There was an article
published by the Independent yesterday talking about the growth in support for
independence in both Wales and Scotland and the way in which the pandemic has
impacted this. On the whole, it seemed a reasonable analysis, but it was
undermined completely by the uncritical inclusion of this passage: “Neither
Cardiff or Edinburgh would have had the finances to support the widely praised
furlough scheme, which, so far, has saved hundreds of thousands of jobs”.
This is not analysis or comment, it is pure and unadulterated unionist
propaganda. Whilst the scheme has indeed received some praise, it has also
received a lot of criticism (largely because of the arbitrary cut-offs in both
percentage of salary covered and timescales), a point which the words ‘widely praised’
glosses over. But more importantly, what is the basis for stating that “Neither
Cardiff nor Edinburgh would have had the finances to support the … scheme”?
It’s true, of course, that neither would
have been in any position to support a UK-wide scheme; in that narrow sense,
the sentence is factually correct. But they don’t need to – they only need to
be able to support the schemes as they relate to Scotland or Wales. It’s also
true, of course, that under current powers and budgets they would be unable
even to do that; but that’s not what was being posited here. The context is clearly
making the unsupported claim that an independent Wales or Scotland would be
unable to run such a scheme itself, a claim which is completely without
foundation. Given that the UK scheme has been funded by simply creating new
money, there is no reason in principle why Scotland or Wales could not do the
same on a scale which suits each country, with a couple of important caveats to
which I’ll return.
In fact, there’s no reason why they could
not do so without the limitation on the period for which the scheme operates or
the initial limit of 80% of salary, let alone the current limitation of 67%.
These limits, imposed by the Chancellor, are entirely arbitrary, based on a particular
ideological view of the world. There is nothing necessary or inevitable about
them. What that means is that Wales or Scotland could not only have initiated
such schemes themselves, they could have done so without the arbitrary limits,
making the schemes better and saving more jobs. Far from us being dependent on
the UK Treasury, the Treasury is actually making things worse than they need to
be and preventing both Wales and Scotland from taking more radical action.
As I mentioned above, however, there are important
caveats. The first is that to be able to create money in this way, a state
needs to have its own fiat currency and to be in complete control of that currency.
The ‘sterlingisation’ which I understand to be the current policy of the SNP, would
be a severe obstacle to this approach and leave Scotland highly dependent on
decisions taken elsewhere. In a crisis like this pandemic, it would
significantly constrain Scotland’s freedom to do better than London – and it could
conceivably make things worse. The other caveat is that spending money into the
economy on a larger scale does not cause inflation – but this is not a problem
in a period of severe economic contraction where deflation is potentially a
bigger danger.
The fact that anyone can repeat the claim
about an independent Scotland or Wales being unable to act in the same way as any
other independent country with no need to explain or justify it highlights how
easily current perspectives can shackle thinking. The biggest obstacle to
becoming independent is, in some ways, throwing off those mental shackles, and
allowing ourselves to think as people in independent countries would. Not only could
we do just as well, we could do considerably better than the ideologically
hidebound incompetents currently in charge.
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2 comments:
You bang on about this like I bang on about Conventions. In a way, we are making the same point. There is a gap in the chain that leads to Welsh Indy, an intellectual gap. Nationalists as a group don't take the mechanics seriously enough. Take economics, which I gave up at A-Level. Two aspects
Currency - what ****ed the SNP in 2014 was that they hadn't worked this out when the Brit Press threw the questions at them. Euro, GBP or Scottish pound? The awkward thing for Scotland and Wales is that its not easy to get our own currency. We don't like GBP (as you point out) and the public won't accept the Euro and a Scottish or Welsh pound sounds poxy or at least new/risky. My answer is - get Dominion Status, keep Sterling. And then work out the next bit and go from there.
Debt - why did the Republic of Texas 1836-1846 fail? How could it have survived? Well it turned on the question of the Texas "National" Debt. Welsh Nats (including me) are nowhere near a confident answer on this. Again, the answer is to build the Welsh ability to borrow and take on what is truly Welsh debt ie get Dominion (intermediate) Status and go from there.
Or have you got some answers ready on the currency, and Welsh National Debt?
Jonathan,
”There is a gap in the chain that leads to Welsh Indy, an intellectual gap. Nationalists as a group don't take the mechanics seriously enough.” I agree, and in that sense we are indeed regularly making similar points, albeit from a different political perspective.
“The awkward thing for Scotland and Wales is that it is not easy to get our own currency.” I’m not sure why you’d think that. Plenty of other countries have done exactly that.
” My answer is - get Dominion Status, keep Sterling.” I fully understand why retaining sterling is politically attractive, and that’s why (I assume) the SNP are so reluctant to let go of the idea. It makes the transition seem easier. It’s fraught with problems, though.
”Debt - why did the Republic of Texas 1836-1846 fail? How could it have survived? Well it turned on the question of the Texas "National" Debt.” I know little about the Texas Republic, and don’t have the time to do the research, so I’ll just make two general points. Firstly, that was in the days when currency was backed by valuable metals, whereas today we use fiat currencies, and secondly the extent to which ‘debt’ is a problem depends on to whom it is owed and in what currency it is denominated.
”Again, the answer is to build the Welsh ability to borrow and take on what is truly Welsh debt” I think that misses the point about having a sovereign currency and the consequent ability to create money (within limits and subject to caveats) rather than depending on ‘debt’.
”Or have you got some answers ready on the currency, and Welsh National Debt?” What we have learned (although not everyone has yet fully understood the implications) from both the financial crisis of 2008 and the current pandemic is that a country which has its own sovereign fiat currency and whose debt is mostly denominated in that currency has a sufficient degree of monetary sovereignty such that it can never go bankrupt. (If it gets things wrong, it can create inflation instead, but that only happens when there is too much money chasing too few resources, a problem which we don’t currently face.) However, a country which uses someone else’s currency, or which owes its debt in someone else’s currency can indeed go bankrupt, so its response is limited by what it can borrow. As a result, an independent Scotland facing COVID whilst using sterling as its currency would have been severely limited in its ability to introduce schemes such as furlough.
Had Wales become an independent member of the EU whilst the UK remained in membership, I would have favoured early adoption of the Euro – not because it’s a perfect solution, but because Euro-zone financial policy has been, as a general rule, closer to meeting Wales’ needs than UK policy which favours financial services and the south east. Outside the EU, it seems to me that a new Welsh currency is the only sensible answer. A hard political sell, I know, but the right thing to do in economic terms.
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