Source Direct: The Economics of Feasible Independence

I am not of the view that independence is economically impossible. But I’m also not a denier of facts. The deficit, Brexit and the pandemic are facts. And Sturgeon’s existing economic prospectus poses huge logistical problems.

I HAVE LONG BEEN sceptical that Nicola Sturgeon’s SNP leadership has any imminent plans to move towards independence. And I’m not alone in this assessment – most insiders are privately disbelieving, but choose not to voice their doubts, because talking up the prospects (or the imminent dangers) of independence is the easiest mechanism for reproducing Scotland’s political and media elite.

Both unionists and nationalists win effort-free votes by riling their respective bases into an emotional frenzy. Meanwhile, mainstream pundits will either be cheerleaders for one “side” or sensationalists seeking headlines in a declining media market; they thus have every incentive to report surface chatter rather than looking under the bonnet.

The dirty secret nobody wants to talk about is as follows: Sturgeon gains wide endorsement from Scotland’s establishment precisely because they trust her to maintain the status quo. That doesn’t rule out moves to an indyref; but it does mean that indyref would mean prioritising “legacy supporters” and alienating the professional elites that Sturgeon has been courting since 2014. Not impossible, of course – but certainly out of character.

Anyone sceptical of this interpretation should consider the economics. I am not of the view that independence is economically impossible: indeed, I’m actively excited by the prospects for enhanced democratic control over Scotland’s resources. But I’m also not a denier of facts. The deficit, Brexit and the pandemic are facts. And Sturgeon’s existing economic prospectus, a combination of the Sustainable Growth Commission plus rejoining the EU, poses huge logistical problems. So far, only credulity, self-interest and deference to power has stopped journalists asking tough questions.

But now the gloves are off. In an interview with Andrew Marr, the First Minister was forced to accept that “independence in Europe” (“Europe” meaning the EU, naturally) would lead to Scotland’s border with England becoming a tightly regulated external EU border.

Her response was telling: “I’m not denying what the EU regulation see I’m not denying that because of the absurdity of Brexit and the Tory Brexit obsession then all sorts of issues are raised for Scotland completely against our democratic will.” In effect, the problem is not denied, but simply redefined as a question of blame rather than logistics. But facts are facts, and pointing the finger is not the same as having a realistic solution.

Having effectively accepted that EU membership poses “all sorts of issues” and “practical difficulties” for trade, Sturgeon then made another curious admission. “The difference with independence,” she said, “is we look at all of the implications, and we make a choice over what in the overall consideration is best for Scotland’s interests.”

I say this is curious not because it’s wrong in the abstract. But remember we are talking here about the vast difficulties that membership of the Single Market would impose for Scotland’s trade relations with its biggest partner. And then consider two things. Firstly, that, by Sturgeon’s reckoning, whether an independent Scotland joins the EU is not open for debate. A public referendum has been ruled out, so only Sturgeon’s team gets to assess what is in Scotland’s interests.

But secondly, more damningly, it’s clear from interviews that the normally unflappable Sturgeon has no answer to these questions. In other words, their assessment of the Scottish economic interest is grounded in little but hunches and intuitions.

Sturgeon has, after all, admitted that the arithmetic behind the Sustainable Growth Commission doesn’t add up after the pandemic. Wilson’s proposals for freewheeling “sterlingization” appear all the more reckless after 2020. A country without its own monetary sovereignty would have been sunk by the coronavirus. Perhaps more to the point, Scotland’s deficit has grown to £40 billion, eight times the limit for EU membership. So polemics aside, the practical difficulties are mounting.

Now, none of this deters me, because I am not a neoliberal and I believe that different models of economic management are not only necessary but inevitable. Much of the global elite, led by the United States, has admitted as much in practice. However, on all available evidence, the biggest diehards for the neoliberal order will be the European Union and Andrew Wilson. They will be the reveller in the front room at 7am, sticking on Ibiza anthems when everyone else has long hit the hay. And if the SNP’s economic case for independence isn’t Wilson’s, what is it?

Again, Sturgeon’s response was telling: “But there’s no credible economists in any other country suggesting that countries should manage those data deficits through austerity and cuts. Why would Scotland be unique?” Well, part of the reason is that the existing prospectus for independence without economic sovereignty would have to involve the type of austerity that ruling elites are otherwise abandoning. Wilson’s model was partly a throwback to the nineties, when free market think tank went on away days and engaged in “blue skies thinking” about selling everything off; but it was also a product of its time, of the Cameron era where cuts meant efficiency.

Doubtless, this will all invite accusations of “talking Scotland down”. But that isn’t my point, and Sturgeon is right: everyone, everywhere, is abandoning the old rules. However, you can’t found a country under the general principle of chaos and rule-breaking. At the risk of being fatuous, surely you need some economic model. And I repeat: if our model isn’t Wilson’s, what is it, and where is it?

And my real point is this: Sturgeon’s failure to initiate a new economic prospectus tells us a lot about her plans. Namely, that moves towards independence are not being planned – not imminently. Given this knowledge, any movements towards independence will have to come from outside of the two parliaments; at this rate, so will the authoring of a viable economic programme.