The Economics of Yes

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Illustration by Peter Kuper

 

The YES campaign can win the emotional vote for Independence. It will never win the economic vote as long as it continues to play to the rules of the British Establishment and the City of London. Nor should it.

As the NO people say, what is the point of separation if everything is to remain the same?

The stagnant wilderness of the UK economy is entirely due to the collapse of its mystic banking system. If the money which is the means of exchange in any civilised State is corrupted then the economy will either die or return to barter. That is already happening in Greece and is under way elsewhere.

It is well known within the upper echelon of financial circles that the nature of this type of banking system renders it vulnerable to domino style chain reaction leading to collapse. Nor is that any secret within the ruling ‘Establishment’ which maintains the Westminster style of democratic government in power.

It is however a closed book to the vast bulk of politicians who have nodded their heads to five years of taxpayer bailouts and money printing programmes to ‘support’ the banking system. It is the Establishment which devised this rescue package and threatened the politicians with chaos if they did not back it.

This is very much the flavour of the economic argument against independence and the Establishment will win if ordinary people do not demand more of their politicians. When for example, did you last hear a rational argument for dealing with the banking crisis or for managing the economy on a full employment basis rather than an endless diet of cuts and austerity?

Such alternatives seldom see the light of day and if they are granted an airing on the Establishment media they are dismissed or ridiculed on the assumption that the audience would not understand ‘the important issues’. For instance.

I trained as a chartered accountant in Glasgow and then went into the manufacturing and construction industries. I have firsthand experience of business success and failure. I do not believe the banks should have been bailed out. They should have been placed into administration like any other insolvent private company and the Administrators would have ensured the continuity of the retail banking and payment system. The toxic assets would have been offered for sale or written off. Today we would have been long back to pre-crisis conditions in the domestic economy.

In turn that would have focused public attention to the demise of the Building Societies which used to supply virtually 100% of our mortgages and indeed 75% of the Nation’s entire supply of money. Ordinary people might well begin to ask questions like –“Why were the banks allowed to take over the Mutuals?” Indeed, people might begin to question how these institutions which were entirely funded by pensions and savings, were bought over using bank debt guaranteed by those same taxpayers?

From there it is but a short step to taking a fresh look at how the economy is financed and in whose interest. Now that is a question a lot of Scots might like to put to the politicians of both Campaigns. It would reinvigorate this final year to debate such issues outside an agenda set by the Establishment. Of course oil is a bonus and not forever, but an honest banking system would regenerate every nut and bolt of the economy.

Is not that the kind of change we need to be talking about? It is certainly the kind of change which would win the economic Yes vote.

So next time those responsible for inviting the panels of academic economists, financial experts and those politicians in whom we have invested our trust, try and make room for some alternative views on what is important bout independence. Wee Patrick Harvey may appear a bit scruffy, but to those with an open mind, he usually makes more sense than the rest put together.

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  1. Crubag says:

    “They should have been placed into administration like any other insolvent private company and the Administrators would have ensured the continuity of the retail banking and payment system.”

    I’d agree that both the shareholders and bondholders should have paid the price for failure of their investment, rather than the taxpayer, though the latter would have had quite the impact on pensions.

    “Why were the banks allowed to take over the Mutuals?”

    They weren’t. The building societies first demutalised by becoming public companies – with member approval as the “windfalls” of shares which could be cashed in were very popular – and the new companies were then merged with or bought over by banks.

    Them and us narratives are easy things to reach for, but as with the environment we shouldn’t ignore the power of individuals acting collectively.

  2. Peter A Bell says:

    While I agree with everything R.F. Morrison says about the way the banking collapse should have been handled and the need for radical reform of the banking system, I have to stress that this is not what the referendum is about.

    We are getting into a situation where everybody is starting to hitch their pet issues to the referendum vote – from Nato membership to an independent currency to the content of a written constitution and more. Combined with the anti-independence campaign’s efforts make the vote all about Alex Salmond and the SNP, there is a real danger that the waters will be muddied beyond redemption.

    There are two related but quite distinct debates going on, each centred around a different process. There is the debate around the process of BECOMING independent. And there is the debate around the process of BEING independent. When we engage with a topic we should be absolutely clear about the question of where it belongs in terms of these two debates.

