Beginners Eck-onomics part 2
“Scotland is not oppressed and we have no need to be liberated” A Salmond, 2012
A lot has been written about how a separate Scotland would fare economically. Usually this revolves around assessing tax receipts and expenditure, if tax receipts exceed expenditure it is assumed everything is right with the world and if expenditure exceeds tax receipts wailing and gnashing of teeth ensue. I don’t presume to be better able to make estimates of these numbers than the many others out there – I would assume that factcheck’s look at this last year is not far off the mark. However, there are a couple of real problems with getting too exercised about the numbers for the last few years or the next few years that such analysis concerns itself with.
Firstly. The numbers presuppose that spending and tax receipts would have been and would be in the future basically the same in a separate Scotland than they would be without separation. One of the few things we know for certain is that the SNP want to take charge of corporation tax in order to reduce it.
Secondly, such analysis reduces arguments of economic viability to a very short term analysis of annual surplus or deficit, and of course really what matters is not the next three years but the next three hundred years. It is fair to assume that the SNP want a permanent separation and any decision will be for life, not just St. Andrews Day.
If you are only interested in the very short term, (even Nationalists say this) the difference between income and expenditure in Scotland is more or less covered by revenues from “Scotland’s Oil”. Now leaving aside any question of how much of it is actually Shetland’s Oil, it seems odd that the SNP should be content with an argument that Scottish independence is possible only because of an accident of geology and not because of the innate qualities of the Scottish people.
Looking at the “viability” of Scotland in the longer term it is difficult to know what the future holds but we know for certain that at the time of the Union in 1707 Scotland was in very deep financial trouble, it lacked money for investment and was remote from international markets, the Scottish pound had progressively devalued against the English pound. Standards of living were appreciably worse in Scotland than in England, and inequality in Scotland was far greater than it is today.
The three hundred years of Union haven’t been all bad. Indeed many of Scotland’s great achievements only came after the Union. The modern enlightenment was more or less invented here and Scotland contributed enormously to culture, science, economics and engineering and still does so within the collective embrace of the Union. Wealth and living standards are now broadly comparable between Scotland and England.
But let’s be clear, correlation does not imply causation, so just because the last three hundred years has seen Scotland go from near basket case economy to one of the wealthiest nations on earth within the Union we can’t assume that ends the argument in favour of the Union. There isn’t any way in which to conduct an experiment in which the Union hadn’t happened. So what we need is sense of what might happen moving forward from here.
Alex Salmond and the SNP have invested a great deal of money and effort in trying to establish the idea that “independence” is historically inevitable and the natural evolution of Scotland’s destiny. They have done the market testing and they have worked hard to make the “positive associations” of independence as something people aspire to in life and therefore should aspire to for their Nation State. (That’s why they find it so irritating when some people prefer to describe it as separation which doesn’t have the same positive association).
That market research also tells them that they have to try and establish a compelling narrative of the viability of Scotland and success of small countries. In recent years there have been a good number of iterations of this idea. Taking them one by one (I may have missed out one or two) more or less in chronological order;
1970’s “Its Scotland’s Oil” i.e. we can afford independence now so up yours England, which has never really gone away as an argument but is now much more subdued.
1990’s “Independence in Europe” membership of the Euro and playing a full part at the top tables of Europe i.e. we wouldn’t change too much because we would be part of the EU that everyone in Scotland is ok with.
Early 2000’s “Celtic Tigers” (Mr Salmond used the phrase “Celtic Lion” in 2007) emphasising the economic success of Ireland.
Mid 2000’s “the Arc of Prosperity” the very embodiment of small successful nations on the periphery of Europe. Ireland, Iceland and Norway hailed by Mr Salmond as proof of the vibrancy of small countries the very model for an independent Scotland. Now as it turns out Ireland and Iceland had particularly large banking sectors and were both badly hit by the international banking collapse, and if they are in an arc it is no longer reasonable to describe it as one of prosperity.
Recently; attempts to draw parallels with Switzerland; both have similar populations therefore Scotland can be just as successful as Switzerland. (so not a member of the European Union at all, neutrality? where would we be on, for example, fighting Fascism?). It really doesn’t work as a reference does it?
As yet that compelling narrative hasn’t materialised and although we often hear that a separate Scotland could spend more (on benefits, pensions, health etc) and reduce taxes on business none of it has the ring on a coherent (dare I say it positive) vision for a separate Scotland.
In itself the difficulties faced by Ireland and Iceland aren’t an argument that Scotland couldn’t survive as an independent Nation, whatever else they are they are both still small and still exist. In fact, nobody opposed to separation has seriously argued that failure to survive would be the problem.
There is a question though, about how well off Scotland would be. Would the treasury break even, run a surplus or deficit? How would such surpluses or deficits be managed in a currency union with the rest of the UK or with Europe? While the next few years matter a great deal to me and my family a parliamentary term is not the right scale on which to decide matters of importance for the future of Scotland. We need to try and take a much longer view because it is our children and grandchildren and their children who have to make their way in the country we leave them.
The Nationalists’ record in identifying the right economic choices for Scotland over just the last few years doesn’t auger well for their competence at managing the economy in the future. The real problem has been in their desperation for a narrative which has seen them jump from one comparator to another in the hopes of not having to alight on any one particular vision for Scotland’s future that could be open to scrutiny or debate.
“The Scottish People will decide” is abrogation of responsibility. As even the most ardent Eck-onomists out there knows no amount of wishing it to be true doesn’t allow you to have both a low tax economy like Ireland and a high spending Scandinavian style social system.
Any economic analysis that says you can is not so much a positive vision for Scotland as a deliberate attempt to deceive.
Evan Williams is an environmental economist and lives in Paisley.