Robin McAlpine: Scotland's recent past is disappearing – and Davos is winning

This image is a graphic of Robin McAlpine and contains a quote from the article. The quote reads: I have met many, many SNP members who will defend the party to the death on social media, but I've yet to meet a single one who thinks that the leadership team of Nicola Sturgeon and her husband Peter Murrell value or even want internal party democracy.

CommonSpace columnist and Common Weal director Robin McAlpine says Scotland is at risk from the status quo elitism that it so nearly defeated in 2014

PEOPLE tend to talk as if the 'battle for Scotland' is a purely constitutional battle, like the only unresolved big question is 'independence or not independence'.

But this has done an intentional disservice to our recent history. There has also been a battle over what Scotland is for, who it is for. For a few brief moments, it looked like that battle might bring some real change.

I am now afraid that those who wanted change are far on the back foot and the old order is re-establishing itself. Unless we do something, I fear Scotland's moment of change will be lost for good.

I am now afraid that those who wanted change are far on the back foot and the old order is re-establishing itself.

Because while there are plenty people in the independence movement who are wholly or mainly driven by a fundamental belief in independence, there were also an awful lot of people who saw it as a best chance to challenge the kind of politics we are subjected to in Britain and to imagine a new kind of politics.

There was a time when the independence referendum was celebrated, even by London-based sceptics, as a remarkable flourishing in genuine grassroots public interest in social change. There was real surprise at the sheer scale of self-driven activism – and its level of imagination and depth of policy engagement.

That story is gradually being disappeared in favour of the preferred 'divisive and violent' narrative. All those town and village halls where ordinary people got together to discuss what they wanted for their nation's and their community's future are being erased from the timeline.

And Scotland was one of the few places in the world where the response to the financial crisis and the gross political and economic mismanagement of high neoliberalism was met with a real, creative and positive response.

It was important beyond its borders, in the same way Iceland, Greece and to a lesser extent Spain were (to pick only European examples). Many, many people wanted to know how such deep and committed policy engagement among 'civilians' was possible. I have lost count of the international academic researchers who have interviewed me to seek to understand how it happened.

Unless we do something, I fear Scotland's moment of change will be lost for good.

But three things happened in the last couple of weeks that have made me realise how long ago and far away that time was.

First, there was Davos, the annual get-together of the people who brought you a decade of economic failure. At a global level, you should clear your mind of any belief that there is any real contrition among elites. If they're trying to learn anything, it seems to be how not to get caught next time.

To give you a sense of how ranks are being closed, it is widely accepted that the Davos set are even making their peace with Donald Trump. He may be a bit embarrassing on Twitter, but with his massive corporate tax cuts and deregulation frenzy, he's their biggest benefactor.

The more things go wrong, the worse things get, the bigger the mess, the less we've seen serious proposals for change or reform. It's a standard psychological reaction of retreat and avoidance in the face of tasks so big and diffuse they feel impossible.

I mean, when did someone last tell you that another world is possible? Who would you identify as the world's leading voices pointing us in a different direction?

All those town and village halls where ordinary people got together to discuss what they wanted for their nation's and their community's future are being erased from the timeline.

Well, it's certainly not Britain's 'progressives'. They're all busy trying to put Humpty Dumpty back together again. If they can't have full EU membership (and they've not yet given up), they at least want as much of the big finance-designed trade rules as they can.

The battle is now to save compulsory competitive tendering, secret dispute resolution courts in which corporations can sue governments, barriers for democratic governments to invest in public priorities ('state aid'), unlimited flows of whatever products the EU Commission (in close consort with the multinationals) say should flow, and the legal requirements to outsource to corporations.

Real European democracy, proper reform of the deeply flawed instruments of the European state, recalibration of the relationship between the EU and big finance – these are not to be spoken of. Like Greece. Don't talk about what was done to Greece.

And leading the charge is the Scottish Government. Restoring the power of the European Commission over Britain is the one policy that I really do not doubt that the Scottish Government believes in enough to prioritise now.

On her defining issue, there really is no difference in the political stance of Nicola Sturgeon and and, say, David Miliband – free market capitalism in Europe must be saved at all costs.

I mean, when did someone last tell you that another world is possible? Who would you identify as the world's leading voices pointing us in a different direction?

And this is all possible because the SNP's decision-making apparatus is so incredibly centralised. I have met many, many party members who will defend the party to the death on social media, but I've yet to meet a single one who thinks that the leadership team of Sturgeon and her husband Peter Murrell values or even wants internal party democracy.

The control exerted by a tiny group at the top of the SNP would make peak-era Tony Blair blush.

Meanwhile, a new funding body for policy research was launched this week – the Scottish Policy Foundation. I had been a bit worried that this was a move by Scotland's financial and political elite to 'take back control'.

I mean, the successes of the outsiders (campaigners blocking fracking, opposing TTIP, fighting for a national investment bank and other radical policy ideas, discussing real participatory democracy) was a real potential threat.

But my concerns were put to rest when I discovered that it is 'non political'. Phew. Funded by the Edinburgh financial set and governed by a Tory Lord, Nato's man in the SNP, Tony Blair's representative on earth, the boss of a big financial company, a former ambassador to the US and the pro-vice chancellor of Oxford University, this is virtually monastic in its impartiality.

On her defining issue, there really is no difference in the political stance of Nicola Sturgeon and and, say, David Miliband – free market capitalism in Europe must be saved at all costs.