    Matters of policy beyond that which is required to facilitate BECOMING independent belong in the debate about what happens afterwards – the debate about BEING independent. It is pointless and confusing to talk as if a Yes vote were a vote for reform of the banking system – or a vote for getting rid of the monarchy, for another example – when it is not and cannot be any such thing.

    It is equally pointless, and frankly rather foolish to insist, as some do, that the SNP and/or Yes Scotland should be adopting a more radical stance. As has been pointed out repeatedly, Yes Scotland doesn’t “do” policy. And the current administration has no mandate beyond securing the referendum and managing the negotiations and transition in the event of a Yes vote. It has no mandate to launch an independent currency. It has no mandate to make Scotland a republic. It has no mandate to take Scotland out of the EU. And it has no mandate to carry out a massive overhaul of the banking system.

    The present Scottish Government cannot be more than the agency by which Scotland BECOMES independent, thereby securing for the people of Scotland the power to decide what BEING independent will mean.

    By all means, let us have a conversation about what BEING independent might involve in terms of particular areas of policy. But let us always be absolutely clear about the fact that we will NOT be voting for any of these policies on 18 September 2014, any more than we will be voting for a political party or personality. Discussion of the promise and potential of BEING independent is healthy and important. But the process of BECOMING independent is crucial and pre-eminent. Let’s be sure to keep the two parallel but separate until we have secured the restoration of our nation’s rightful constitutional status.

  3. Crubag says:

    “Matters of policy beyond that which is required to facilitate BECOMING independent belong in the debate about what happens afterwards – the debate about BEING independent.”

    The two are not so readily separated in real life. Some policy options only become possible through independence (including from the EU, e.g. fisheries), and conversely the mood music that Scotland is a centre-left country with no place for the centre-right, could suggest to conservative voters that independence would be the death of their policy ambitions.

    I think that is pessimistic given what is happening in Norway. Yes Scotland could do well to rope in a centre-right figurehead (Jim McColl?) to assure centre-right voters (some 400,000 voted Conservative in the 2010 UK elections, 270,000 in the 2011 Scottish Parliament elections) that they will have a voice too.

    “Combined with the anti-independence campaign’s efforts make the vote all about Alex Salmond and the SNP, there is a real danger that the waters will be muddied beyond redemption.”

    Which would suggest AS step back from set-piece national televised debates and leave the main event to Yes and BT leadership?

    1. Peter A Bell says:

      The BECOMING and the BEING are essentially separated in “real life”. They are being artificially conflated by people talking as if the referendum was a vote on the monarchy, banking reform and myriad other things.

      The role of the Scottish Government is to be the reassuring (small-c) conservative voice. It’s job, apart from the nuts and bolts stuff is to convey the message that independence is not a sky-dropping event. That life will go on. Radical voices are being heard in Scotland as they haven’t since the 1970s. The Scottish Government and the SNP, in it’s role as the party of government, have the task of being the voice of moderation. I know some in the SNP find this frustrating. But it comes with the territory. We just have to grit our teeth and bite our tongues for the time being.

      Alex Salmond has already stepped back about as far as he can. Like it or not, he is the political figurehead of the independence movement. At least as far as the media is concerned. The impression that he is too much to the fore comes from the fact that the media focus so much attention on him. And the fact that the anti-independence campaign desperately tries to pretend Yes Scotland doesn’t exist.

      It might be argued that, rather than Salmond stepping back, Yes Scotland needs to step forward. But that doesn’t sit well with the nature of the organisation as merely the umbrella for a massive grass-roots campaign. The unfortunate thing about such a campaign is that it is too diffuse for the media to get a grip on it. The media simply isn’t evolved to deal with a political grouping that lacks a leadership in the traditional sense.

      This doesn’t mean that Yes Scotland isn’t effective. It simply means that its effectiveness isn’t highly visible.

      It is within Yes Scotland that the BEING conversation is and should be proceeding. But the media prominence of the SNP can mask this. Which is why we have to make a prticular effort to distinguish between the BECOMING and the BEING conversations when we comment.

    2. Nick Jardine says:

      ‘Yes Scotland could do well to rope in a centre-right figurehead (Jim McColl?) to assure centre-right voters (some 400,000 voted Conservative in the 2010 UK elections, 270,000 in the 2011 Scottish Parliament elections) that they will have a voice too.’

