The SNP leadership and unionist politicians both talk as though if we just adopt the option they favour, Scots will face no uncertainties about the future and no risks. Salmond and Osborne are both stubbornly sticking with their own plan, with no plans on what to do if it doesn’t lead to the results they expect.
After the financial crisis, the Iraq war and the floods, continuing with no plans for different possible outcomes and just sticking to old assumptions will not do fine.
Eliminating risk and uncertainty is impossible, but by having plans prepared for various possibilities we can reduce both.
Scotland and the pound – Or the Euro?
Or its own currency?
Or staying in the UK? Every option brings risks
It’s true that the UK government couldn’t stop an independent Scotland using the pound, but that’s only half the truth. An independent Scotland would inherit its share of the UK’s assets and liabilities. That means it would inherit a share of the UK’s national debt – i.e an independent Scotland would be in debt. True, it would be at most no higher a debt as a percentage of GDP than the UK has.
However the UK has its own currency. If an independent, indebted Scotland didn’t have its own currency it would risk being in the same position as Ireland and Greece were after the financial crisis – forced to beg other governments or the IMF to provide them with pounds. We might face the same harsh terms imposed on Ireland and Greece. If it joined the Euro it might have exactly the same problem.
Scotland could issue its own currency, but if it issued its own currency immediately on independence it would increase the risk of being targeted by currency speculators. There are other options though.
First, keeping using the pound for a few years after independence, before issuing our own currency. We could issue our own currency once the recession caused by the financial crisis has ended, and after uncertainty among businesses and investors over how independence would affect them has become less intense.
Ireland kept using the British pound for many years after independence before issuing its own Irish pound.
Of course lacking our own currency for several years while in debt would restrict what the Scottish government could do until it issued its own currency.
Another option would be to issue our own currency (e.g Scottish Pound) pegged in value to equal to the British pound. We could ban international currency trading of it and large transfers of it outside the country for the first 5 years.
During the Asian financial crisis in the late 90s the IMF advised Asian countries to keep their currency markets open, continue deregulated markets etcetera. The result was disaster for most of them.
Malaysia managed to make the crisis much less bad for it by pegging its currency to the dollar, banning all international currency trading of it and imposing limits on the amount of currency Malaysians could take abroad to stop the run on its currency which was fuelled by speculators.
As with the US and European financial crises the cause was deregulation empowering fraud and speculation.
Some might ask, so why not stick with the pound and stay in the UK to avoid these risks? The pound is no guarantee for economic stability for Scotland or even England though. We had the pound and were in the union and suffered the banking crisis and the recession since it.
In the 1980s an economic boom in the city of London financial sector led the UK government to increase interest rates to double figures during a recession in Scotland and the North of England, whose economies were devastated as a result.
With a government led by a party which gets more than half its donations from banks and hedge funds, UK economic policy continues to be made for the benefit of the banks and hedge funds, not the whole country. So the status quo carries its own risks. Another crisis as bad as the banking crisis could happen at any time.
Independence would provide a chance of regulating Scotland’s financial sector properly, which would be an example UK governments would find it difficult to ignore.
A country’s size doesn’t make it safer from economic crises
Regulation and having its own currency do
So staying in theUK doesn’t guarantee our economic future
Unionists politicians often claim Scotland couldn’t have survived the financial crisis as an independent country, pointing to Iceland, Greece and Ireland as supposed evidence that small countries can’t make it.
This is confusing the causes of the crisis, which was nothing to do with the size of the countries and everything to do with deregulation and in Greece and Ireland’s cases with not having their own currencies.
Norway, which has a population of 5 million – similar to Ireland’s and less than Scotland’s – regulated its banks properly and has its own currency. As a result it didn’t suffer the financial crisis suffered by the UK with over 10 times its population or the US with over 40 times its population, nor did it suffer any recession as a result.
Safe and secure with small government, welfare cuts,
personal debt crises and deregulation?
Welfare cuts and public sector job cuts by successive UK governments of both parties have eroded the welfare state on the false assumption that the market, left to its own devices, will provide employment to all who want it.
The Conservatives in the Coalition government have gone far further than Labour did with this, but most of the “reforms” being carried out under the Conservatives were already being planned under Brown and Blair, even if they might not have taken them to the same extremes.
As a result the number of people reliant on food banks has increased by a factor of 10 in the first 3 years of the Coalition government, many genuinely disabled people are denied enough money to survive. Is that certainty, security and lack of risk?
Neither unionist parties nor the SNP have put forward any plan to deal with the personal debt crisis facing millions of people in the Scotland and the UK, which could also lead to an economic crisis affecting even those who are not in debt as millions go bankrupt and default on their debts.
Neither have either side put forward any serious plan to reverse the growing inequality which, if it’s not changed, will make any economic growth irrelevant as only a tiny minority will benefit from it.
So the unionist claims that staying part of the UK automatically makes Scotland (or any of the rest of the UK’s population) safe and secure is ridiculous.
To even significantly reduce the risks and uncertainties most people live with we need several things. Proper regulation of the financial sector. An end to allowing banks and hedge funds to buy political influence through donations to political parties. Enforcement of anti-monopoly and oligopoly laws. A guaranteed comprehensive welfare state.
The floods in England again show how the minimal government neo-liberal theory backfires. Man-made climate change, cuts to the Environment Agency’s budget and relaxing of planning processes (especially on building on flood plains) led to disaster for thousands - and a government left impotent by its own small government agenda.
Acknowledging Uncertainty,
Planning for various possibilities
Yes and No campaigns, unionists and nationalists, alike, need to start acknowledging that they can’t be certain what the results of the choices they advocate would be - and providing a set of various plans to deal with each major possibility.
Politicians are frequently successful by telling people what they want to hear – and we all often convince ourselves that what we want to believe is the truth. But that often backfires with severe consequences for everyone. Better to face up to the facts, including the fact that there are many questions which we can’t be 100% certain of the answers to – and that it’s better to have planned various options to deal with various possible outcomes.
