Nationalism is destroying the Eurozone

There is a recent example of a reasonably long lasting currency union between peoples who spoke different languages that is often forgotten. Not very long ago I could spend the same Rouble whether I lived in Moscow, Vilnius or Kiev. Further afield I could spend it in Yerevan or Tbilisi. This currency union endured for at least 70 years and if you count the time when these places were part of the Russian Empire it existed rather longer than that. What made this possible? The most important was that throughout all of these places there was a common language. While people spoke their own languages at home, at school and at work they spoke Russian. Not only this, but in every tiny Soviet town and village there was the same ideology. The streets were called the same sort of names such as Lenin Prospect, Marx Street etc. There were the same statues of Lenin stretching out his hand. People watched the same films and the same television. They more or less eat the same food and drank the same drink. They believed the same things and they were taught to think of themselves as one Soviet people. For this reason Roubles were transferred around the Soviet Union without anyone counting the cost. What the Soviet Union had the Eurozone lacks.

I followed the recent Greek crisis from afar. I was in a pretty little German town and every morning I would read the headlines in the German newspapers. There were two I particularly remember. One had Angela Merkel dressed up as Bismarck and called the Iron Chancellor. The other complained of bailing out Greece with “our money”. I think people have been pretty tough on Germany in recent days. I don’t think that people in the UK would be particularly keen on sending much of our money to Greece either. These are not trivial sums.  But if you think of it as "our money" you frankly should not be in a currency union with the people you think of as them.

But this is the problem altogether. People in the EU are not coming closer together they are moving further apart.  If the EU was serious about creating a single European state it would have made sure by now that everyone was working towards speaking the same language. It doesn’t matter much which one, but let there be one, or else free movement of people really means free movement of people to do menial labour. If we all grew up speaking the same language in school, then I really could work anywhere. As it is, in most EU countries I would only be able to clean floors.

But can we really imagine an EU with a common language and a common ideology, where people felt themselves to be part of one common European people? Can we imagine that Germans will willingly and gladly send money to Greece and think of Greeks as more or less the same sort of people as themselves? If this was going to happen it would have happened by now. This #Grexit crisis was the crisis that was supposed to bring about closer monetary union in the Eurozone.  Perhaps it will. Perhaps 10 or 20 years from now we will have a transfer union  and a full political union in the EU and this will be seen as the first step towards it. But no, I can’t see it.

Where I stayed in Germany there were German flags on every building in a way that would have been unthinkable 20 or 30 years ago. There was a statue of Frederick Barbarossa (1122-1190) standing next to Wilhelm the First (1797-1888). It was just fine to celebrate the First Reich (962-1806) and also the Second Reich (1871-1918), there was a gap and some things that were never to be mentioned, but then we could all just leap right over to a new Kaiser and a new Reich.

This is all, no doubt, terribly unfair to Germany, which remains one of the most pleasant, liberal places imaginable. It should be remembered that Germany had no vote on joining the Euro and the people would undoubtedly have preferred to keep the D-Mark. But they have been placed in the position of leadership of the Eurozone and that leadership role looks anything but democratic.

When Greece had its referendum on austerity, it was explained very clearly to them by the Eurozone leaders that voting No meant leaving the Euro and probably the EU. They voted No anyway. But guess what they got still more austerity and they still stayed in the Euro. There were two honourable courses of action that were possible for the Eurozone leaders at this point. Either they should have followed through on their threat and kicked Greece out of the Euro, or they should have recognised that the Eurozone must henceforth be a transfer union, where the words "our" and "your" no longer applied.  The EU has too frequently been ignoring the will of the people in recent years and governments, including the Greek Government, have too frequently cooperated. This really is turning the EU into some sort of modern Holy Roman Empire.

Something died last week. I have always been someone who was willing to go along with the EU as an ideal. I thought a democratic, equal EU was a reasonably good ideal. Let’s bring down borders rather than erect new ones. But that ideal has gone. The Soviet Union fell apart because of its own contradictions, it would be better if the EU did the same. In the end even with a common language and a common ideology the Soviet Union could not overcome the differences that existed in the peoples who lived there. That as much as anything split the whole thing apart. Yet those differences were small compared to the difference between a Greek and a German.

