I imagine sometime back in the late 1690s there were
broadsheets handed out in Glasgow and other parts of Scotland promising “realms of gold”. Perhaps our ancestors studied all 354 pages of the scheme. Maybe they
studied in detail the cunning plan to
turn Scotland into a great economic power. The whole world would be faced with
the same dilemma: either pay us and take the short route or face the dangers
and delays in going the long way round. How could it fail? We would all be at
least four thousand pounds a year richer.
So get rich schemes are not new. Today they pop up
unwelcome in your email inbox. They promise that you can make a good living by
staying at home and doing nothing. All you have to do is send off for the
following ebook. Please send ten dollars and hope that no-one steals your
credit card details. At other times get rich quick schemes promised that
Greenland was green and that Newfoundland (Vinland) grew grapes or is that a
mistranslation? Who knows? It doesn’t matter. What matters is that whoever was
fooled into travelling to either place because of promises of riches found
instead somewhere that did not quite live up to expectations. Norse settlement
in both places eventually died out when the world turned colder. No doubt this was because they didn’t drive enough
motor cars or is it that humans can only make the world hotter? Global cooling
is never our fault but always because Thor is angry.
The gullible and the desperate believe that you can
get richer by putting a cross in box and saying that you are independent. They
read a headline promising that they would get four thousand pounds if only
Scotland were like Finland. But let’s test this? Every single Scot has the
right at present to live and work in Finland. So if you move there, do you get
four thousand pounds? Luxembourg and Switzerland are also very rich countries.
They have GDP per capita that is much higher than in the UK. There is nothing
stopping anyone from the UK moving to these places. Does the fact that they
have high GDP per capita mean that I personally get a share of this money just
by living there? Unfortunately not. The streets of Lëtzebuerg are not actually
paved with gold and Scots who move there don’t actually get to pick them up and
put them in their pockets.
There’s a relatively simple idea that some
independence supporters struggle to grasp. It is this: People get wealthy by
working. Even if you could increase the GDP per capita of Scotland, it would
not mean this increase was just handed out to everyone in their baby box.
If increasing GDP per capita were easy why doesn’t
everyone do it? If independence were the route to prosperity, why isn’t South
Sudan as wealthy as Norway by? After all they have been independent for 7
years. Doesn’t independence kill all known
germs and cure all diseases? How can it be that poor South Sudan still has a
GDP per capita of only two hundred and twenty eight dollars a year? They too
had a detailed plan set out by a Growth Commission. No doubt someone promised
them that they too would get four thousand pounds a year if only they were
independent.
Increasing prosperity in Scotland requires that we
have sensible economic policies and for individual Scots to increase their
productivity and help create businesses that make a profit. The easiest way and
probably the only way for each of us to make an extra four thousand pounds a year any time soon is to get a job that pays
that amount more than we earn at present. Just working rather than living on
benefits is far more likely to lead to an income gain of four thousand pounds
than voting for the SNP. If independence supporters put as much effort into
working as they do into marching they might find they didn’t need the SNP to
give them money, they could earn it by themselves.
The SNP’s latest scheme depends on all sorts of ifs
and buts. Their four thousand pounds headline figure depends on growing the
Scottish economy over a few decades. With good policies this is indeed
possible. But then again with good economic policies the Scottish economy could
equally grow as part of the UK. It is pure guess work to suppose that we would
be four thousand pounds better off if we were independent. After all it isn’t
as if the UK economy would stand still. What if they grew more than Scotland did. Then
we would be worse off. Who is to suppose that this couldn’t happen? Do the SNP
have a crystal ball?
The biggest problem with the SNP scheme however,
just like the one that was developed in the 1690s is that it depends on
everything going right and nothing going wrong. There is a fatal flaw in the
plan that makes it as risky as any scheme in Scottish history. The SNP intends us post-independence to use
the pound unilaterally.
It is not uncommon for certain countries to use the
currency of someone else. This is usually known as dollarization. Many small
countries use the US dollar. Panama is a good example. Some tiny islands
use the Australian or New Zealand dollar. Other countries like Zimbabwe use the
dollar because their own currency had a serious inflation problem. For these
sorts of places there are advantages that outweigh the disadvantages. But does
Nicola Sturgeon seriously think that Scotland should go down the route of
Pitcairn Island and Tuvalu?
Using Sterling outwith a currency union with the
other parts of the UK is perfectly possible. No-one could stop an independent
Scotland doing this. But why would we want to? The main advantage of having
your own currency is that you have a central bank that underpins the whole
economy. It acts as a lender of last resort. The Bank of England as we have
seen in recent years can print money, engage in quantitative easing (QE) and
keep interest rates very low indeed so as to encourage growth. In difficult
economic circumstances the exchange rate adjusts. This might make it more
expensive for us to go on holiday, but it makes our exports cheaper and
encourages people from other countries to spend their money here.
Using the pound unilaterally would be possible, but
it would hardly be desirable. Scottish banks were bailed out in 2008. Who would
bail them out if such a crisis were to occur again? There is nothing wrong
about being optimistic about the future, but we have to be prepared for things
to go wrong, especially when they did go wrong ten years ago.
If an independent Scotland were to face a financial
crisis while using someone else’s currency we could not print money, we could
not use QE, and we could not lower interest rates. If a Scottish bank failed,
this could potentially mean that everyone with any money in that bank would
lose it. Who would bail out the savers?
But under those circumstances who would put their
money in a Scottish bank? Who would use financial services based in Scotland?
Who would insure their house with a Scottish firm?
So if things went wonderfully well the Scottish
economy might after some decades be a few thousand pounds per person better
than it is now. It might. But each of us if we faced a rerun of the crisis of
2008 could lose all of our money.
This I’m afraid is a rerun of the Darien
scheme. In the 1690s absurdly optimistic
Scots put all their money in the idea that we could control the Isthmus of
Panama. They ignored the fact that Darien was disease ridden and that anyway it
was a Spanish colony that the Spanish might fight for. Even if the scheme had
succeeded and Scotland had established a successful colony in Panama is it
really likely that larger powers than ours would have meekly handed over their
money for ever? What would have stopped them seizing it just as we did?
Anyway as we all learned in primary school the
Darien scheme failed and bankrupted Scotland leaving many wealthy families
bawbeeless. The Panama pound could have
exactly the same effect on Scotland. We are promised riches, but we just as
before we ignore the risks. A crisis no-one can dream today may arrive a few
years from now, but unfortunately our cunning plan lacks a lender of last
resort. I am forced to conclude that the major problem with Scottish primary
education is that no-one ever learns from it. Next we will challenge England to
a rerun at Flodden.
It might be that even if Scotland were independent
the Bank of England would still be forced to bail us out. But this too is a
repeat of the Darien scheme. English money bailed out Scotland in the early
eighteenth century, if it had to bail out an independent Scotland the result
would be the same.
Roll up, roll up, the SNP have a new Panama pound
scheme. Get rich quick. Put everything you have into Darien. There are realms
of gold there.
