This is one topic that’s liable to get me going. People down her find it perplexing that I should even be talking about it but with mum being Scots and being in regular contact with the family up north it feels quite immediate. What they say, I hear, mum and I talk about. Needless to say I am rabidly against independence; I don’t like the idea of what is after all my country being broken up. I don’t like Salmond, in fact I hate him because he is, in the final analysis, an asinine demagogue, he reminds me of the Paphlagonian in Aristophanes The Knights in that he’ll say anything if gets him what he wants.
We’re at a time in the UK, well apparently only in England, where foreigners making demands on us are not the most popular of people and Salmond seems to have totally misread the English. He thinks that because he says, “The pound is as much ours as theirs” that this somehow alters the fact that in terms of realpolitik Scotland is a tiny nation with a tiny economy, no allies, it isn’t part of a wider trading block, their opinion isn’t particularly important. When we say that we will not enter into currency union we’re not messing around. Currency union does not benefit us, a profligate left wing government destabilising our currency is not in our interests and Salmond is not the kind of person who will abide by the fiscal restrains imposed on him by Westminster via the Bank of England. Politically no Scottish leader can say to the Scottish electorate, “I’m sorry but all the public spending we planned can’t happen, the Bank of England won’t let us”.
That’ll only be even more true if the Scots use the pound without a currency union because they’ll have no representation on the board of the Bank of England and no way of gaining representation. They won’t be able to print money and in fact they’ll have to buy hard currency off of the UK. Ultimately all public spending will have to be financed via taxation, even borrowing will have to be funded by taxation because there will be no central bank to fall back on.
On top of that the Scottish banking sector is twelve times the size of the Scottish economy, so another 2008 style crash which the UK as a whole could absorb, would literally wipe out the Scots economy. They’d be back to begging Westminster for a bail out, a bailout which would not benefit us one bit and which British voters would be deeply opposed to.
Astute and long term readers of this humble blog will know that I’m an Austrian and that therefore strictly speaking I oppose all central banking. I do. I think Scotland could turn out just fine as an independent country but to do so it has to stop being socialist. I think actually this is what will happen. I think that within fifteen years of independence both the UK and Scotland will have Conservative governments. Most Scots will find this idea preposterous but my logic is simple, for three centuries the Scots have never had to worry about where the money comes from, only what to do with it and who should be in charge of distributing it. Any shortfall in Scottish taxation is made up by taxation in the rest of the UK with the effect that public spending per capita is higher in Scotland than it is in the rest of the country. If that changes, if Scotland is forced to worry about where the money comes from, if it’s forced to deal with the dilemma of high taxation versus high economic growth then the people who are most economically sound will come to the fore and those people are the people on the right of the political spectrum.
This is exactly what has happened in England, and is still happening, it’s happening in the US, it’s happening in Europe. Everywhere the post war model of deficit spending and high taxation to fund public services is under fire. Ironically in their quest to keep the tories out the Scots are probably going to ensure that the left is defeated as heavily as it looks like it might be in the rest of the UK. We’re on a tipping point in England, we realise that the NHS is not all that good and that our schools are failing we realise that taxation is unbearably high, we realise that we’re over regulated to the point where we’re stifling ourselves. The Scots have been insulated from this.
I think Scotland therefore, if there is a yes vote, will find itself rapidly in a position where it has to reevaluate its priorities. I wouldn’t be surprised if they turn into an Athens of the north after a massive borrowing and spending binge. I don’t think any major reevaluation will come until some kind of crisis. Until then the government will use the promise of future oil revenues to fund public spending and borrowing.