In the days following a successful leave vote in the Brexit referendum, Scotland remains upset that things didn’t go their way. Upset might be a bit too gentle. They’re angry; so much so, that many want out of the UK now more than ever. They’re bitter, they want to stay in the EU and they’re not going to tolerate Longshanks… I mean, “Tory England” any more.
I sympathise to some extent. The Scots are a great people. I understand their concerns and especially share their feelings about the Tories. There are many of us non-scots who wouldn’t mind shipping the Tories off to a small island to rot. In truth, more than a few deserve to spend the rest of their lives in prison. That being said, where I do not sympathise with Scotland is the desire to break with the UK, remain in the EU and keep the Pound Sterling. Yes, neoliberalism and ordoliberalism are major factors driving my opinion with regard to the EU, but there’s a concern about leaving the UK, which I do not think that Scotland has thought through very well. What will Scotland do for “money”? I do not mean that in the sense of production. I literally mean to ask, what will Scotland do for a currency?
Currently, Scotland is part of the UK, so it has the Pound Sterling and right now that is not a problem. Where it becomes a problem is if Scotland decides to leave the UK. Now, there are many Scots who claim that leaving Britain and staying in the EU will not change anything, short of Scotland not being a part of the UK any more. They are wrong; dead wrong 100% and such a decision will prove fatal to Scotland.
Firstly, Scotland says that should it break with the UK, it will continue on with the Pound Sterling. What most Scots do not realise is that by leaving the UK, but keeping the pound, they will become users of a foreign currency. Such a scenario would be no different were Texas to leave the United States but continue using the US dollar as its currency. To put things as simple as possible for the people of Scotland so they might understand: only the government of the UK has the authority to issue Pounds Sterling. If Scotland is not part of the UK, then Scotland needs to understand that it will not have the right to issue pounds. It then becomes a mere user of another nation’s currency. Its national debt will be denominated in a foreign currency and that debt will become a very real debt. Taxation and borrowing will fund spending. Should it experience a rise in domestic unemployment, Scotland will not be able to sufficiently expand its deficit to alleviate the situation. Point blank: Scotland won’t be independent; it will be dependent. Its fiscal space will be restricted, because it must now earn pounds like any household, or business and even more to the point, like any EMU nation must earn Euros.
By leaving the UK and keeping the pound, monetarily speaking, the result would be the same if Scotland took on the Euro, whether Scotland believes this or not. You can’t just waltz into the EU and say, “Oi! We’ve got a currency and that is the British pound. It’ll do. We’ll have no bloody Euros here” and expect things to come up roses. So, belief doesn’t enter into the question. The reality is, whether a pound-using nation or a euro-using nation, the result is the same for Scotland – dependence, not independence, because it will be a user of foreign currency. If that’s what you call independence, then I must be missing something. And make no mistake, joining the EMU would be an act of self-abasement. Better said, it would be an act of economic suicide. If Scotland thinks the Tories are bad, wait until they get a taste of Mr. Ordoliberalism, Wolfgang Schäuble. Should Scotland get into a fine mess with its finances, it will be lucky to have anything left of public services. Frankly, it will be lucky if it has any vestiges of Scotland remaining after Schäuble and Brussels are done with the nation. Unemployment rates of 15% or greater and youth unemployment reaching 45% are not out of the realm of future possibility with the Euro. If Scotland’s vision is one of regression, privation and misery, then Schäuble and the Euro are a good choice.
So, belief that leaving the UK for the EU will be business as usual is a pipe dream for Scotland and the nation needs to come to terms with reality rather quickly. To reassure my Scottish friends that this isn’t some political diatribe aimed at keeping the kingdom united, let me explain how Scotland can vacate the UK and avoid the aforementioned problems.
Simply put, all that Scotland need do if it wishes to leave the UK is to introduce its own currency. Call the currency what you will: Scots pounds, Celtic dollars, etc. The name isn’t important; what is important is the sovereign currency itself. A Scotland operating as a sovereign currency-issuing nation means that it will have the needed fiscal space to react to domestic unemployment issues, protect valuable public service programmes and modernise infrastructure when necessary. Its national debt will not be an actual debt, because it is denominated in Scotland’s own currency. Without its own currency, Scotland is doomed were it to leave the UK and keep using the Pound Sterling or take on the Euro. Do not point to Ireland, because I will point to Puerto Rico. And as far as the Euro is concerned, I will point to the PIIGS. You cannot keep the pound and maintain stability nor can you take on the Euro and have any hope for lasting prosperity. The Euro will eventually mean deflation and high unemployment.
I would ask Scotland to think things through. You do not have to commit suicide just to get out of a relationship. There’s a better way out of the UK. There’s a superior path for Scotland rather than becoming Schäubleland. Institute your own currency and gain real independence. You don’t need to remain in the EU. You don’t need to remain in the UK either. Stand on your own two feet. Put the gun down and think it through.