      Your analysis shows no negative impact on the ‘Yes’ vote by inviting a centre right figurehead. Why ?
      You don’t think appealing to Tory voters could harm the left or middle left vote ?

      1. Dave Coull says:

        The people we most need to motivate to vote YES are the more than forty percent of the electorate who didn’t even turn out at the last election. In general, and while recognising all sorts of exceptions, that forty percent plus tends to be both poorer and more skeptical of politicians as such than the electorate in general. But when motivated they are far more likely to embrace radical change than to endorse the status quo. All research suggests that conservative voters are the most hostile to change and the least likely to alter that view. Why on Earth should we waste any time or energy on pursuing conservative votes when the probability is that, in pursuing that minority, we would destroy the chances of motivating the 40 percent plus who ought to be the YES secret weapon?

    3. Dave Coull says:

      Tory voters are, notoriously, the most likely to be against independence, and the least likely to be open to changing their minds. Concentrating time and effort on them would be spending a lot for comparitively little returns. By contrast, more than 40 percent of the electorate voted for NOBODY at the last election. This far larger group of folk, skeptical of politicians in general, saying that no matter who you vote for nothing changes, could be open to the argument that a referendum doesn’t involve voting for ANY politician, but it does offer the possibility that things really might change. The non-voters are far more numerous and far more important than the Conservative voters.

  4. As I see the economics of the UK it is enslaving people economically tying them to low paid jobs mortgages,and a constant stream of adverts aimed at the children from 0-30 on all the things they must have and old daddy and mummy have to work more and more,its all a trap.I only worked it out about 10 years after my youngest had left home.

  5. Gordon says:

    By coincidence 80 Business people already signed up to attend my next talk “An economic vision for an independent Scotland” http://ow.ly/phsWQ on Wednesday in Glasgow.

    Business for Scotland is creating an economic vision for an independent Scotland which is forward looking, visionary and ambitious. This event is for the business sector but videos will be available for everyone soon.

    Gordon

    1. Nick Jardine says:

      Gordon,

      Your website has become an extremely valuable asset and I’ve caught many of your videos on You Tube or other websites.

      You and the team are putting forward a coherent, factual, progressive and positive argument for the benefits of independence and I can only wish you and the team great success.

      The fact i’m not a businessman, nor involved in business management makes no difference, the information Gordon is putting out there is valuable to every supporter of independence.

  6. AndyMMT says:

    Why does this myth that QE is money printing persist? It just isnt..it is swaps between different types of govt liabilities.

  7. George Gunn says:

    swaps between different types of government liabilities.Would you like to expand on this? How is that any different from the never never money the government give to banks in order to lend but which they don’t?

    1. FlimFlamMan says:

      QE involves the central bank purchasing bonds, so the bondholders – the commercial banks in most cases – hand over their bonds and get reserves or cash in their place. That’s a swap; they had bonds, now they have reserves or cash. Government bonds are barely distinguishable from cash in terms of liquidity; they are both ‘money’ in that they are both highly liquid financial assets.

      The reserves and/or cash are created new by the central bank – part of the government sector, despite the smoke and mirrors of ‘independence’ – but the bonds were created new by the treasury. One is given but the other is taken; no new money enters the economy as a result of QE. In fact, money leaves the economy, since the bonds pay interest while reserves pay little – or none, depending on the nation is question – and the cash pays none.

      The government doesn’t give money to the banks so they can lend it. Commercial banks make loans first, and then acquire whatever reserves they need afterwards, based on their reserve requirements and their position with respect to other banks in the payment system.

      1. Applause to FlimFlamMan. We will never get meaningful reform of our financial/banking system until we educate ourselves on how our current system actually works.

  8. Almost every Fed chairman in the past 60 years has manipulated
    interest rates to brighten the economic outlook for incumbent presidents
    or newly elected presidents who won by large margins. The
    purchasing power of the U.S. dollar has fallen 94 percent in the past
    100 years. The only way you can create inflation is by creating more
    money that is backed by the same reserve assets; the Fed is the only
    entity that can create more money. Ben Bernanke’s quantitative easing
    (QE) programs have pumped billions of unfunded dollars into the
    economy, thereby setting us up for massive inflation in the very near
    future. If this isn’t a form of financial terrorism, it is incompetence of the highest order

  9. George Gunn says:

    In reply to Ziad and Mr Flim Flam – you can call it what you like but it is manipulation of a financial system born out of desperation which is the result of greed and criminality. Rising inflation seems to me at least to be the obvious result of all this. How long, do you think, before the machine beats itself to bits?