This is our problem. If Czechs cannot bear to live with Slovaks in the same country, if Scots cannot quite bear to live in the same country as English people, how on earth do we expect Greeks and Germans to become one people? The problem as always is nationalism. It is something instinctual and goes back to when Germans were tribes waiting to be united by a great leader. But what unites these self-same Germans today divides them from all others. Germans will give to Germans, but they won’t give to Greeks and this is for reasons that happened both in the 19th century and a thousand years ago.  

If we can’t find a sense of being the same people then it is hard see the EU surviving other than as an Empire held together by an undemocratic bureaucracy. An EU that is willing to crush democracy in Greece and ignore the will of the people living there is not a force for good. Until and unless it can show itself to be a force for good I want no part of it. If Scotland really thinks in terms of "ours" and "yours" with regard to the people in the other parts of the UK, then I want no part of that either. Either we are one British people who share without limit or in the end it would be better for those who don’t feel a part of our common journey to leave. Choose #Scexit, choose independence within the Fourth Reich, after all small countries do wonderfully well there, but I’ll not share it. I want no part of it.  

If you like my writing, you can find my books Scarlet on the Horizon, An Indyref Romance and Lily of St Leonards on Amazon. Please follow the links on the side. Thanks. I appreciate your support.

Don’t turn the UK into the Eurozone.

If North Koreans, by some good fortune, were able to rid themselves of tyranny what would be the result? Well just as in 1989, when the Berlin Wall came down, there would begin a process of reunification with South Korea. Why? It would happen simply because the Koreans speak more or less the same language and have a shared history that goes back hundreds of years. They would see themselves as family rather than foreigners. It would not matter at all that technically they had been at war for decades. Whatever harsh words may have been spoken by one side about the other would instantly be forgiven and forgotten.

We already know what would happen during such a reunification because we can look at the example of Germany. The process by which Germany became one united country again was carried out by a number of steps. The border was opened and there was free movement of people. A single currency was reintroduced. Each Eastern mark was found to equal each Western Mark even if the former traded massively below the latter. There were massive transfers of money from West to East that have gone on for decades. Why were people in Western Germany willing to transfer billions or Marks to the East? For a simple reason. They viewed those people as compatriots.  It didn’t matter that Bavarians, Hessians, Prussians and numerous others had been living in separate nation states until 1871 and had fought a war against each other as recently as 1866. No one in Germany celebrates a war against the “old enemy”, even if Germans still sometimes make jokes about each other.

The single currency of the reunited Germany was a currency union that covered not just two formerly independent states (East and West Germany), but going back a little further literally dozens if not hundreds. If I were a German I could describe my country in any number of ways. Almost everywhere at some point or another was an independent country, some remarkably recently.  Imagine if Germans were to try to re-establish the borders of 1707. We would all struggle to name all the new countries that would result.

People then can see themselves as forming a family even if they once lived in independent states. This fundamentally is the reason why they are willing to transfer money to each other. In the same way as most of us care more for our children than someone we’ve never met, so we care more for a compatriot than someone from abroad. This is human nature and there is no changing it. It is the reason why it was possible to introduce a single currency in Germany in 1990 without too much difficulty. It is also the reason why it will ultimately prove impossible to introduce a single currency across the European Union, unless and until people in member states across the Eurozone view each other as compatriots.

The fundamental reason for the crisis in the Eurozone is that Germans are unwilling to transfer massive amounts of money from Germany to Greece. They were willing to give without limit to the former East Germany, but they feel no such obligation to Greece. Why? Because Greeks are not compatriots.  It’s as simple as that. But a currency union without a transfer union is bound to fail ultimately. What would have happened if the West Germans had refused to transfer money from West to East following reunification? The problem was that East Germany could not have competed on international markets with a currency as strong as the D-mark. It would have required devaluation in order to become competitive. But it could not devalue owing to the fact that it was in a single currency. Exactly the same situation obtains in Greece, which desperately needs to devalue its currency, so as to make exports more competitive and holidays cheaper. Greece is faced with a choice. Either devaluation or transfer union. The logic of the Eurozone is that it must begin acting as a single country or it must break up. There isn’t a third alternative.