They are convinced that think tanks are simply 'seekers after truth'. This is total rubbish. Think tanks were invented in the early part of the 20th century by the emerging PR industry as a means of influencing government on behalf of interest groups.

They were a way of 'laundering' lobbying positions to make them look like they weren't lobbying positions. By far the most effective think tanks over the last century have been those funded by corporate interests which have created the current economic policy agenda – in Britain, the Adam Smith Institute virtually invented Thatcherism.

Which is fine – I'm a fan of pluralism. There are only two problems – first, the corporations have all the money so the corporate think tanks always win. There is no balance. Despite the small donations of our many supporters, Common Weal will never be able to compete on a level financial playing field with something run by the CEO of Virgin Money.

And the second is the honesty. There is no such thing as policy without politics. It is a lie. Every decision favours someone or something; the honest thing is to say what you're trying to make happen.

I fear that the Scottish Policy Foundation is trying to reassert the narratives about Scotland which were dominant throughout the period of RBS's supremacy and which were challenged by the social movements that emerged during indyref.

A new funding body for policy research was launched this week – the Scottish Policy Foundation. It is governed by a Tory Lord, Nato's man in the SNP, Tony Blair's representative on earth, and the boss of a big financial company, among others.

When I put all this together with an awareness of what the Scottish media considers 'news' (mainly tax rises being bad and flags), it looks like, well, the past.

I know that the efforts of ordinary people to stay engaged in politics have in some cases been enormous. I have such a massive amount of respect for the groups who have kept trying to debate and discuss the future, funded by donations thrown in buckets on the way out (the kind of donations that jingle).

But I fear they will struggle to keep going. To find the energy to keep going you need to win occasionally, and that isn't happening.

Their vision of a Scotland run by and for its people is beginning to fade. The vision of Scotland run by and for its elites seems to me to be growing stronger.

Of course, it is never too late. Common Weal may not be able to play on an equal financial basis with the monied set, but we are still Scotland's biggest think tank. Our strength is that lots and lots of ordinary people really want the policies we campaign for.

I fear that the Scottish Policy Foundation is trying to reassert the narratives about Scotland which were dominant throughout the period of RBS's supremacy and which were challenged by the social movements that emerged during indyref.

That people power and our sheer, relentless campaigning eventually got the Scottish Government to introduce an investment bank. We will soon launch our campaign for a national infrastructure company and then for a public banking network, with a series of housing policies after that.

Our Democracy, various land reform campaign groups, Friends of the Earth, Global Justice Now and a host of others will also keep doing their bit.

But they have a hard fight. They don't have a media that wants to write about them. And frankly they don't have a government that is particularly interested in what they have to say.

Unless we open Scotland up again to a real conversation about what politics means to people, to communities, to our hopes for the world around us, Davos will conquer Scotland once again.

Picture courtesy of Documenting Yes

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Comments

John Stuart Wilson

Thu, 02/01/2018 - 17:17

"we are still Scotland's biggest think tank"
I suppose you can define "think tank" in many different ways, but you certainly aren't larger than the Fraser of Allander institute.

And you can plead poverty all you want, but there is simply no excuse for your presenting the shoddy work of amateurs as economic analysis, and then ignoring all the feedback you receive about the obvious errors in it. Not "ideological errors", but gross mistakes in both fact and methodology.

"status quo elitism"
Is that what they call the pound in your circles?

MauriceBishop

Thu, 02/01/2018 - 18:23

You could ask the SNP to give you the money they trousered after they shut-down the IndyRef2 crowd-funding site.

I have mentioned before how to solve your funding woes, but here goes again:

Launch a crowdfunding effort for a survey of PROFESSIONAL economists throughout the world. Ask them to write 500 words on the topic "what would it cost for Scotland to start its own currency, and by what mechanisms could that sum be raised".

Commit to publishing, in full, every response you receive, whether it fits your ideology or not.

You'll hit your funding goal in no time flat. I'll be the first.

Alan Bissett

Thu, 02/01/2018 - 18:35

I suppose these will be the same network of 'professional economists throughout the world' whose foresight failed to predict or whose policies *actually caused* one of the biggest global financial crashes in history?

MauriceBishop

Thu, 02/01/2018 - 18:42

You can't have it all ways, Alan. If you want to contend that economics is useless, then so be it. But that also means you have no economic arguments for independence, nor any reason for believing that the average Scot would be materially better off, or even unchanged, after independence.

And, for the record: it is a lot easier to answer the question I posed than it is to predict the course of the global economy over the next two years.

Alan Bissett

Thu, 02/01/2018 - 19:09

It's perhaps not so much that 'economics' is useless, Maurice, just that economists are.

I've got absolutely no fiscal training and even I can see that if you decimate a nation's manufacturing base, to instead bet all the chips on an ever-expanding property market and consumer debt, it's going to end in disaster. That's exactly what happened, and is still happening.

But how many of your 'leading economists' - all of whom had the ear of No.11 Downing Street - were making this claim prior to 2008?

I find it absolutely staggering that Unionists, who boast about their fiscal rectitude, can ignore three elephants of immense size in the room: that UK Govts from 1979 onwards were fronting the charge to deregulate financial markets, which led directly to the 2008 crash; the catastrophic mismanagement of North Sea Oil by those same governments; and the imminent damage of Brexit on Scotland's economy, with no hint of a viable plan or leadership in sight from Westminster.

It's actually hilarious that Unionists continue to insist on their superiority in economic matters given this hapless, and ongoing, comedy of errors.

MauriceBishop

Thu, 02/01/2018 - 19:22

And I find it it absolutely staggering that you think whataboutery of this sort has a point.

