Opinion

If you’re not serious, everything is difficult

by | 26 Mar 2024

An economist asks some basic questions about independence and we don't have the material to make it look like we have a clue. This is why we're not making progress on independence.

Two stories show yet again that the cause of independence is neither taking itself seriously nor presenting itself seriously to the outside world. Story one is the latest in the endless stream of pointless Scottish Government ‘independence papers‘. Story two is the comments made by economist Mark Blythe about the economics of an independent Scotland.

The lesson from both is one I wish the indy movement’s leaders would pay attention to – if Scotland is to become an independent nation then it must take the enterprise seriously. We’re not. It is right that those who do not have full confidence in our plans yet continue not to have confidence. If anything, my confidence is fading with each Scottish Government paper. We cannot continue with a ‘this’ll do – whatever’ mindset if we are to persuade people of our case.

First the indy papers. I basically stopped reading these a while ago. They’re like student essays. They read like people were allowed to produce what purport to be serious explanations of a post-independence Scotland but they are really an awful lot closer to ‘edited highlights of speeches previously given by senior SNP politicians’.

In the most literal sense they swerve round any question about the detail of independence which has not formed the basis of a soundbite in something a politician has said before. In fact you can narrow this down; the independence papers are really edited highlights of Nicola Sturgeon speeches, faithfully curated by her disciples.

These are not explanations of how independence would be achieved or how it would operate, this is The Gospel of Angus, the Gospel of Jenny, The Epistles of Humza. The current SNP team seem to me not sure what ‘the correct answer to the question is’ and so are simply cribbing from the one person they still seem sure had the answers.

The problem is that Nicola Sturgeon did not have the answers. She had a very particular skill at appearing to answer questions without providing any real substance. It often sounded plausible unless you tried to draw a diagram of what you’d just been told. It often worked as rhetoric but seldom as practice or theory.

The result of this is an M C Escher collage in which every answer can be found in another place. The indy papers moves in a lateral direction and appears to go upwards but if you keep going you end up back in the place you started. If you read the education paper it basically says ‘if we solved poverty, education would get better – see poverty paper’. If you read the poverty paper it says ‘if we solved the economy, poverty would get better – see economy paper’.

But then when you read the economy paper it says ‘if we solved our education problem, the economy would get better – see education paper’. This is because the whole thing from start to finish is a rhetorical device, not the outcome of trying to take independence seriously.

No independent country or trading block anywhere in the world can export significantly less than they import indefinitely without some form of policy response or their currency will devalue

That takes us to Mark Blythe’s comments. He seems perhaps a touch flowery in his choice of language (then again, who am I to comment?), but his points are actually rather simple and not particularly surprising or objectionable in any way.

So how did the anti-independence parties find it so easy to present this as ‘the economic case for independence demolished’? It’s because we don’t have fundamentally simple answers to fundamentally simple questions. At which point I need a short detour to make clear what I mean by ‘simple’.

What Professor Blythe does is pose a number of policy challenges for an independent Scotland – which inevitably and reductively get called ‘economic questions’ even though they’re actually questions about fiscal and monetary policy more than economic policy. The questions are simple; to take one example, what he asked was ‘how will you manage your balance of payments?’

This isn’t exactly what he said (hence my comment about his choice of wording). What he did was present a clear problem that if we are importing more in goods and services than we are exporting, that means we are exporting more of our currency than we are importing others. That will result in a drop of confidence in the value of our currency, a lack of confidence that would be exacerbated by our lack of track record in international money markets.

But that’s just explaining balance of payments to an audience. And do you know for whom the above isn’t true? No-one. No independent country or trading block anywhere in the world can export significantly less than they import indefinitely without some form of policy response or their currency will devalue. That is simple, normal national balance sheet accounting.

Yes, 100 per cent, that will be a more acute question in a country using a new currency – but the response is basically exactly the same. Either you have to increase exports, decrease imports, boost the value of the currency by other means, reassure the markets in other ways or accept devaluation.