If there had not been a transfer union in Germany after reunification, there would have been radically different standards of living in East and West with no prospect of the differences narrowing. There would have been more jobs in the West and given an open border, the same language and free movement of people there would have been depopulation in the East. People would literally have voted with their feet.  A transfer union is the only way that a currency union can work long term. In the end Germans must treat Greeks the same as Germans or else they must accept that they must break up the Eurozone.

The UK just like Germany is formed from places that once were independent, some like Scotland a long time ago, others like DálRiata a very long time ago. At one point, no doubt we all lived in independent tribes and villages and painted ourselves blue. Since coming together the various parts of the UK have had different economic circumstances. It’s only necessary to read Thomas Hardy to realise that quite recently parts of the south of England were very poor. They must have looked on with envy at the wealthier northern parts of Britain at the height of the industrial revolution. These things tend to go in cycles. Scotland had an oil boom in the 70s and gave more than we received, now the boom is over and we receive more than we give. This is usually called sharing. What is necessary to keep standards of living in the UK reasonably equal is a transfer union. It is this transfer union that guarantees that everyone gets a similar level of benefit, a similar level of healthcare and education, no matter where we live. The people living on a small island off the Scottish coast with a tiny population have a teacher and doctor which they simply could not afford without money being transferred from the other parts of the UK. Without the transfer union that exists in the UK the rich parts would get richer, the poor parts would get poorer.

The proposal that Scotland gains Full Fiscal Autonomy (FFA) is being proposed by the SNP and Iain Martin suggests the Conservatives might agree with them in order to get English Votes for English Laws (EVEL). It is bizarre that this proposal is even being considered seriously.  For fundamentalist nationalists who want independence at any cost, there is a certain logic for FFA inevitably leads to independence. There would be no need even to have a second referendum as FFA would break up the UK in and of itself. No country in the world has a part which has FFA for the simple reason that it is incoherent economically.

The SNP have spent the last few years complaining bitterly about wicked Tories introducing austerity. They want the next UK government to end austerity and spend £180 billion more than either Labour or the Conservatives intend. Yet FFA would give rise to eye watering levels of austerity in Scotland. People who don’t understand this fact simply have not seen the figures, or more likely don’t understand them. FFA would massively increase taxes in Scotland and massively cut public spending. The poorest would be hit hardest. Do nationalists really believe it is worth paying this price just to obtain independence? This isn’t “Devo-Max” it’s "Austerity-Max". This is simply fanaticism. I begin to wonder if my country has literally become so drunk on nationalism that it has taken leave of its senses.

Logically if Scotland had FFA, it would hardly make sense for us to send MPs to Westminster at all. What would they have to do there that would have anything to do with Scotland? Foreign affairs, defence? These are not exactly issues that we have spent much time debating in the General Election. This isn’t devolution its independence in all but name. We voted against that remember.

Would the Tories really sell Scottish No voters down the river just to get EVEL? Who can tell? There’s a short term cunning about some present day political leaders which I find hard to understand. Statesmen look at the long term interest of our country and work for that. It was Cameron’s fatal underestimation of Scottish nationalism that got us into this mess in the first place. He can still go down in history as a rogue if his future actions are seen as breaking up the UK.

It should however be made clear that FFA is not in the interests of anyone in the UK. The reasons for this have already been made clear. FFA turns the Poundzone into the Eurozone. The Poundzone only works because we have for centuries had a transfer union between the various parts of the UK.  FFA takes away the transfer union and turns Scots into Greeks in relation to the UK’s Germany.  If the UK is unwilling to transfer money to Scotland and vice versa it would be treating Scots in the same way that Germans treat Greeks. Scots would no longer be compatriots, i.e. people we share with without question. Scots would already be foreigners. But the same logic that applies to the Eurozone would immediately start to apply to the Poundzone. Either we would have to start behaving like a single nation state or we would have to split up. To start behaving like a single nation state we would have to begin our transfer union again (which we just stopped with FFA!). Alternatively we would have to break up our currency union.  There isn’t a third alternative. Does anyone really fancy bringing the economics of Grexit to the UK? What would we call it Scoxit or Engxit?

