Sunday, 14 September 2014

The Power of Negative Thinking (Scottish edition)

There's a lot of keech, as they say in Scotland, bring spouted on both sides of the indyref debate. No, Scotland will not slide into catastrophe as an independent nation, and nor will it be a megarich socialist utopia with unicorns giving out free prescriptions. It probably will thrive and become wealthier in the long run, but the birth pains of getting there could well be pretty painful and I am certain that there will be some who will regret, in the short term at least, voting Yes. Conversely, it will probably see a rebirth of the sensible centre-right in Scotland, and some right-leaning No voters will quickly embrace and love the possibilities offered by independence.

Weirdly, though, it appears that about half of No voters want an independent Scotland to fail. I have been looking at the data tables for Sunday's Sunday Telegraph ICM poll that showed 'Yes' 8 points ahead. Martin Boone of ICM gave an interview last week to the BBC in which he expressed concern that the pollsters could get the result completely wrong, as they did in 1992. That tells me that even he isn't entirely comfortable with the results of ICM's own poll. It should be noted that the sample size was also smaller than usual (700), and it was online rather than by telephone (ICM's own telephone poll a few days earlier gave No a 2-point lead).

Anyway, I digress.  A big part of the No campaign has been that they believe Scotland having its own currency and central bank would be a disaster for the country in the short term (and they are probably right), to the extent that it's not currently even on the agenda: the plan is for a currency union with the rump UK (rUK). The No argument contends further that even a currency union with rUK would be bad for Scotland, even were rUK to agree to one.

Fairly logical so far. Where it starts to get weird though is that according to the ICM poll, half of No voters believe Scotland shouldn't be allowed (by rUK) to have a currency union (page 14).  Now, I accept that it is possible that a section of No, having given thought to the economic and monetary policy implications of a currency union believe that, actually, a new Scots pund would actually be preferable to a currency union. I suspect they are small in number though.

That leads to the conclusion that a very significant minority of No voters, believing that an independent Scotland keeping the £ sterling would be the lesser of two evils, also believe that Scotland should not be able to keep it in any case. Or to put it another way, having convinced themselves that Scotland won't be allowed to keep the £, or alternatively believing that Scottish independence and a currency union will damage the economy, they want to see Scotland not being able to keep the pound to vindicate their opinion and how they voted*.

I believe that psychologists call this cognitive dissonance. You and I are more likely to call it cutting off your nose to spite your face.

*(There is also the possibility that they believe that it would be unfair on rUK to allow this to happen; I can't see that equating with No's claims to also be 'Team Scotland').


Mark A said...

Chris, this is nonsense. The SNP and the Yes campaign think an independent currency would be worse for Scotland and unpopular with Scottish voters - that's why they don't want it and why they made currency union an important part of their campaign, since at least their white paper earlier this year. Many economists have however been pointing out, in some detail, that a vote for independence is a vote against the factors which make the UK currency union work (Simon Wren-Lewis, Angus Armstrong, and Tony Yates among others are all good; Krugman as usual is probably the pithiest).

There are two big problems - first, an independent Scotland would share many fewer risks with the people of the rest of the UK. For example, if there was a big temporary fall in the oil price, blowing a hole in the Scottish fiscal position and leaving half of Aberdeen out of work, this would at present be cushioned by the UK's automatic fiscal stabilisers (lower tax payments and higher benefits in Scotland, leading to a transfer from the rest of the country). In an independent Scotland, there would be no such transfer. Scotland's economy would instead be screaming out for looser monetary policy, but under any reasonable currency union arrangements wouldn't get it, because the interests of Scotland's 5 million people can't outweigh those of the rest of 55 million in the rest of the UK.

Second, it is hard to see any reasonable mechanism for providing the necessary democratic accountability of the BoE under a currency union. At present, the Government sets the BoE monetary policy target, appoints its senior management, oversees the BoE's various crisis management functions, approves and indemnifies programmes which go beyond the BoE's publishes monetary policy framework, and can and does legislate to change the BoEs powers and responsibilities as needed. BoE management are regularly called to explain themselves in public before the Treasury Select Committee, which also holds non-binding but influential appointment hearings for them. Both Chancellors and TSC members often have Scottish accents. How is all this to be replaced? Most of these things are not sufficiently foreseeable to be fixed in treaty at the date of independence. It would be profoundly undemocratic, as well as risking paralysis, for Scotland to have a right of veto over these matters. And a weighted voting arrangement would be meaningless given Scotland's small size.

Chris Connolly said...

I understand all that. But the question asked, was 'Do you believe Scotland should be able to keep the £?"

Is it your position that you believe these 50% of No voters believe that joining the euro or having an independent currency are preferable?

The position I am talking about is those who think Scotland *shouldn't* be able to keep the £.

Mark said...

Yes, exactly - under the current system, currency union with Scotland is the best option. But under the changes independence would bring, it would be worse for both Scotland and (11x more importantly) the rest of the UK than an independent currency (probably pegged to £, at least to start). I don't think your premiss that most no voters think a £ currency union after independence is the lesser evil is right.

Chris Connolly said...

I'm not being facetious: but do you really believe that a big chunk of No voters believe that an independent currency would be preferable to a currency union?