Unionists would like us to think that Scotland is all about oil. That is not the case as we have a diverse economy ranging from raising potatoes in the Highlands, in Fife and in the Borders, to textiles which still employs upward of 20 thousand people in the country.
In between these extremes we have construction, whiskey, financial services, electronics, and software. Tourism is a big factor too, with 3 per cent of our annual GDP generated by that industry. In total Scotland has a GDP per capita of £45000.
The GDP is a bit of a blinder though because while Scotland is distinctly average in that respect, compared to our European neighbours, the GDP per capita in North and East Ayrshire is €16.200, which is comparable with the poorest of the French overseas territories.
The key difference between the UK economy and the Scottish one, if that separation can be made, is that Scotland is an exporter of goods, while the rest of the UK is an importer. This has consequences for our economy.
The most famous commodity we sell is, of course, the oil. But that is a trade denominated in dollars, so it should be a source for foreign hard currency reserves. As per usual, that is not a benefit we’re seeing much of as the headquarters of the oil companies in these isles are located south of the border. The foreign currency ends up there, not here.
We also sell whiskey, which is another iconic Scottish export. We also export electricity, electronics, and aeroplane parts. I’ll remind you that one of the biggest selling computer games franchises of all time is Scottish – Grand Theft Auto. So, we make things, and then we sell them abroad.
Naturally, Scotland also has a large services sector, particularly in banking. But even that can be said to be export driven. We are certainly not big enough to house such a large finance sector on local business. It is a global service industry. Unfortunately it too is located in London these days, although the accounting shows up on the Scottish balance sheet as we’re part of the UK.
Like I said, this has consequences, because we’re tied to an economy based on importing goods. Whilst Scotland would dearly need a currency that made our exports competitive on the global markets, the key to the much larger UK import economy is to have a high value currency that makes imports cheaper. That creates a glass ceiling for our economy.
London’s and Westminster’s aim for the cheapest possible imports make our exports non-competitive. There’s only so much we can do to make things and sell them because our currency prices us out of many markets – or makes it more difficult to convince others to buy our things.
For some goods, like whiskey, it’s less of a problem because whisky is seen as a luxury that’s not that price sensitive. For other industries, it’s a huge problem, because they are competing on pennies against cheap third world companies. For all industries, it introduces a cap on our economy. Unless we deindustrialize completely and become an import and service economy like England and Wales, the economy will be artificially depressed because the things we make will be too expensive for foreigners to buy.
Other problems arising from the union with England, Wales, and Northern Ireland contribute to the economic glass ceiling. The concentration of land ownership, for instance, makes our tourism industry needlessly restricted. Unless the 500 or so owners of the private land in Scotland agrees to tourist development, it won’t happen.
Politically we’re stuck under an insane economic policy pushed by the Tories that goes something like this: in order to be friendly to business, we need to pursue an economic policy that make it so that most customers can’t afford to buy anything. With the recent budget, the Tories have embarked on impoverishing a quarter of the electorate, which of course will have contractionary effects.
We already see that with rises in unemployment. After a general election campaign where the central theme has been about belt-tightening and further austerity, it is not a great surprise that employers either hold off hiring new people, or that they let people go expecting a downturn.
It is, of course, economic madness – and therefore it is maddening to see Scottish unionists continue to argue for staying in the union. If they, as the poll studies after the referendum about independence said, mainly voted no for pragmatic economic reasons, then it was irrational to vote for a continued union.
But this tendency was helped by the SNP’s caution when they pushed for currency union, the monarchy, Nato, and European Union membership. In hindsight, they propagated for independence light. I understand why they did it, and we acquiesced to the plan with just a little grumbling here and there. On the whole, we went along with it, and I think in hindsight that it was a mistake.
I think that it was a mistake for us in the other yes-parties to agree to this line for the sake of unity in the yes campaign. However, the Better Together campaign would have attacked perceived disunity as harshly as the Currency Union plan. I can hear Alistair Darling thundering about ‘chaos’ and ‘shambles’ as clearly as I can hear his demands for ‘Plan B’. I don’t know if us pushing for an independent currency would have made any difference to the outcome thus.
It convinces me that in the next independence referendum, we must absolutely have the currency sorted. We should state categorically and firmly that we will use the UK pound in a transition period, and introduce a parallel currency – the Scottish Pound – at the same time. Both should be legal tender in an independent Scotland for the first five or ten years. Gradually, as the Scottish pound stabilises, we move more and more of our economic weight over to the new currency.
For the first years we introduce point taxes on exports to build up the necessary currency reserves. We are going to need 30-40 billion Scottish pounds in reserve. The bigger the reserves, the more stable the currency will be, but gathering that amount of money will take time unless the point taxes are introduced at an extortionate level which will wreak havoc with our exports.
This is a doable plan, so let’s forget about currency union next time we vote for independence. Let’s have a firm, solid plan for our own currency. Only with our own currency can we shatter the economic glass ceiling that the UK pound puts on us. Oh, and let’s expropriate a fair chunk of the land from the feudal lords in their castles. Let’s make titles as much of a joke in Scotland as they are in the rest of Europe.
We have what we need to become a nice, prosperous manufacturing nation once we become independent. Collectively, we are clever and resourceful. We’re also blessed with a patch of land that’s abundantly rich. Right now, in this union, all of that is pushed down, repressed – not least by our own habit of thinking we’re not good enough. The Scottish cringe has a price tag which is a non-optimal economy.
If we break free from the union and the cringe, we can be pretty awesome. But only if we abandon the SNP’s caution and do what’s needed to be done – become truly independent instead of relying on a foreign head of state, a foreign lender of last resort, and a foreign monetary policy. We can do this, then.
Often when people talk about the economy, they want to obfuscate, or they don’t really know what they’re talking about
I wrote another post for my Medium blog, which you can read here.