Do people in the rest of the UK really want to go down this route? Moreover, if FFA is given to Scotland, why not to Wales and Northern Ireland? Once we start going down the route of breaking up our country, why shouldn’t London and the South East demand FFA? They would be far richer if they didn’t have to share their wealth with the rest of England? By some calculations Londoners wouldn’t have to pay tax at all if they kept all the money earned in London to themselves. Why moreover, should not Aberdeenshire have FFA? We’re far richer than people in the Central Belt. Why should we have to share our money?

Nationalism is poisonous because it divides people who until that point thought of themselves as the same. Look at how it has already divided our country, not only within Scotland, but also in the UK. Where previously we all thought of ourselves as compatriots who had a duty of care to each other, nationalism would divide us and then divide us further.  I have seen what nationalism can do to a country like Ukraine. It leads people to act irrationally. They cease to act in terms of basic self-interest.  But equally a people that would vote to make itself poorer, that would joyously embrace "Austerity-Max" is capable of anything. When nationalism trumps every other political policy, I begin to get very scared, for it is just this kind of nationalism and fanaticism that led Ukrainians to destroy their country. Nationalism is the most powerful political card that can be played, therefore it should never be played. It appeals to something instinctual in human nature and base. Blair is right:

“National pride is a great thing. Nationalism, as a political cause in the hands of parties like [the SNP], is almost always ugly and, despite being wrapped in the garb on high-sounding phrases, can never disguise its essentially mean spirit.”

But Blair is ultimately responsible for the rise of nationalism in Scotland. It’s growth can be traced to his time in Government. The other Prime Minister most responsible for the rise of nationalism is David Cameron. It was his folly and miscalculation that gave the SNP their chance. Now is the time when both Labour and the Conservatives must make amends. Don’t play the nationalists game. Don’t make short term political calculations that risk our country’s future. Don’t make deals with separatists. Rather find a long term strategy that will bring our country together again. Above all else don’t turn the UK into the Eurozone.

If you like my writing, you can find my books Scarlet on the Horizon, An Indyref Romance and Lily of St Leonards on Amazon. Please follow the links on the side. Thanks. I appreciate your support.

The road not taken

  

18^th September 2014: Unexpectedly poor weather for September keeps turnout down in the Scottish independence referendum. Large groups of Yes supporters, however, attend polling stations en masse despite the wind and the rain. In an intimidating atmosphere No supporters stay at home.

19^th September: It becomes clear from the early morning that Yes has a chance of victory. Eventually at 8 o’clock David Cameron has to phone the Queen. She is devastated and makes immediate plans to leave Scotland vowing never to return. Cameron on the steps of Downing Street announces that Yes has won the referendum by less than 0.1 percent. He congratulates Alex Salmond and the Scottish people and promises that the UK Government will do all in its power to facilitate Scottish independence. However, he immediately resigns both as Prime Minister and MP. He reflects that a short campaign with the question “Should Scotland remain a part of the UK?” would have been won easily and regrets forever that his weakness and overconfidence broke up the UK. The pound falls immediately by 20%, and UK Government bonds come under pressure from international markets. The Bank of England raises interest rates by 2% with the prospect of more to come if necessary. That evening the major ratings agencies reduce the UK’s sovereign debt rating to A-. There are mass celebrations throughout Scotland. Every major pro-UK Scottish party leader congratulates the Yes side and promises to respect the result and work together for the future of Scotland.

20th September: Some Unionists attempt to demonstrate in favour of the UK remaining together in Glasgow’s George Square. They are condemned by all sides as being undemocratic. Yes supporters condemn anyone who is unwilling to accept the result or who attempts to overturn it. Some UK supporters come up with the slogan that they are the 49.99 %, but it is met with a simple response from the Yes camp: You lost - get used to it!