Alan Bissett

Thu, 02/01/2018 - 19:22

What a weak response.

MauriceBishop

Thu, 02/01/2018 - 19:33

I'll leave it up to you to decide, Alan: is there a point to discussing the economics of independence, or not? At present, your answer is "Yes" if it is someone in favour of independence talking, and "No" if it is someone who is neutral or opposed.

Thy-Robocop

Thu, 02/01/2018 - 19:50

I would perhaps specify that it’s not all economists that are useless. After all, there are those who have developed Modern Monetary Theory, and by the looks of what one of their proponents is saying in his blog (Richard Murphy, to be precise), their theory seems to match the reality of our economic situation much better than the neoliberalism economics that got us into this mess.

If Maurice’s survey is to be unbiased, it is going to have to ask for responses from those economists studying MMT. And from what I gather, I can guess their response is going to be: “Costs? What costs? You’re the Scottish Government, you’re the ones who get to decide how many Scottish Pounds are in circulation! Spend as much as you need to spend, have your Central Bank print the money you need, and if inflation starts being an issue, use your tax system to sort things out accordingly”.

Indeed, I would also suggest that we add the question “How could Scotland benefit from having its own currency, and would the benefits outweigh the costs?” to this hypotetical survey that Maurice is suggesting. Knowing the costs of something is all fine and dandy, but if you can’t prove that the costs outweigh the benefits, and can’t convince people that that is the case, then people are still going to believe that paying the cost is worth it. And I don’t think there are many costs that can outweigh the benefit of being in control of the money printing machine and never having to worry about balancing the budget ever again, provided those in charge can keep inflation under control...

MauriceBishop

Thu, 02/01/2018 - 20:01

That's all good and fine right up until somebody in Scotland needs to buy something located in a foreign country.

Alan Bissett

Thu, 02/01/2018 - 20:12

Those big elephants roundly ignored again. I can understand why, right enough.

My issue was with your continued and touching faith in 'professional economists', despite the fact that they brought the global order to ruin a mere ten years ago. You seem to have invented a response in which I said economics cannot be discussed. Rather, it's you who seems to be saying that economics cannot be discussed, unless it's by 'the professionals'.

Here's my analysis: the future success of an independent Scotland is of course speculative - though how a nation *which would remain in the the world's largest trading bloc*, has thriving food and drink exports, an educated workforce, outstanding universities, almost unlimited potential for renewable energy, strong bioscience and software sectors, an oil and gas industry which latest reports suggest is set to boom again, no legal responsibility for the UK's gargantuan debts, and only five million people to pay for cannot *thrive* let alone survive is anybody's guess - but the UK model has *demonstrably* failed. Utterly failed. It is a hollowed-out shell with a Union Jack painted on it.

The Unionist 'plan' is simply that Scots huddle beneath it, grateful, while they shout "WHERE'S YOUR SURVEY FROM PROFESSIONAL ECONOMISTS?"

MauriceBishop

Thu, 02/01/2018 - 20:44

A "discussion of economics" that disregards economists is not a "discussion of economics".

Its a Common Weal "White Paper".

"how a nation ...cannot *thrive* let alone survive is anybody's guess"
Not really. A gigantic currency crisis upends everything.

Alan Bissett

Thu, 02/01/2018 - 20:49

Let's face reality, Maurice, there is literally no economic or currency plan which the SNP or Commonweal could put in place that would make Unionists go, "Yeah, that'll work." Literally none. You know and I both know it.

The tone certainly seems to have changed from 2014, when Alasdair Darling and David Cameron both said, "Of course Scotland could be a successful independent country". Now the message is: "Nope, sorry. That's impossible."

In 2014, it was: "What's your Plan B for currency?" Now it's, "Well it doesn't matter, because Plan B, C, D and E are all doomed to failure anyway."

I used to hear a lot from hardened No voters about how it was 'all about the economy'. Now, quite frankly, I don't believe them. I think for most of them it's about staying British, pure and simple. There is no plan that likes of us could come up with to which the likes of you would give even the remotest hint of assent, which makes this whole discussion moot.

It's about identity, isn't it?

Bill Melvin

Thu, 02/01/2018 - 20:58

How depressing to hear the arguments of unionists, especially when they just flatly ignore the current state of the UK and the job options for so many of our people. Scotland needs Independence not because it means the next day that we are all suddenly "better off", although we would be, because Independence delivers true Interdependence. The idea that we could start to do things differently is an idea that could and should invigorate many, many more of our people than the tired old battle to overcome the absolutely broken cesspit of a system that passes for democracy in the UK, which is still trying to serve elite establishment members who control so much of it.

MauriceBishop

Thu, 02/01/2018 - 21:27

@Alan

It is true that any plan you put forward for currency is going to be subjected to a cost-benefit analysis, and yes, that is not going to turn out well. Because the costs of replacing sterling are enormous, and they far outweigh the benefits. Alex Salmond understood that in 2014, which is why he persisted with his ludicrous insistence that he would force the rUK into a currency union against its will.

And any attempt to do it on the cheap - which is what Common Weal espouses - is a recipe for certain disaster. Which is why they have to rely on amateurs to churn out their "white papers".

So you want to rely on emotive arguments instead. And in order to justify that to yourself, you then have to project your mental habits onto others, despite the evidence to contrary.

Alan Bissett

Thu, 02/01/2018 - 21:30

So it's your contention that the currency union was a rational option and that the UK's decision to rule this out was political, rather than economic?