Every one of these is an entirely viable response, even devaluation. If our economy isn’t competitive and so we can’t export, a devalued economy makes us more internationally competitive in exports – but raises prices of imports. In reality you would probably want to use a mix of the approaches I suggest.

And you can disagree with my formulations all you want but at least I’ve offered my broad answers to these questions (see Sorted). I’d undergo a process of Green Import Substitution Reindustrialisation (rubbish term, I know). That means making more things domestically to a higher environmental standard and putting up gentle trade barriers to enable this domestic production to meet more domestic demand.

I’d then push to shape these emerging businesses as export opportunities, and I’d then be looking for other export expansion. Here Scotland’s energy could be key, though I will again sing the merits of keeping our options open and having access to multiple markets.

(Short version – if you sell energy through a cable or a pipe, you can only sell it to the person at the end of the cable or the pipe. If you can load your energy onto a ship you can sell it into whatever market is paying the most. That’s my case for exporting a lot of our energy as green hydrogen, and not through fixed pipelines but via specialist tankers. Which we should build.)

I’d very possibly accept some slight currency devaluation – though global energy prices could conceivable force the value of the currency in another direction. Basically I think imports are already too cheap for Scotland’s economy if we want to industrialise. But either way round, I’m deeply won over to the idea that Scotland needs to take explicit steps to reassure markets.

Scottish independence looks seriously difficult because its most prominent advocates don’t take it seriously

We proposed to do this by establishing a ten-year business plan for an independent Scotland. This would literally say ‘this is what we’ll take in tax, this is what we’ll borrow, this is what we’ll quantitatively ease, this is how we’ll spend it, here is a conservative model for what that will do to induce economic activity, therefore here is how we think our national debt will be affected’ – then again for year two, and year three…

Along with producing all-government accounts, we’d be telling everyone really clearly and openly what we’ll do, how we’ll do it, what we think will happen, how we’ll respond and what this will mean for every square inch of our finances. It would not be a conservative programme but a rapidly expansionary one, and yes our national debt would go up – but peanuts compared to what has happened in recent decades. But it would be a no-surprises guarantee to money markets.

My point is a simple one; every difficult question being asked by Professor Blythe is being asked now of the Bank of England, the Federal Reserve in the US, the European Central Bank. China’s problems fiscal and monetary problems right now are arguably more substantial than an independent Scotland’s. This stuff is the hard work of running a nation state.

The point is – that’s true for every nation state. The reason what is normal for everyone else looks intensely complicated for Scotland is because we have shown zero interest in behaving like a normal nation state-in-waiting. At governmental level we’ve swept all these questions under the carpet using soundbites and by shouting ‘Tories are bad’.

And when he concludes that this will involve pain, he’s also right. Like the interest rates you’ve been paying to keep down the inflation that you’ve also been paying. Pain – as in the trade-offs and sacrifices you need to make in governing a modern nation state. Nothing is plain sailing forever.

If you don’t know how to turn leeks, potatoes and some stock cubes into a pot of soup and you show no interest in learning, leak and potato soup is the most complicated black magic in the world. That’s all that is happening here; Professor Blythe is asking first year economics questions and it is our inability to engage with them that make them seem so complicated.

They’re not ‘easy’, but the principle is simple. I am most certainly not being dismissive – on the contrary. I’m saying that the task is simple but getting the right answer requires skill. Jeez, we wrote a whole book about this. One of the overarching answers we came up with was ‘making a success of independence is really a recruitment strategy’. We need to recruit people with the skills not only to answer these questions but to run a central bank (etc.).

That we’re bluffing this by putting forward Shona Robison and saying ‘will this do?’ is the heart of the problem. Scottish independence looks seriously difficult because its most prominent advocates don’t take it seriously. I have been repeating this point for ten years now, over and over. This will keep happening until we grow up.

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