23^rd September. George Osborne acting leader of the UK Government and provisional leader of the Conservative party announces that he intends to work with the Scottish Government so that currency union between Scotland and the UK is maintained. He has no choice. Uncertainty in the financial markets means that he has been advised by the Bank of England that this is the only way to maintain stability. It has been pointed out to him that a Scottish exit from the Poundzone would be, as traumatic if not more so, than a Greek exit from the Eurozone. It just would not be possible without wrecking the UK economy. EU leaders over the weekend have been discussing what will happen to an independent Scotland’s application to join the EU. They say that they will look favourably on it, but the decision on the terms will have to wait until the day on which Scotland becomes independent. Spain is particularly concerned not to encourage separatism and is intent on driving a hard bargain.

15^th October: After a period of relative calm owing to Osborne’s announcement about the pound, the UK stock market crashes by 25 %. This sets off market crashes throughout the world and makes difficult economic conditions in the Eurozone still worse. The UK is tipped back into recession. People in the rest of the UK express resentment that Scotland has damaged the UK economy. Ordinary British citizens start to blame Scotland for their loss of jobs.

18^th October: A team of Scottish politicians from all parties join together to begin the process of independence negotiations. UK politicians from all major parties are represented also. Everyone promises to work together for the good of Scotland and the rest of the UK.

9^th November: Nationalists from all over Europe emboldened by the success of the SNP come together to plot secession. Large numbers of people vote in an unofficial referendum in Catalonia. The Spanish Government promises to ignore such illegal referendums and attempts at secession. The EU backs this stance describing secession as the enemy of the EU process of integration. Every EU Government with secession movements vows to declare all attempts at secession illegal. They look on the UK as weak and foolish and don’t intend to go down that path themselves.

22^nd November: It has become clear over the previous two months that an exodus has begun from Scotland. The major financial industries in Scotland have decided to move to England. Huge numbers of people from other parts of the UK have been withdrawing their money and their business. Many No voters have decided to vote with their feet. An especially high number of people from other parts of the UK feel no longer welcome in Scotland and have either left or are making plans to do so. Some reflect that they don’t want to live in a foreign country. The response to this from Yes supporters is “Good riddance”, which tends only to increase the exodus.

11th March. The full extent of the fall in world oil prices becomes clear and that this is liable to continue for some time. Scottish Government figures show that Scotland is being subsidised massively by the UK Government. Anti-Scottish feeling in the rest of the UK has increased. There is a demand from the UK electorate to stop subsidising Scotland.

28^th March. Some Scottish pro-UK voters wish to turn the General election into a second referendum on independence with the goal of getting the UK Government to overturn the result. This campaign gets nowhere however as none of the Scottish, formerly pro-UK leaders are willing to back such an undemocratic attempt to ignore the result. Moreover, George Osborne says he no longer wishes Scotland to be part of the UK and would not allow such a change of mind. “You chose to have a referendum,” he says, “you chose to leave. Now you must leave.” The UK parliament decides that while Scottish MPs will be elected, they will not be able to vote on matters affecting a country they are soon to leave. The UK Government states that it intends to implement Full Fiscal Autonomy for Scotland as an interim measure prior to independence.

8^th May: The Conservatives win an overall majority in the House of Commons, owing to Scottish MPs no longer being allowed to vote on matters affecting the continuing UK. The election in Scotland is almost ignored as being completely irrelevant. On a low turnout the SNP emerge as the largest party, just beating Labour. No-one notices.

June: Prince Philip and Queen Elizabeth die within a few days of each other. The Queen left broken hearted by the imminent break-up of her kingdom, had not been seen for months. The nationalists in Scotland say that they intend to hold an immediate referendum on abolishing the monarchy. Charles III announces that they need not bother as he has no intention of even visiting Scotland, let alone being its monarch. Balmoral is sold and becomes the country house of the First Minister.

September: A year on from the independence referendum the effects of full Fiscal autonomy are being felt in Scotland. The SNP Government is forced to raise taxes and cut spending in order to try to reduce the size of the deficit which is one of the highest in Europe.

