Currency symptom of Salmond’s problem, not the cause

Despite what seemed to me to be a comprehensive “victory” on Monday evening, Scottish First Minister Alex Salmond appears still to be losing ground at the very time he needs to be gaining it because, it is suggested, he cannot come up with a “Plan B” on the currency an independent Scotland would use if the Continuing UK refused to enter into a formal Currency Union. Yet in fact I think the “currency issue” is the symptom of his basic problem, not the cause.

Firstly, it is worth being clear about what the “currency issue” is. Mr Salmond claims that an independent Scotland will enter into a formal Currency Union with the Continuing UK – a Sterling Zone, effectively, with a single central bank, interest rate and so on with influence on decisions affecting it from both countries. All three main UK parties have said, however, that they will not allow this. The obvious “Plan B” would be for Scotland to have its own currency pegged to Sterling, the same way Denmark’s is pegged to the euro (as Mr Salmond pointed out, although it would probably be called the pound and pegged at 1:1, thus in practice similar, as Mr Darling has said, to countries such as Panama which simply use the US Dollar). Economically this “Plan B” has a certain appeal, as having a no bank of last resort (the inevitable consequence) means banks have to be more careful – as has indeed proved to be the case in Denmark and Panama. However, politically, it is a disaster because it means the Continuing UK would make decisions affecting Scotland’s currency without Scottish input – an unsellable proposition to undecided voters as it hints at loss of control rather than gain.

My own view is that Mr Salmond is being skewered over the Currency Union not because of its potential economic ramifications but because it demonstrates a more obvious (and potentially unpalatable) point – if Scotland is independent and gets to make decisions in its own interest, well, so is the Continuing UK…

In other words, what is alarming people about Mr Salmond’s proposals is that it is becoming increasingly apparent that “independence” works both ways. If Scotland gets to act entirely in its own interests, so do its neighbours. Given Scotland’s peripheral location, unfavourable demographics and small population, undecided voters are increasingly reaching the conclusion that this works to Scotland’s disadvantage. To make matters worse, it would be Scotland which unilaterally departed, thus leaving the Continuing UK with all the benefits of being the successor state (not least full control of Sterling).

By insisting that his campaign is about having decisions affecting Scotland made in Scotland, but then also insisting that he knows and can influence decisions affecting England which will be made in England, Mr Salmond is beginning to look somewhat disingenuous. It is that, not the currency, which is the crux of his current difficulty.

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9 thoughts on “Currency symptom of Salmond’s problem, not the cause

  1. The Listener says:

    What you say is obvious to the logical mind, however will that kernel of truth you describe, be grasped by those in Scotland’s central belt who will determine the outcome of this referendum?

    Mr Salmond has come across for a long time as a slick salesman of Scottish independence. He always has an answer, whilst at times actually avoiding addressing the issues raised. Nevertheless, his party has made a pretty good stab at devolved government. Like our own two major parties, SNP has energised the grass roots, in this case with the simple notion of independence, or not.

  2. Scots Anorak says:

    Has Alex Salmond been “skewered” on currency? Is it not more correct to say that the idea of rUK disregarding its own manifest self-interest and refusing a banking union was cooked up by Alistair Darling himself — and neatly sums up, with its intended paradigm of big finance trumping the democratic will of the people, much of what is currently wrong with the UK and Mr. Darling himself?

    Commentators pointed out at the time that it might backfire, since it very clearly suggested that the Union was not a partnership of equals, or even one characterised by parity of esteem, but an abusive, one-way relationship built on a shoogly foundation of ego, tantrums and threats of revenge. Not only that, but a high-ranking Government Minister (Gideon Osborne?) has been quoted off the record saying that such a currency union would “of course” happen.

    The fact is that most Scots believe the currency question to be a bluff.

    That’s shown very clearly by how the debate on the street has moved on. As one observer put it: “[Darling] made the mistake of returning once too often to the currency issue leading Salmond to accuse him of being a ‘one-trick pony’. The audience at Kelvingrove Museum and viewers around the country seemed to groan in unison.”

    http://www.edinburghnews.scotsman.com/news/scottish-independence-darling-flounders-in-debate-1-3520547

    It’s also interesting that the Nobel-prize-winning economist Joseph Stiglitz, who has made Scotland’s currency arrangements his special study, has said the following:

    “The position of England today is obviously bargaining, trying to change the politics of the electoral process. Once they get independence, if that happens, then I think there would be a very different position.”

    http://www.bloomberg.com/news/2014-08-20/stiglitz-says-u-k-would-drop-denial-of-pound-to-scotland.html

    It is of course possible that the No bodies of No Better have dug a hole for themselves and that the good people of rUK, who pay scant attention to Scottish politics and believe their own representatives’ propaganda, will hold them to their bluster about the pound. No one should pretend, however, that it is a decision based on economics.