Did you support the UK in this decision?

MauriceBishop

Thu, 02/01/2018 - 21:43

I thought that the currency union was a terrible idea for BOTH independent Scotland and the rUK.

I recommend the writings of Prof. Ronald MacDonald to you.

I supported the rationality of Westminster in rejecting it, and I condemned the lies that Salmond told us as to how he was going to make it happen anyway, and how it would all work out fine.

Alan Bissett

Thu, 02/01/2018 - 21:45

In which case it's your contention that Scottish independence is impossible.

Scotland, uniquely, among all the nations of the world, cannot afford independence.

Scotland, a 'developed' Western nation, one of the oldest of the world, find itself after 300 years of the Union robbed of all the means and mechanisms by which it could survive as an independent nation, despite the fact that there was a gargantuan windfall from oil a mere forty or so years ago.

Can you explain that one for us, Maurice?

Alan Bissett

Thu, 02/01/2018 - 21:50

"I supported the rationality of the UK govt in rejecting it...."

...because you wanted to see a UK govt which we didn't elect triumphant over a Scottish one which we did.

But it's not about identity.

MauriceBishop

Thu, 02/01/2018 - 21:53

There is nothing "unique" about it. The basic principles of economics apply the same everywhere. The cost of independence for Scotland would far outweigh the benefits...which is why you don't want to talk about them. The best you can do is take you emotive response, invert it, then attribute it to me.

Alan Bissett

Thu, 02/01/2018 - 21:57

The basic principles of economics apply the same anywhere, but Scotland seems to be the only country in the world that can't afford it.

After 300 years of the Union.

Go on. Explain it.

MauriceBishop

Thu, 02/01/2018 - 22:00

I can't explain your fallacy to you...because it is a fallacy!

Alan Bissett

Thu, 02/01/2018 - 22:05

You can't explain it.
Funny, that.

Bill White

Thu, 02/01/2018 - 23:36

@Maurice,

You said "The cost of independence for Scotland would far outweigh the benefits..."

That statement makes me ask "what is it about Scotland that makes independence too costly compared to other, similarly sized and resourced countries?"

Can you answer that question Maurice? What is it we lack, that other countries have?

If you can't answer those questions, then your argument has no substance.

MauriceBishop

Fri, 02/02/2018 - 00:18

@Bill White
Of course I can answer that question, and have a thousand times.

What we lack is our currency. Leaving the union would mean leaving sterling, so we would have to create a replacement. And that new currency has to be stable against sterling, because big swings in EITHER direction would be devastating to the iScottish economy.

Therefore, currency reserves will be needed to back the new currency, so that the world knows that we are serious about the peg. And we are fortunate to have a well-working model that is a near perfect fit. Denmark. Northern European, same size and level of prosperity, and shares a border with a much larger currency with which it does the preponderance of its trade. So they are benchmark. And they find that the need the equivalent of over 50 billion pounds in reserves to stabilise their exchange rates. iScotland's "divorce settlement" would be around 1/4 of that amount, and would also come with liabilities attached. And, of course, the new state would also be starting life with a big budget deficit, so the cash received upon independence will be gone in 2 years.

So the only option left open to the independent Scottish government will be to do what the Greek government is doing: raising taxes and slashing spending so as to create primary budget surpluses.

This is the reason why Alex Salmond wouldn't talk about what his REAL currency plan was in 2014. Because nobody who understands the issue would ever vote for it.

Penny

Fri, 02/02/2018 - 07:22

There is no doubt that currency is a vexatious issue. There is also no doubt a controversial issue within Economic theory, past and present. This lack of consensus and, to some degree, lack of coherence allows conclusions to be drawn via empirical materials a la carte. What we can say is that 'taking a share of UK debt' is an option. We can also say there is a quantum of taxation and public finance to which Scots are accustomed. There are also 'export oriented industries' whose trade would earn UK pounds which could then be converted into a basket of currencies. Included in these 'export oriented industries' are two big sectors: hotels/tourism and universities. They sell a lot of 'services' to people who could pay in their own currencies. The Hotels that are part of global corporations could pay their taxes in a 'home currency'. Ah, you say, but at what price. Well....this would be initially subject to some discussion, bargaining and so forth. However within 3-5 years, the Scottish central bank would have (in common with other CB's world wide) an stock of foreign currencies and a flow of foreign income permitting a more market based valuation of the Scottish currency. What I describe is not so different to what China does, what Hong Kong did during its transition, ditto Singapore and so on and so forth.

Bill White

Fri, 02/02/2018 - 08:59

@MB

So, what your saying is that it is possible, other similar countries have done it successfully, but that it would cause some economic pain. And our pro-indy politicians are unwilling to acknowledge that pain for fear of putting people off voting for indy.

I can go along with that, I too think it could be hard times for a while but I also think that the long term benefits would outweigh the short-term pain.

I too see politicians shying away from hard truths. With an almost 100% pro-union, hysterical media it's hard to see how a mature and reasoned argument can be put across.

"Indy will cost you £1,400/yr!" shrieked one tabloid in Sept 2014.

Mike Fenwick

Fri, 02/02/2018 - 09:10

It is noticeable that in all the above comments related to economics and economists, the name of Adam Smith failed to appear, an individual often acknowledged as the father of economics. Had his thoughts been considered in this discussion, it may have been possible to elicit the difference between currency as a medium of exchange, wherein it has no value in and of itself, other than as a mutually accepted, and trusted, means of facilitating buying and selling - as opposed to currency when treated and dealt with as a commodity, wherein a value is attached vis-a-vis one currency in relation to another currency. The discussion would benefit from a recognition of that distinction.