November: It becomes clear that it will take longer than estimated to break up the UK. Each side negotiates with good will, but it is not easy to untie a 300 year old country. Almost all of the energy of both the Scottish and UK parliaments is devoted to these negotiations. Neither parliament has much time left to do anything else. Having made large gains in the UK parliament UKIP continually demands a referendum on the EU, but are told that this will have to wait until the negotiations with Scotland have concluded. This leads to still more resentment in England and a further rise in nationalism there. There is tension moreover in both Northern Ireland and Wales with nationalists seeking to use the breakup of the UK for their own ends. Northern Ireland in particular sees a renewal of terrorist activity from both sides.

March 2016. The date of the intended Scottish independence day passes with no end yet in sight to the negotiations. The Nationalists have been trying to use the location of the Trident missiles as a negotiating ploy. The American President visits Mr Salmond and explains the concept of soft power. We ruined the Russian economy, we can certainly ruin yours. You will lease the submarine base to the UK in perpetuity. Mr Salmond agrees.

May 2016: The SNP loses the election to the Scottish parliament. A new party made of hard left-socialists and greens, called an SIRIKA an acronym meaning “The Radical Coalition of the Left” in Gaelic sweeps to power on the promise that it will reverse the SNP’s austerity measures. Alex Salmond has become a hated figure in Scotland, while his deputy Nicola Sturgeon is compared to Margaret Thatcher owing to the harshness of the cuts she has presided over.

March 2017: First Minister and first leader of an independent Scotland Tommy Sheridan just has time to speak to the independence day’s crowd, which turns out to be rather disappointing, before he is called to an urgent meeting with George Osborne, the governor of the Bank of England and the leader of the IMF. They explain that Scotland cannot keep running its unsustainable deficit without reaching bankruptcy in a few months. Mr Sheridan says that he will not be bullied, that the debts which Scotland cannot pay are the fault of the English who should pay reparations owing to the fact that they repressed and exploited Scotland for 300 years.

May 2017: Although English voters would like to see Scotland default and be kicked out of the Poundzone, the governor of the Bank of England explains that this is not possible without hugely damaging the UK economy. The UK agrees to reintroduce the Barnett formula renamed the Osborne formula, but only on condition that the UK Government has the right to oversee Scotland’s budget. The 3 members, soon to be known as the Troika, visit Edinburgh each month in order to tell First Minister Sheridan what he must do.

October 2017: The UK votes to leave the EU. In the years since the independence referendum the EU has moved beyond the crisis over Greece and implemented policies which will create a new nation state called the United States of Europe. It rapidly becomes apparent that there are two choices, either join the Eurozone or leave the EU. The UK chooses the latter. Scotland, too, decides not to continue with its application to join the EU. It is explained to First Minister Sheridan that if Scotland wishes to become a member of the EU, it would have to set up its own currency prior to joining the Euro. It would also have to be part of the Schengen zone, which will mean a manned border between Berwick and Gretna. The governor of the Bank of England once more explains about what is possible and what is not possible, that Scotland leaving the Poundzone would be as disastrous for Scotland and everyone else as it would have been if Greece had left the Eurozone. The logic of monetary union is followed and Scotland joins the UK outside the EU.

October 2019. The UK concludes negotiations with the EU. It is in both sides interest to continue free trade. The UK, moreover, concludes new trade agreements with its major trading partners around the world. Scotland has to negotiate on its own and owing to the size of the Scottish economy is rather disadvantaged in the negotiations.

May 2021. Sick of socialism, after five years of Tommy Sheridan, the Scottish electorate votes for a radical alternative. They choose as a new First Minister Ruth Davidson and the map of Scotland is painted blue. Her party has a brand new name which does not mention the word Conservative, but it is still universally known as the Tories. Scotland introduces radical free-market policies and begins to become much more prosperous. The brain drain south begins to slow, then to cease and finally to reverse.

