The Sunday Herald (23.03.14) carried a report on the latest offering on the Scottish currency debate, by Professor Leslie Young of Cheung Kong Graduate School, under the headline, "Osborne's case against currency union ripped apart by top economist." Professor Young points out that the letter from the Treasury penned by Sir Nicholas Macpherson, the permanent secretary to the Treasury, has focused on "non-issues" and presented a "loose analysis" based on "inconsistent assumptions". He sums up his analysis by stating, "There may be good reasons for the UK to reject a currency union with an independent Scotland, but none can be found in the Treasury letter. Yet that letter is the key justification for the stance of the UK Government".
That is a pretty damning critique and it has been covered by most of the serious media, thereby fulfilling the hope of Sir Tom Hunter, that the group he has set up - scotlandseptember 18.com - to disseminate information to Scots, about the key issues in the referendum debate, has made a good start. Professor Young's work has been commended by two Nobel Prize winners and by the chairman of the Nobel Committee, but his obvious academic expertise has cut no ice with the Treasury, whose spokesman simply said, "A currency union is not going to happen. The UK Government has set out detailed analysis supported by numerous independent voices as to why a currency union is not in the interests of an independent Scotland or the rUK. this decision is not going to change. This means less than six months from the referendum the Scottish government still has no plan for what currency they would use."
That is the argument in a nutshell; no matter how many "experts" are quoted, this is a political decision and just like the setting up of the euro, politics and not economics, will determine the outcome. On the advice of their Fiscal Commission - Crawford Beveridge in evidence to Holyrood's Economic Committee this month, said none of the members of the Fiscal Commission believed that Westminster politicians will stop a currency union in the event of a Yes vote, claiming "economics will trump politics" - the leadership of the SNP has set its face against stating any preference for a Plan B, laying itself open to the derision of the Unionist side and helping to create greater uncertainty among business leaders than is necessary. Every request for information, every counter argument to a currency union, no matter its source, is met with the SNP mantra of, "The Fiscal Commission, which contains two Nobel Prize winners...". Professor Young has yet to win the much coveted prize but the fact he has had his work commended by two Nobel winners, has been well trailed and seems to be considered accolade enough.
The constant reference to winning Nobel prizes is obviously meant to deflect criticism as if the fact of winning a Nobel prize is in itself sufficient to win any argument and how dare the rest of us have the temerity to argue against them. Those who set such store on Nobel Prizes would do well to remember that Henry Kissinger also won a Nobel Prize - for peace no less - as did Barack Obama, after five minutes in the job, two awards that rather took the gloss off Nobel. Alan Greenspan, one-time chairman of the Federal Reserve, was a God to the world's media and his word could shake stock markets throughout the world, while he was in office. Now, he is blamed for creating the conditions which caused the housing bubble and mortgage crisis, which created the financial crisis which destroyed the banking system in several countries throughout the world. So before we abolish elected government in Scotland and hand over the reins of power to a committee made up of Nobel Prize winners, perhaps we should stop and examine what the latest expert in that group has actually said.
Professor Young condemned comparisons between a currency union with the rUK and the euro zone on the grounds that Scotland and England will be closer in "business and financial and fiscal systems" than euro zone members. He stated, "They (Scotland & rUK) would start from very similar political and business cultures, hence very similar macroeconomic and business structures and financial parameters, so currency unification would not bring on the tensions that drove the euro zone crisis." That is to do no more than state the obvious and is hardly surprising, given that Scotland has been in the Union with England since 1707 and had her economic structure determined by London-based governments which, since government took responsibility for economic management last century, have ensured the economies of both countries have been managed as if they were one and the same economy. Neither is opposition to a currency union, by those who have opposed it on Nationalist grounds, based on comparisons with the crisis in the euro zone. The question of sovereignty and where it lies, who will control Scotland's economic development does not enter into his analysis. The politics of the debate are totally absent.
Professor Young is getting closer to the crux of opposition to the currency union, although he seems to be unaware of it, when he goes on to say, "The two governments and the central bank could quickly agree to head off any downward economic spiral with decisive action, given their shared values and culture, virtually identical business, financial and fiscal systems, and the familiarity, goodwill and respect that obtain between their electorates." According to Professor Young, economic management of the Scottish economy would be conducted in exactly the same way as it has been managed in the past, ignoring the fact that for the past thirty years, Scottish economic growth has lagged behind that of the rUK in every single year. The economic nationalists who lead the SNP, have consistently made the case for taking control of "our own resources" in order to "build the better and fairer society we want." Not according to Professor Young we won't.
The Professor, whose work has been commended by no fewer than two Nobel Prize winners, goes into overdrive when he states, "Therefore ignorant, inflammatory rhetoric blaming English intransigence for the consequences of Scottish fiscal over-reach, would be quickly dissected and dismissed by the many respected journalists, academics and think-tank analysis on both sides of the border." In other words, if Scotland stepped out of line by attempting to exert a little more control over fiscal policy - as the SNP have consistently claimed they would do - we would be quickly brought to heel. He goes even further when he comments on the banking system, stating, "If a currency union is agreed without the tight banking union and tight fiscal rules" recommended by Bank of England Governor Mark Carney and the Treasury, then the big banks as we know them will shift to England. He further states, "The transition to independence and a new currency regime would create a great deal of uncertainty, which all Scottish citizens and businesses could hedge by opening an account with a rUK registered bank." Professor Young paints a picture of financial collapse unless we have a currency union, with Scots business and savers transferring capital wholesale to rUK and Scottish banks losing savers until they became insolvent.
The only question that remains is why the hell do Alex Salmond and Blair Jenkins of the Yes campaign, think for one moment, that Professor Young's report helps the case for either a currency union or independence? A spokesman for the First Minister is quoted as stating Young's report "totally demolishes" Treasury objections to a currency union. He further states, "UK Government analysis has overstated the risks but failed to capture the benefits of formal currency union." Blair Jenkins is quoted as saying, "The report states that no good reason can be found to reject a currency union". A currency union, as laid out by Professor Young, means Scotland's economy will be as tightly controlled as it is now, a point that critics of a currency union, including this writer, have made consistently. Perhaps even more important, despite the claim made by SNP supporters, this putative currency union won't be just for Christmas and there will be no going back. To do so, would create the financial Armaggedon forecast by Professor Young, whose work has been commended by no fewer than two Nobel Prize winners, as well as Alex Salmond and Blair Jenkins. Perhaps there is another final question; if this is what economic nationalists mean by independence, a currency union as laid out by Professor Young, what is the point of their kind of independence?