    • I do think it remarkable that “Yes” supporters don’t give any credence at all to the fairly obvious point that, when the UK parties say they will not enter a Currency Union, they may actually mean it.

      Those same supporters will not even consider that Mr Swinney is guilty of “bluster” when he threatens not to pay Scotland’s share of the debt. Nor indeed do they consider that the SNP – a party with no experience of fiscal management – may actually be in error (for example with its ludicrous assertion that Sterling is an “asset”).

      Each side in this debate is guilty of taking everything its own side says at face value and 100% correct, and everything the other side says as “bluster”. It genuinely alarms me to see intelligent people unable to consider, just consider, that *some* of what their own side says is nonsense and some of what the other side says presents a challenge to be taken seriously.

      It all rather sums up why I’ve given up on politics!

      • Scots Anorak says:

        “I do think it remarkable that “Yes” supporters don’t give any credence at all to the fairly obvious point that, when the UK parties say they will not enter a Currency Union, they may actually mean it.”

        I suggest that their healthy disbelief might be founded on the fact that a) senior Government Ministers freely admit that they are bluffing in off-the-record briefings and b) world-renowned economists who observe the situation reach the same conclusion.

      • Scots Anorak says:

        “Those same supporters will not even consider that Mr Swinney is guilty of “bluster” when he threatens not to pay Scotland’s share of the debt.”

        You may have a point, there; it would clearly be a very difficult situation. However, logically speaking, if one is absolutely convinced that the Better Together people are bluffing, questions of Swinney’s veracity or practical room for manoeuvre in the event of negotiations are not key.

  3. Scots Anorak says:

    “Given Scotland’s peripheral location, unfavourable demographics and small population, undecided voters are increasingly reaching the conclusion that this works to Scotland’s disadvantage.”

    The three latest polls have all shown an increase in support for Yes.

    http://en.wikipedia.org/wiki/Opinion_polling_for_the_Scottish_independence_referendum,_2014

    As for the unfavourable demographics and small population, it’s worth remembering that Scotland also suffers from the following intolerable burdens:

    32% of the UK land mass

    At least 90% of the UK’s oil reserves

    25% of Europe’s tidal potential

    10% of Europe’s wave potential

    30% of the UK beef herd

    9% of the UK dairy herd

    20% of the UK sheep flock

    10% of the UK pig herd

    28% of the UK’s barley area

    60% of the UK’s fish catch

    56% of the UK’s trees

    In short, unlike the UK, Scotland has a balance of payments surplus, and unlike the UK, it can feed itself. To argue otherwise, as Better Together are doing, is pure and simple misinformation.

  4. Chris Roche says:

    If the YES side get reasonably close to around forty per cent of the total vote in Scotland’s Independence referendum it doesn’t matter a tinker’s curse one way or the other about Alex Salmond’s perceived strengths or weaknesses __ Northern Ireland will, for a certainty, be condemned to a long, long, long miserable humiliating death by a thousand cuts scenario, which will ultimately leave the traumatized and godforsaken DUP wishing the Brit loyalist NO brigade had LOST the damn referendum all those years ago in 2014!

    • Scots Anorak says:

      A lot can happen between now and polling day, and even then a great deal will come down to turnout. However, all six pollsters are currently showing a Yes vote of at least 42% once don’t-knows are removed, and support for independence has not yet peaked.

  5. Martin J Frankson says:

    Having watched & listened to many debates over the past couple of years on this subject, I can’t help but notice just how utilitarian the main planks of the arguments are. The case that Scotland should be independant no matter the financial consequence is hardly ever made. It’s like watching an elongated general election campaign with the usual topics of jobs, budgets etc being debated.

    SNP & better together are debating passionately but about rather in passionate things. Can we imagine George Washington, Nelson Mandela or DeValera totting up the credit & debit columns and saying ‘ah, we will be a few quid/groats/rands better off if we rule ourselves. Lets be free!!”

    No, they believed in freedom as its own self evident justification in itself no matter the financial consequences.

    This is what intrigues and depresses me about the Scottish Yes campaign. I really don’t see them as true nationalists nor do I see the No side as true unionists. They are like kids choosing which parent to spend the weekend with on the basis on which one will buy the most sweeties.

    Hardheaded yes, but principled? Absolutely not

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