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The Scottish play

The Scottish play

Do Scottish people follow the same path of Macbeth?  Is it all about power and not economic prosperity? What is independence about?

Surprisingly, all parties offered more rights and power to Scots just before the referendum, declaring this is irrespective of the poll. At the same time, the reaction of the Prime Minister is just sentimental. David Cameron is literally begging Scots for a ‘No’ vote.  Some politicians have gone as far as saying “Whatever! Their loss!” or described a ‘Yes’ vote as ironic.

While the decision is in the hands of the Scottish people, Sir John Major, the former Conservative Prime Minister has criticised David Cameron for allowing the Scottish referendum to go ahead. The pressure on the UK government is severe, as this referendum not only changes the future of all Scottish generations but also the rest of the UK. Whether it is the fear of losing the union and all that hassle or just the uncertainty about the consequences, history will crudely judge the current governments if Scotland becomes independent. The loss of Scotland would be compared to the loss of the American colonies by Britain. This loss would not only be in terms of economic significance, but in terms of the national identity. Announcement of union break and its symbolic flag that has represented the union over 200 years will be shocking. It will be only flag manufacturers who would be better off as Scots would also be busy panicking for the negotiations and the challenges of starting a new country.  

As the support for independence has increased recently, the economic Nobel laureate, Paul Krugman has warned the Scots to be very afraid. While the Scottish government wishes to maintain the pound as the national currency, the UK governors are bluffing that Scotland wont be independent if it shares the pound. Even if there will be some sort of monetary union, Krugman says, “The combination of political independence with a shared currency is a recipe for disaster”. The Euro experience has showed the difficulties of running a government without monetary instruments.

The independence movement had made clear promises on tackling inequality and improving public services without clearly demonstrating how they will finance the independent Scotland.  Does full control of fiscal policy and North Sea oil and gas field revenues come to the rescue? Looking at the past, the answer is no. The Scottish government’s estimates show that in 2012-13, Scotland’s national budget deficit was 8.3% of Scotland’s GDP, which was bigger than the deficit of 7.3% of GDP for the UK as a whole. What will Scots do with £143 billion debt without any control on the interest rate?  Moreover, creating a border has its own cost and the history of trade shows that trade between countries is less than trade within countries.

While it has been argued that there is no financial ground for independence, it appears to me that the independence will be a financial disaster for the UK in the short term. Due to the huge amount of uncertainty and little information about what will happen post-referendum, markets could respond dramatically to a ‘Yes’ vote. The decline in the value of the pound is clearly the response to the recent polling as a ‘No’ vote was assumed for a long time.  These negative shocks in the foreign exchange and stock markets can have massive consequences in the economy. Perhaps the fear of prolonged negative shock has made Westminster government all jittery about the referendum.

My understanding is that the ‘Yes’ campaign has got the right strategy. The movement is trying to urge voters to vote with their instincts and make the dream come true. When people make decisions with their instincts, it is effortless, quick and emotional. Because the UK are trying so hard to keep the union, some Scots may believe that it’s in their best interest to vote ‘Yes’. This emotional deliberate reaction may surge a ‘Yes’ vote as well. The referendum shall reveal whether Scots are voting with their emotions or their logic. We shall all see whether Scottish people listen to the words of Lady Macbeth: “Screw your courage to the sticking-place, and we'll not fail”.

 

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