Thy-Robocop

Fri, 02/02/2018 - 10:55

@MauriceBishop: Since you keep bringing up Denmark as an example for Scotland to follow, can you show us that in order to build up its foreign exchange reserves to keep the krone pegged to the Euro, Denmark had to enact crippling austerity and run budget surpluses to pay for those reserves?

Because a quick look at Denmark’s government budget is showing that they have been running a deficit for a number of years, and still have a sizeable amount of debt to pay off (about 30% of GDP). This article from the FT is also saying that the head of Denmark’s Central Bank is willing to print unlimited amounts of krone, with no upper limits to its balance sheet, in order to maintain the peg, and indeed appears to have done exactly that in the past.

https://www.ft.com/content/d3c385f6-adc6-11e4-919e-00144feab7de

So if Denmark can print new krones in order to maintain the peg without the need for balanced budgets and crippling austerity, then why do you think Scotland can’t do the same?

On that point, how do you think Scotland is going to estabilish the new currency without printing money? Scottish Pounds, as a separate currency, doesn’t currently exist. Until it is estabilished, everyone living in Scotland on Independence Day will still be using British Pounds. If Scotland puts in place a law saying taxes can only be paid in the new currency, without printing Scottish Pounds and putting them in circulation, then it will never be able to balance the budget, no matter how crippling the austerity it imposes, because no one will have the right currency to pay for them. At some point, enough Scottish Pounds need to be printed to exchange all the current British Pounds in circulation in Scotland for the new currency to work. But if Scotland can print enough of the new currency to replace every British Pound in Scotland on Day 1 of the new currency taking place, then it can print enough money to cover for all the government spending without the need to balance the budget with crippling austerity.

And crippling austerity would be counterproductive anyway in the first few years of the new currency. The Scottish Government can only obtain as many Scottish Pounds as there are in circulation though taxation, so a balanced budget in year 1 of the new currency being estabilished would mean it got back as many Scottish Pounds as it has issued, leaving everyone in Scotland with no new currency, and leaving us back to where we started. The Scottish government will therefore need to run deficits for a few years to ensure everyone in Scotland has the new currency. The only way austerity and budget surpluses would work for a nation using a new currency it has estabilished and has full control over would require another source of Scottish Pounds being made outside Scotland’s control. So the fact that you’re still claiming austerity is required, Maurice, would mean that you know there’s another way in which Scottish Pounds can be created for the Scottish government to use. Can you show me what that source is?

MauriceBishop

Fri, 02/02/2018 - 12:03

@Penny
In reality there is not a lot of controversy about theory. There are just some people ideologically committed to independence who need to clutch straws to make this vexatious issue go away.

"What we can say is that 'taking a share of UK debt' is an option."
It is not. For two reasons. First, Scotland can only leave the UK via a negotiated settlement approved by Westminster. That will never happen unless the debt is part of it. Second, Scotland will want to start borrowing immediately. No one will do business with the iScottish Government if they start life by being debt scofflaws.

"Ah, you say, but at what price. Well....this would be initially subject to some discussion, bargaining and so forth."
No. The market determines exchange rates.

"However within 3-5 years, the Scottish central bank would have (in common with other CB's world wide) an stock of foreign currencies."
No. Because you are forgetting that the Scottish Government has to BUY a lot of things from foreign countries. The NHS alone will consume all the trickles of foreign currency that you are imagining.

"What I describe is not so different to what China does, what Hong Kong did during its transition, ditto Singapore and so on and so forth."
Singapore backs its currency 1 for 1. It is even more expensive than the Denmark model.

MauriceBishop

Fri, 02/02/2018 - 12:08

@Bill
"So, what your saying is that it is possible, other similar countries have done it successfully"
No. There has never been a first world country accustomed to deficit spending having finance as the 2nd largest private sector employer that has become independent and started a new currency.

"but that it would cause some economic pain."
Immense pain. Worse than Greece.

"And our pro-indy politicians are unwilling to acknowledge that pain for fear of putting people off voting for indy."
Correct.

"I too see politicians shying away from hard truths. With an almost 100% pro-union, hysterical media it's hard to see how a mature and reasoned argument can be put across."
So, you understand that first Salmond and now Sturgeon are gambling with people lives for political gain, and yet you blame the media.

""Indy will cost you £1,400/yr!" shrieked one tabloid in Sept 2014"
That is a substantial underestimate.

MauriceBishop

Fri, 02/02/2018 - 12:11

@Mike Fenwick
"facilitating buying and selling" is exactly what is being discussed.

Denmark, an almost perfect model, finds that in the real world it needs to keep reserves of over 55 billion pounds on hand to facilitate buying and selling.

MauriceBishop

Fri, 02/02/2018 - 12:30

@Thy-Robocop
"can you show us that in order to build up its foreign exchange reserves to keep the krone pegged to the Euro, Denmark had to enact crippling austerity and run budget surpluses to pay for those reserves?"
No, because they did it over time as the economy grew. Independent Scotland won't have that luxury. Will will emerge onto the world state as a fully-fledged first world economy, accustomed to deficit spending, and with finance as its second largest private sector employer. There has never been anything like it.

