As Scotland Mulls Independence, A Stupid London Plays It Dirty
Forbes, By Eamonn Fingleton
For students of British politics, the big issue this year is the future of Scotland. The Scottish people have enjoyed limited self-rule since 1999, when a separate Scottish parliament was set up. Now in a referendum planned for this September, they will vote on whether to establish an independent nation.
Instead of letting Scottish voters make a reasoned and unpressured decision, the London establishment has increasingly been playing it dirty. As the Irish economics commentator David McWilliams has pointed out, London’s “bully-boy” tactics have been so clumsy that they may backfire.
The latest development is that, in a statement almost certainly inspired by London, European Commission President Jose Barroso has opined that it would be “extremely difficult, if not impossible” for an independent Scotland to join the European Union (EU).
Is this the same EU that so lately rolled out the red carpet to countless new members in the remotest parts of Eastern Europe? For the record some of these nations are more than twice as far from Brussels as the crow flies – and several have entered the EU with post-Soviet economic systems far more awkward to integrate than Scotland’s.
Barroso’s intervention is particularly anomalous given that the European Commission has no official role in deciding who joins the EU. That prerogative lies with the governments of individual member nations.
In an arguably even more counterproductive tactic, London has been spreading unfounded concerns about an independent Scotland’s finances. London has focused particularly on Scottish National Party leader Alex Salmond’s wish to retain the pound after independence. In an almost unheard of outbreak of unanimity, the three major political parties in London – the Conservatives, Labor, and the Liberal Democrats – last week concurred in saying that the U.K. would not allow an independent Scotland to use the pound.
But why? The Scottish nationalists’ wish to retain the pound is hardly unreasonable. What Salmond is proposing is technically known as a currency union, an arrangement that typically does much to promote efficient trade among closely linked nations and, with reasonable self-discipline on both sides, has little or no downside.
In fact some of the world’s richest nations are members of currency unions. Examples include Hong Kong/Macau and Singapore/Brunei.
Then there is the granddaddy of them all, Switzerland/Liechtenstein. Established in 1920 and still going strong, it is an arrangement that neither nation has had any reason to regret. Certainly Switzerland ranks well up among the world’s richest nations, with a per-capita income more than 50 percent higher than America’s. Meanwhile Liechtenstein’s per-capita income at $142,000 at last count was the world’s highest.
The concept of a currency union is not exactly new in London. Writing in the Dublin-based Sunday Business Post, David McWilliams has pointed out that the United Kingdom and Ireland maintained a currency union for many decades after Ireland became independent in 1922. British pound notes circulated interchangeably with Irish pound notes up to 1979, when finally, in preparation for Ireland’s transition to the euro, the Irish pound’s link with sterling was broken. All the evidence is that the arrangement worked well for both nations.
McWilliams is not alone in looking to the Irish pound as a model. The same point has been made by the prominent London-based commentator Andreas Whittam Smith. Writing in the Independent newspaper, Whittam Smith has commented: “The best guide is what Ireland did when it became independent in 1922. The similarities with Scotland are striking. Like Scotland today, most of the Irish banks had been issuing bank notes. Today seven Scottish banks have the authority of HM Treasury to issue sterling banknotes as currency. In 1922 the Irish banks continued issuing what were, strictly speaking, British currency notes backed by cash held in London.”
Whittam Smith went on to note that though the Irish monetary authorities gradually extended their authority in subsequent decades and thereby brought into existence an Irish pound, the process raised few alarms on either side of the Irish Sea. He commented: “For the Scottish National Party, there are two points to note in this history. First, the exercise was extremely pragmatic. The Irish started with what they had already got – banks that issued currency notes – and, step by unhurried step, they created their own currency before joining the euro. And second, as matters evolved at their cautious pace, there were no disasters, no crises and no drama. Isn’t that what a new nation would want?”