September 2022. It is decided that it would make sense if the devolved parliaments in Northern Ireland, Wales and England plus the independent parliament in Scotland could have a forum to debate their shared interests.  This parliament meets in York, but owing to a disagreement has to shift periodically to Inverness.

September 2023. This shared parliament decides that it should have a goal of bringing the people that they represent closer together. It is decided that there should be a goal of ever closer union.

September 2024 A major economic crisis means that the monetary union of the Poundzone is put under great strain. It rapidly becomes clear that the logic of monetary union means that the Poundzone just like the Eurozone all those years earlier must choose to either break up or join together and form a single state. After some debate and advice from central bankers, it is decided that Scotland, Wales, Northern Ireland and England will henceforth be known as the United States of Britain, commonly to be called simply called Britain.

September 2114. Historians look back on the ‘time of troubles’ when Scotland briefly became independent as a rather perverse moment in British history. It seems unimaginable to people living in North Britain that they should be separated from people living in South Britain or West Britain. The former identities that people apparently held and the idea that there were even four countries in Britain seems hopelessly old fashioned and quaint. It would be like saying ‘I’m from Wessex’ or that ‘I’m a Pict from Pictland’. Everyone looks back and is pleased that they have moved beyond such archaic notions of nationalism. Pub quizzes frequently ask about the figures involved in the brief breakup of Britain, but it has become as forgotten as the Schleswig-Holstein question. Something to do with fish some people vaguely remember but can’t quite think why and wasn’t there someone from Cameroon? 

If you like my writing, you can find my books Scarlet on the Horizon, An Indyref Romance and Lily of St Leonards on Amazon. Please follow the links on the side. Thanks. I appreciate your support.

Do Independent countries have the right to their own currency?

One of the things that independence grants a country is choice. For example, an independent Scotland could decide to join the Euro. Alternatively, it could decide to set up a Scottish pound. There would rightly be a great deal of indignation in Scotland, if someone else tried to limit our newly won independence by saying that we did not have a choice in these matters. Being a sovereign nation would mean that we would have the right to have a currency that was different from that in the rest of the UK (rUK). If we did not have that right, we could not properly be called independent at all. Independence is always a relational concept. I am independent as I am independent from something else. But if Scotland became independent from rUK, it follows logically that rUK would become independent from Scotland. They too would gain independence. Not only us. But it would be unjust if we were to deny to newly independent rUK something that we would demand for ourselves. Just as an independent Scotland would have the right to choose a currency different from rUK, such as a new Scottish pound, or the Euro, so newly independent rUK would have the right to have a different currency from Scotland. For either side not to have this right would be to imply that were not properly independent.

The Scottish government has expressed a desire to retain pound sterling after independence. This is a perfectly proper and reasonable aspiration. But no supporter of independence would want to say that Scotland could not at a later date change its mind. Perhaps, in time the Euro would prove to be such a success that we would want to join it, or perhaps we might decide that having our own currency would be better still. No one could force us to retain the pound if we did not want it post independence, and we would resent it deeply if anyone tried. But by the same token we could not force rUK to retain a currency union with us if they did not want to.

At the moment the UK government, in an official paper, is saying that it probably would not be in rUK’s interest to maintain a currency union with Scotland post independence. This has been met with some indignation by the SNP. They have argued that it is in everyone’s best interest that Scotland retains the pound. This is because they think that it would be beneficial economically to rUK to retain Scotland’s economy within a sterling zone, not least because it would help rUK’s balance of payments. They have even gone so far as to suggest that if rUK were unwilling to allow Scotland to remain in a sterling zone, then they would not accept a share of the UK’s national debt. This share could amount to around 125 billion pounds. It’s always tricky to know for sure what’s going on when we get into economics. One side comes up with a set of figures and economic arguments that look very sensible, only for the other side to come up with a set of figures that are equally hard to dispute. In this case, it might be better to look at the psychology of the situation.