"This article from the FT is also saying that the head of Denmark’s Central Bank is willing to print unlimited amounts of krone, with no upper limits to its balance sheet, in order to maintain the peg, and indeed appears to have done exactly that in the past."
They can do that because they have a track record, and that huge pile of reserves. Nobody worries about the krone. Serbia, Montegnego, Kosovo and the Czech Republic have all been independent for 10 - 15 years. Where's the evidence that they can do whatever they want and the markets will accept it?

"So if Denmark can print new krones in order to maintain the peg without the need for balanced budgets and crippling austerity, then why do you think Scotland can’t do the same?"
No track record and no reserves, and therefore the market will view us as not the same as Denmark. Really, it isn't rocket science.

"At some point, enough Scottish Pounds need to be printed to exchange all the current British Pounds in circulation in Scotland for the new currency to work."
Yes. And the Scottish Government can force every business within Scotland to accept them. However, that power stops at the border.

"Maurice, would mean that you know there’s another way in which Scottish Pounds can be created for the Scottish government to use. Can you show me what that source is?"
I suppose what you are hinting at is an unbacked, freely floating new currency. Which would be an economic catastrophe. If that is what people think is on the cards, no one will vote for it. What if the separatist movement have it in mind but dupe the voters into thinking that really they've got something else planned? The private sector is not so easily duped. The morning after the 50% plus 1 "victory" for independence the capital will start flowing out of Scotland and it won't stop until everything that isn't nailed down is gone.

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Bert Logan

Fri, 02/02/2018 - 14:05

Its as if commonspace doesn't understand. Scotland is not independent yet, has utterly no control on so many issues its hard to imagine, and yet its 'The SNP' that is the problem.

Sorry - I eclipse everything written by so called 'socialists' with reality. Its pragmatic inside the 'UK' framework to do politics the way the SNP are doing it.

If commonspace is too stupid to see that 'things will change' post #ScotRef, and that change will be offered up as a chance to vote for X or Y or Z or G, then they are the most clueless morons on the planet.

We get the constitution, the currency, the protections and society we want, we vote for AFTER we get independence, never before.

Moaning about the car because well, its given to you by your bastard evil dad is ... well, pointless. Just drive it until you can get the one you want.

MauriceBishop

Fri, 02/02/2018 - 14:46

@BertLogan
Independence will never happen so long as you keep telling voters that you don't have to answer their tiresome questions.

Mike Fenwick

Fri, 02/02/2018 - 15:15

Hi Maurice ... let's recap, shall we?

I posted: " It is noticeable that in all the above comments related to economics and economists, the name of Adam Smith failed to appear, an individual often acknowledged as the father of economics. Had his thoughts been considered in this discussion, it may have been possible to elicit the difference between currency as a medium of exchange, wherein it has no value in and of itself, other than as a mutually accepted, and trusted, means of facilitating buying and selling - as opposed to currency when treated and dealt with as a commodity, wherein a value is attached vis-a-vis one currency in relation to another currency. The discussion would benefit from a recognition of that distinction."

You replied " "facilitating buying and selling" is exactly what is being discussed.

Denmark, an almost perfect model, finds that in the real world it needs to keep reserves of over 55 billion pounds on hand to facilitate buying and selling."

Why does Denmark hold a foreign-exchange reserve it is in order to have funds for intervention in the foreign-exchange market. What is the buying and selling to which you refer? The reality is that what is being bought and sold is the Danish Krone as a "commodity", there are various ways in which that can be undertaken, but it establishes precisely the difficulty that arises in these discussions when that distinction of a "currency" in the form of a "commodity" in and of itself is not recognised - precisely the distinction that I said had to be made, between currency as a "commodity" and its entirely separate identity as a "medium of exchange".

MauriceBishop

Fri, 02/02/2018 - 15:43

"Why does Denmark hold a foreign-exchange reserve"
So that it can peg the value of its currency to that of the much larger currency with which it shares a border and does the preponderance of its trade.

"What is the buying and selling to which you refer?"
Goods and services that cross that border.

"precisely the distinction that I said had to be made, between currency as a "commodity" and its entirely separate identity as a "medium of exchange"."
Your turn to answer a question. How does pedantic waffle such as this shed light on the question of what it would cost independent Scotland to replace sterling?

Mike Fenwick

Fri, 02/02/2018 - 16:51

"Pedantic waffle which has no bearing on the question of what it would cost independent Scotland to replace sterling."

Pedantic, I most certainly accept. I therefore pedantically repeat once again, currency can be discussed as a "commodity" or as a "medium of exchange", and when that simple but crucial distinction is accepted a meaningful discussion can be engendered.

"Waffle?" - childish insults, and they are childish, just diminish whatever interest I have in contact with you, Maurice, make your case by all means but try (if you can - and I believe you can) to do so as an adult, please.

Your question - what would it cost Scotland to replace sterling.

My question - Should an independent Scotland replace sterling?

One answer to - both - questions, but certainly not the only one, might be for an independent Scotland just to continue to use sterling, might it not?.

Downside? This:

ONS - Economic review: January 2018

Estimating the import intensity of the CPIH basket is particularly relevant given the recent sterling exchange rate movements, in which the Effective Exchange Rate Index (ERI) has depreciated by 20% between November 2015 and October 2016, including a record 6.5% fall between June and July 2016 following the EU referendum vote. A weaker pound makes imports relatively more expensive for UK consumers. This has coincided with an increase in CPIH inflation from a low of 0.2% in October 2015 to a December 2017 rate of 2.7%.

(Pedantic again - no apollogy, ok.) That 20% depreciation arises, not from sterling as a "medium of exchange" but from sterling as a "commodity", from its being bought and sold on worldwide foreign exchanges, as a commodity.

