Bill Michell-en Scotland: a nation cannot be independent and use another nation’s currency or even peg to it
… The few points really relate to the latest news from Scotland that it is thinking (once again) of seeking independence but using a foreign nation’s currency (one version) or pegging to another nation’s currency (another version. We should be clear – an independent Scotland requires its own currency, which it floats on international markets and has a central bank that sets its own interest rates (that is, determines its own monetary policy). Using a foreign currency or pegging to a foreign currency immediately voids national independence. The fact that the leading players in the independence debate don’t seem to comprehend that point is a worry. The fact that there is also strong sentiment to be part of the European Union post independence also tells me that the notion of independence is not well understood or developed in Scotland. That’s the bad news today. (…)
Bonnie Scotland seems intent on going down the ‘gurgler’
I have written about Scotland before:
1. Australia and Scotland and the need to escape neoliberalism (May 20, 2019).
2. Some MMT considerations for an independent Scotland – Part 1 (May 7, 2019).
3. Some MMT considerations for an independent Scotland – Part 2 (May 6, 2019).
4. Ridiculous MMT critiques distorting Scottish independence debate (April 23, 2019).
5. Oh Scotland, don’t you dare! – Part 1 (June 4, 2018).
6. Oh Scotland, don’t you dare! – Part 2 (June 5, 2018).
7. I would be voting NO in Scotland but with a lot of anger (August 18, 2014).
8. Bonnie Scotland – ignorance or denial – either way it is fraught (October 13, 2013).
9. Bonnie Scotland – ignorance or denial – either way it is fraught (September 27, 2012).
Many of those posts were in response to my interest in the questions that were arising about Britain’s position in Europe and the possibility of Scotland breaking clear of the neoliberal chains that continued membership of the UK guaranteed – whether run by the Tories or New Labour.
I have also been fascinated with the Scottish question since I studied the Jacobite period quite intensely as a university student and beyond.
But they were also in response to calls from activists in Scotland for research evidence from an Modern Monetary Theory (MMT) perspective to help them lobby for the best currency outcome should Scotland become independent.
By the way events have unfolded in the last year, it appears that shifts within the independence movement has meant they are no longer interested in an MMT solution nor an anti-EU voice and I am no longer part of their dialogue.
They have instead sought to build a strategy using input from those who purport to be MMTers but who sadly lack the qualifications to claim that expertise and are pro-EU and all that that represents.
I sensed on my several visits there that there was always a friction between the pro-EU camp within the independence movement and those who, sensibly, understood the EU to be the bulwark of neoliberalism and that Scotland would only be going from the ‘frying pan into the fire’ if it left the UK but then sought EU membership.
The pro-EU camp also could not seem to appreciate that they would not be able to claim continuation of Britain’s membership, post Brexit and thus retain the Treaty Annexure exemptions pertaining to the maintenance of their own currency that was applicable to Britain (negotiated by Margaret Thatcher).
If they entered the EU it would be as a new country and they would then have to adopt the euro after the convergence criteria were met, which, as we all know forced the accession candidates in the late 1990s to invoke premature austerity long before the Stability and Growth Pact was introduced.
Which brings me to the latest development that echoes a long held proposition – that Scotland should adopt the Norwegian krone should it gain independence1.
One word describes this proposal: madness.
This idea goes back to 2012 before the first independence referendum.
It was based on the idea that Norway and Scotland share an industrial bias – export sectors dominated by oil, which in Norway’s case, helps maintain a strong currency.
Scottish economists are scared of a new Scottish currency collapsing.
But the relative productivity of the oil sectors are very different even though the populations of both countries is similar. Norway is more efficient.
Further, the Scottish economy tracks the overall British economy fairly closely. And if you look at real exchange rate movements, the British and Norwegian economies do not move in sympathy in terms of international competitiveness.
In the blog posts cited above, I explain in detail why an independent Scotland requires its own currency, which it floats on international markets and has a central bank that sets its own interest rates.
Nothing short of that will deliver independence.
In this article – Scotland should choose the krone (January 25, 2012) – carried the subtitle “Which currency should an independent Scotland use?”
The irony of recommending the use of a foreign currency and being independent seems to pass these commentators by.
But the problem is deep in Scotland it seems.
The – Survation poll – conducted over September 10-12, 2020 – revealed that:
1. 42 per cent would be less likely to support independence if “The pound is replaced with a new Scottish currency”. 15.93 per cent said they would be more likely to support the vote. 34.8 per cent were indifferent.
2. 41.9 per cent would be less likely if “An independent Scotland is outside both the UK and the EU for several years”. 33 per cent indifferent, 15.1 per cent more likely.
This Table from the Poll shows the problem:
I am sorry to say that it doesn’t look like a very prospective future for Scottish independence with all that going on.
Argi, berriz!, Katalunia edo eta Euskal Herria?
Moneta propioa, edozein delarik haren izena, Banku Zentrala eta politika fiskal propioa: horiexek dira independentziaren zutabeak, nonahi.
Gehigarriak, soilik baten batzuk:
Ikus UEU-ko bloga, non Eskozia-ren independentziaz maiz aritu izan garen…
1 Ikus, besteak beste, ondoko hau: Nicola Sturgeon tipped to use ‘Norway’s krone’ in an independent Scotland, https://www.express.co.uk/news/uk/1382566/nicola-sturgeon-news-scotland-independence-referendum-currency-norway-krone-spt.