The SNP seem pretty keen to keep the pound post independence, even going so far as to make threats if they don’t get their way. The UK government,  on the other hand, does not exactly appear to be begging an independent Scotland to stay in the pound. It may well, of course, be just as the SNP suggest that it would be foolish for rUK not to keep Scotland in the sterling zone, but then if that were the case, it would hardly be necessary to resort to threats. If it were so self-evident that it was in rUK’s interest to keep Scotland in the pound, there would be no need to persuade at all. Naturally, this might all be a bluff in order to discourage Scots from voting for independence and that in the event of independence, everyone would see sense. But again, it would be a fairly feeble bluff if it were so obvious to all concerned that monetary union between rUK and an independent Scotland was so self-evidently desirable.  

The best argument in favour of currency union between rUK and Scotland is the example of the Republic of Ireland, which retained the pound after independence and kept it until the 1970s. Currency unions between independent states are clearly possible. We already have a currency union between the UK and the crown dependencies  (Jersey, Guernsey, Isle of Man) and the overseas territories (Gibraltar, the Falklands etc). Why couldn’t we have a currency union between an independent Scotland and rUK? There are some limitations and constraints on all sides from being in a currency union and to say the least the crisis in the Eurozone has ably demonstrated that monetary union without political and fiscal union is at best problematic. But if both rUK and Scotland considered a currency union to be in their own economic interest, no doubt it could be made to work.  

But here’s where it looks more difficult for the SNP. If rUK really did not want a currency union with Scotland, then it could not be forced. Scotland could continue to use the pound unilaterally and unofficially, but this would not be a currency union. For a country as developed as Scotland, with a large banking sector, this is hardly a serious option. A Scottish government under these circumstances would have no control whatsoever over monetary policy. To become independent only to have the status of Kosovo, Montenegro or Panama is hardly a pleasing prospect.

The threat of not accepting a share of the national debt, can likewise hardly be considered as serious. Having refused to accept a share of the UK’s national debt, Scotland would not exactly appear to be a trustworthy country to lend money to. Trying to sell bonds on the international market, quite possibly in London would be tricky at best. The credit rating of an independent Scotland would hardly be helped if we had  just shown ourselves willing to renege on our debts. Most importantly however, if relations between rUK and Scotland deteriorated to the extent of Scotland walking away from the debt we had built up together, it would mean that the post independence negotiations had effectively reached deadlock with neither side willing to cooperate with the other. Relations between the two nation states would be characterised by recrimination and hostility. This would be a disaster for everyone no matter on which side of the border we live.

In the end, we in Scotland have to accept that in the event of independence, rUK would have a perfect right to have a different currency from us. We might regret this, we might think it foolish, we might even think that they are acting against their own best interests, but that really is their business. After all, they might think it foolish for Scotland to leave the UK. A supporter of independence would hardly let that influence his judgement. These are matters on which reasonable people can disagree. So if there were to be a difference of opinion about economic self-interest between Scotland and rUK, Scots would have to extend the same right to those south of the border to disagree with us. An independent Scotland could not force them to have us in a currency union, nor should we want to force them.

An independence supporter who is completely unwilling to accept the possibility of losing the pound should seriously consider whether he really understands the concept of independence. It might indeed be possible to remain in a currency union with rUK. No one will know for sure until the negotiations begin after a “yes” vote in the independence referendum. But recognising the fact that the people living in rUK would clearly have the right to judge for themselves and make their decision independently of us as to whether they thought it was in their own economic interest to remain in a currency union with Scotland, means accepting that it must be possible that Scottish independence would lead to us losing the pound. Even if we were to disagree with the rUK position, even if we desperately wanted to retain the pound, we would have to allow them the choice. Otherwise we would not be respecting their independence. Honesty therefore requires supporters of independence to admit that a vote for independence might also be a vote for losing the pound. After all, the UK government has stated its official position that it is unlikely to be in the rUK’s interest to retain a currency union with an independent Scotland. This we must assume would be their negotiating position in the event of Scotland choosing to vote for independence.

This need not discourage independence supporters. There are advantages that come with having an independent currency for which reason most newly independent countries, like Latvia or Ukraine made establishing their own currency one of their top priorities. An independent Scotland, of course, could do likewise. It may be that we would have no alternative but to do so.