Is a devaluation of 20%,and is the resultant increase in price inflation, with perhaps worse to come as Brexit meanders on its way to an unknown destination, a price Scotland should pay?

It is most certainly a cost Scotland is - currently - being asked to pay.

Upside? Maybe, at least for a period of time, the continued use of sterling may well warrant bearing that cost for the benefits that may accrue?

MauriceBishop

Fri, 02/02/2018 - 17:25

Really? OK, I'm sorry I said "waffle".

"My question - Should an independent Scotland replace sterling?"
It is a non-question, because there is no choice. Leaving the union means leaving the union's currency. So even using using sterling informally is, infact, replacing sterling. It is "sterlingisation".

The major downsides of sterlingisation are:
1) the SG won't be able to provide a LOLR facility for the finance industry, so it will relocate to a different jurisdiction that can. And that is a big deal, because finance is the largest onshore employer.
2) the SG will be borrowing money in a currency that it can't print. If you want to know what it looks like when those payments come due at an awkward time, see Greece.

There is also the slightly more esoteric issue of policy. If there was another oil boom, Scotland could find itself in an economic cycle that is badly out-of-kilter vis a vis that of its largest trading partner, but with no policy tools to apply to the problem.

Thy-Robocop

Fri, 02/02/2018 - 18:54

@MauriceBishop: "No track record and no reserves, and therefore the market will view us as not the same as Denmark. Really, it isn't rocket science."

So you're basically admitting that Denmark ISN'T a good example to determine what the markets would do upon the creation of a new nation with its own currency.

And I agree with that. Denmark's situation gives us a sense of the amount of money involved for a nation equivalent to Scotland, but doesn't tell us anything about how the markets would behave to a newly established nation with no track record and no reserves to back its currency. To work that out we need to have a look at those nations, and their currencies, that have emerged in the last few decades, and see how they behaved at the time to establish their own currencies. You've mentioned a few of them above, and I would add Croatia and Bosnia as examples.

So tell me: Did those nations's economies collapse when they've established their new currency? Was there a massive amount of capital flight when their independence was announced? Did they require crippling austerity to balance their budgets? How were they able to extract from the citizens and businesses more money (denominated in their own currency), than the amount of currency they printed and circulated in order to get a budget surplus and be able to acquire foreign currency reserves?

And if none of the above happened, what did they do to avert full economic meltdown?

You might say that the sizes of their economies at the time makes them not comparable to Scotland's situation nowadays. But at the time of their independence, economists would have compared their economic situation to an equivalent small nation's economy similar to how we're doing with Denmark. I don't think it's too far-fetched to say that the principles used back then can also be applied by an independent Scotland, or indeed any other nation which will be created in the future, as there's no upper limit to how much money a nation using fiat currency can print in order to match the size of its economy.

"Yes. And the Scottish Government can force every business within Scotland to accept them. However, that power stops at the border."

And? Seriously, what's your point there? That Scotland can't acquire dollars, or yen, or euros, because it can't force anyone outside Scotland to trade their currency for its own? That limit applies to every other nation using fiat currency. And yet other nations are willing to borrow or exchange their own currency for another nation's all the time. Why is that? Because any exporter from any nation is going to be paid in foreign currency, and they will need to convert their money into the local currency in order to pay taxes enforced by their home nation. Trade and business between nations is not going to stop overnight once a new currency is put in place. If it did, then nations like Croatia, Bosnia, Montenegro, and others you have listed would have collapsed within a year of their independence, and every economist on Earth would have used that as a cautionary tale to warn Scotland not to set up its own currency. But that isn't what happened, now, is it?

MauriceBishop

Fri, 02/02/2018 - 19:14

@Thy-Robocop
Denmark is a near perfect model. It is the best benchmark we have. You are saying that Scotland isn't going to meet it, isn't even going to TRY to meet it. Yes, in that case - in the case of failing to emulate Denmark - Scotland isn't going to viewed the same as Denmark.

"And I agree with that. Denmark's situation gives us a sense of the amount of money involved for a nation equivalent to Scotland, but doesn't tell us anything about how the markets would behave to a newly established nation with no track record and no reserves to back its currency."
The answer, in two words, is "less favourably".

"Did those nations's economies collapse when they've established their new currency?"
No, because they were already at a third world levels. They are TERRIBLE models for Scotland. The only reason to bring them up is because you have an ideologically driven desire to argue for a lower benchmark. The Common Weal "white paper" used the same dishonest approach. The question is "what is the right benchmark", not "what is the lowest benchmark".

"And yet other nations are willing to borrow or exchange their own currency for another nation's all the time. Why is that?"
Because the market is setting the exchange rate and pricing in the risk.

"Trade and business between nations is not going to stop overnight once a new currency is put in place."
Correct. But will it be at an exchange rate that is favourable to the Scottish economy? That is the 55 billion pound question.

Bill White

Fri, 02/02/2018 - 21:01

@MB

No, I blame the politicians (of all stripes). They all infantilise the voting public by playing along with the hysterical media and avoiding straight talking.

They need to have the courage of their convictions, tell the whole story and present a well researched & argued case for a better country.

My own reading shows me that the UK is a dying enterprise and that Scotland is being held back by a sentimental attachment to Britishness. I too feel British, but I've realised it's time to move on. We can't afford to keep feeding the parasites of the establishment. An old lady in a gold hat giving us permission to form a government, jeez.

