The Scottish campaign for independence is effectively an uprising against the British state and its collusion with the globalized, mobile finance sector and supranational corporations. It is a protest against an economic and political system increasingly centralized and aloof—a protest bound to spread to other equally neglected regions.
It is a campaign to end allegiance to Westminster politicians that promote and/or tolerate austerity and the accelerating privatisation of the NHS and other national assets.
Rising anger against the establishment has mobilised support behind the campaign for Scottish independence. We share this anger and believe the Scots are right to challenge both the above, and also the narrow focus of Britain’s politicians on, e.g., voters in marginal seats.
But the uprising is led by a political party (the SNP) whose campaign will lead to Scottish subordination to the British state on the one hand, and to multinational corporations on the other. And make no mistake: the SNP’s determination to fragment the British state—even if achieved peacefully and even if it were possible to define a Scottish government as progressive—ultimately serves the interests of footloose finance capital more than those of the Scottish people.
The currency question
The SNP seems to have ruled out an independent Scottish currency and central bank, which we and other economists recommend as the only solution consistent with sovereignty and independence—even if it, too, is a risky strategy for a country of less than five million taxpayers.
The SNP’s commitment to a currency union with Britain, as many have argued, is a commitment to subordinate Scottish economic independence to the control of the British Treasury and the Bank of England (BoE). As the Governor of the BoE Mark Carney repeatedly says: a currency union is not compatible with sovereignty.
Under a currency union, the Bank of England and Treasury will influence and shape the exchange rate of Scotland’s currency (sterling) and Scotland’s interest rates. Furthermore, the British Treasury will insist on final control over an independent Scotland’s taxation and spending policies, and the management of its public debt. Scotland can today have some say over Treasury policies. An independent Scotland in a monetary union will have no say.
Post-independence, 59 million British taxpayers will not be willing to guarantee, via the BoE, the bank deposits of 5 million Scottish citizens. The BoE will no longer regulate, manage or lend to Scottish banks. As a result and over time, money will flow out of Scottish banks, bankruptcy will loom, so banks will quickly migrate their HQs to London, to flout free market ideology and seek protection from losses from British taxpayers.
The SNP and the Euro
The SNP have also argued they do not want and are not obliged to join the Euro. This is legally wrong, unless, as is most unlikely, they can negotiate an opt-out from the Euro, on the same basis as the UK and Denmark originally.
To join the EU requires Scotland to sign up to economic and monetary union, including eventual Euro membership. Pre-Euro member states have a ‘dispensation’—not an exemption from joining the Euro, but from immediate adoption of the Euro. Strictly, a member state can be obliged to adopt the Euro once it meets convergence criteria. The SNP argue they are not so obliged because joining the Exchange Rate Mechanism is ‘voluntary’. This is to misread EU Treaty requirements.
Moreover, Treaty provisions imply that every Member State must have its national central bank, which could perhaps be the Bank of England in a formal currency union, but not otherwise. But a union in which one party (residual UK) is not bound to adopt the Euro, but another is bound to work towards such union, seems fraught with potential contradiction.
Looking to the long-term, an independent Scotland that joins the EU will join the Euro. This will curtail Scotland’s economic independence.
Furthermore Scotland under the SNP will follow Ireland and attract multinational corporations by cutting corporation tax, making Scotland one of the friendliest European jurisdictions for Big Business.
In conclusion, while the uprising against the British establishment is wholly justified, the SNP’s project for political independence tied to economic dependence, will lead Scottish politics down a blind alley. Independence under the SNP will not liberate the Scottish people. On the contrary: Scottish interests will be subordinated to London (under a currency union) or ultimately, under the Euro, to an unaccountable central bank in Frankfurt.
Our biggest concern remains this: de-regulated, supranational Haute Finance welcomes the fragmentation of states, which tends to increase their dependence on inward flows of capital and global bond markets. Unless they have a large surplus (as with Norway) small states can easily be pressured to adopt Finance-serving policies.
So while the current level of political engagement, debate and anger is right and courageous, the channels along which it is directed by the SNP leadership will maintain a state of dependence on the very politicians, policies and institutions they are keen to reject.
That would be a tragic defeat for the rising political consciousness and growing political power of the Scottish people.
This article by PRIME’s co-Directors is cross-posted from the New Left Project’s website