scotland. (This leads to a funny contradiction: to the extent that you believe the British state is amoral and suboptimal, you’ll be voting Yes – but that very same evidence should make you scared that they’ll punish independence, so you’ll vote No. To break the circle, I suggest you decline to let intimidation determine your future.) But there is reason to think it won't be all that. The strongest conclusion is that independence is unlikely to be worse than the status quo, and has some chance of being a great deal better. That'll do.
Stracathro service station, (c) "Dauvit Horsbroch" (2005)