For the avoidance of doubt, I think there are plenty such parasites in Scotland, but I think they have less of a grip on our democracy and there's a better chance of creating a fair, market economy here without the dead weight of our corrupted/co-opted Westminster.

Plus, people are always more productive when they are working for their own community. I fully understand why Cameron, Boris, Gove et al want to keep the Home Counties swimming in wealth. It's their own patch, they understand it. Scotland, indeed anywhere north of Peterborough, is of no interest to them other than as a potential short break destination.

PS: "Worse than Greece." How do you work that out? What do Greece and Scotland have in common? And why is Greece always brought up as a comparator by Unionists? I never heard Scotland & Greece compared until 2014. Weird that.

MauriceBishop

Fri, 02/02/2018 - 21:28

@Bill White
There was nothing but straight talk from the Unionist side on the currency matter during the IndyRef, so "both sides do it" won't wash.

"My own reading shows me that the UK is a dying enterprise and that Scotland is being held back by a sentimental attachment to Britishness."
Then your "reading" is restricted to separatist literature.

Greece is brought up a a comparator by unionists because it is a real world, real time example of the misery that falls on the average citizen when a European country is forced to run primary budget surpluses.

Thy-Robocop

Fri, 02/02/2018 - 22:09

"No, because they were already at a third world levels. They are TERRIBLE models for Scotland. The only reason to bring them up is because you have an ideologically driven desire to argue for a lower benchmark. The Common Weal "white paper" used the same dishonest approach. The question is "what is the right benchmark", not "what is the lowest benchmark""

No, I'm bringing them up because I'm trying to answer that question "How is Scotland going to meet any of those benchmarks in the first place?" and arguing that if Scotland paid for the foreign currency reserves via budget surpluses obtained through with the new currency it has just made, it won't even make the lowest benchmark, let alone the one set by Denmark. Indeed, none of those nations that form the lowest benchmark would even exist today in the first place, if they'd done the same when they established their own currencies.

Because running a budget surplus via crippling austerity with a currency that is effectively starting from scratch would mean that

a) all the money issued by the central bank has been reclaimed by the end of the financial year
b) no one other than the central bank is going to have the new currency
so c) the government has therefore ordered the central bank to print more money to give itself a surplus to pay for those foreign currency reserves.
which d) no foreign nation is going to want, because by that point, businesses inside the currency would have either collapsed or left the country, so that currency is not going to pay for anything generated from that country.

All this for something that the government could have achieved if it had just accepted it was going to run a deficit and printed the new money for the foreign reserves in the first place, while taxing just enough to stop inflation while ensuring citizens and businesses have that currency in their pockets or bank accounts. That is effectively what Denmark has been doing to maintain the peg to the euro. Without the central bank creating money, Denmark would either have to enact crippling austerity, or allow its currency to free float.

Basically, my point is that when a nation has its own fiat currency, austerity is the wrong policy to apply to anything other than cooling down an overheated economy heading for hyperinflation, as it can print as much money as you need to make the economy of your nation work. Denmark's example also shows that central banks and government policy have a major effect on the exchange rate. With the same methods used by central banks around the world, and with the right policies in place at the central bank, Scotland will also be able to influence the exchange rate in favor of its economy. As to what that exchange rate will be, well, that's up to whoever is in charge of an independent Scotland to decide.

MauriceBishop

Fri, 02/02/2018 - 23:20

Congratulations, Thy-Robocop. You have discovered why Alex Salmond would not discuss starting a new currency.

It has never been done by a newly independent first world economy with a big finance sector and that relies on deficit spending.

"printed the new money for the foreign reserves in the first place"
Oops - now you are going backwards again.

"With the same methods used by central banks around the world, and with the right policies in place at the central bank, Scotland will also be able to influence the exchange rate in favor of its economy."
But Scotland cannot use the same methods used by the central banks of the first world countries you are thinking of ... unless it is willing to put "the market" in charge of setting the exchange rate. That is a terrible idea...one that will only appeal to someone who wants independence at any cost, regardless of the amount of misery it creates for the first and second generation.

Bill White

Sat, 02/03/2018 - 09:53

@MB;

"There was nothing but straight talk from the Unionist side on the currency matter during the IndyRef,..."

Ah, OK, we'll need to agree to disagree Maurice, no point in putting any more time into this.

MauriceBishop

Sat, 02/03/2018 - 13:21

@Bill White
I challenge you to present any links to anything that was said by the unionist side on the currency matter that wasn't straight talk.

The best you will be able to do is to find instances where someone on the unionist side has made the simple point that currency union is never going to happen, and a separatist then twisted that into a claim that the rUK was threatening to stop independent Scotland from using the pound informally. But, of course, that is the separatist doing the obfuscation, not the unionist.

Bill White

Sat, 02/03/2018 - 15:21

Quick, genuine, question;

Why is the UK's central bank called the "Bank of England" and not the "Bank of the UK" ?

Why was the name not changed when the, formerly privately owned, bank was nationalised in 1946 to become owned by the UK government?

Bill White

Sat, 02/03/2018 - 15:28

Prof. Ronald McDonald (Maurice's go to guy for economic expertise) in August 2014:
"If an independent Scotland had a separate [new] currency then I'm sure in the longer term it could survive and prosper," MacDonald said. A separate currency "is the only tenable plan B, to be perfectly candid".

MauriceBishop

Sat, 02/03/2018 - 15:32

I have no idea. Why is the Royal Bank of Scotland named as it is? Do you think this is an important matter that has some bearing on the question of what it would cost Scotland to replace sterling?

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