    1. FlimFlamMan says:

      QE cannot increase general inflation. There is no extra money in the economy, so no mechanism by which inflation can be caused. The only change QE really triggers is a shift of some existing money from bonds to equities, boosting – yes, artificially – share prices, trading, and the fees creamed off by brokers.

      None of which is of benefit to most people or the real, productive, economy, so QE shouldn’t have been started and should be ended. But the problem with it isn’t inflation; the problem is its ineffectiveness in its stated purpose, combined with the equities side-effect.

      I agree that governments, not least Westminster, have aided the dodgy dealing and outright criminality of the financial sector; most of what the financial sector does is worse than useless and the political class are at best incompetent. I’m not defending QE, but it’s vital to pick the right targets and for the right reasons.

      As for how long it will last; your guess is as good as mine. The fundamental problems haven’t been addressed, and some have even grown, so the next crash may be bigger than 2008. If Scotland were independent you* might be able to extricate yourselves from the Westminster/City nexus, shoo the financial types in Edinburgh off to London, and institute economic structures that benefit the whole population. It won’t happen in the UK as a whole any time soon.

      * I say ‘you’ because I’m English, living in England. You might not want my opinions; I’ve watched the TV news and read the papers so I know the Separatist movement is based on hatred of the English… Sarcasm works on the internet, right?

  10. In the first few words of this article I expressed a personal view that we will not win the YES vote without an economic argument. This cannot materialise under current banking and City of London hegemony. No one is in a position to make policy promises about anything but if the matter is seriously discussed among YES campaigners then the swinging voter can at least hope that Independence might offer the prospect of a more level financial playing field. At present the ‘undecideds’’ imagine a Scotland under the same system of financial feudalism as at present – so why take the risk of changing horses if the other horse is also dead?

    1. Peter A Bell says:

      This fails to acknowledge that no new “financial playing field” can be created until after independence. The current administration cannot make promises on behalf of a future Scottish Government. It has no mandate to implement any specific policy in relation to currency, financial regulation etc., And the referendum CANNOT provide such a mandate as it is not a vote on policies but on Scotland’s constitutional status So all the Scottish Government can do at this time is set out a reasonable and practical starting point from which the government elected in 2016 might proceed.

      This, of course, does not preclude discussion of what course that government might proceed on. It is perfectly fitting that we should be discussing ideas and exploring options. But it would be wrong and even dishonest to confuse or conflate such discussions with the referendum itself.

      Is it at all credible that anybody would give up the possibility of effecting progressive change for the certainty of no progressive change simply because they can’t be sure of getting precisely and entirely the reforms that they want? If the undecides are unable to imagine the better, fairer Scotland that we might create with independence then perhaps this is in no small part because of the blinkered obsession with the SNP that characterises the No campaign and, apparently, infects some in the Yes camp.

      1. Crubag says:

        “Is it at all credible that anybody would give up the possibility of effecting progressive change for the certainty of no progressive change simply because they can’t be sure of getting precisely and entirely the reforms that they want?”

        It’s entirely possible if a possible downside (loss of savings, pensions, healthcare, business activity, etc.) can be envisaged by voters, whether justified or not. What psychologists call loss aversion: http://en.wikipedia.org/wiki/Loss_aversion

        “this is in no small part because of the blinkered obsession with the SNP that characterises the No campaign and, apparently, infects some in the Yes camp”

        I’d agree that the SNP can appear to be too controlling of the Yes Scotland campaign, and currently in demanding that their man be the hero to take the lead in televised debates. Is there scope for getting together national representatives from Ireland, Slovakia, Ukraine, etc. to discuss how to dissolve political unions in a controlled way? The Slovak example is probably the most relevant experience to draw upon and reduce the fear factor.

        1. Peter A Bell says:

          Your remarks regarding Alex Salmond and the TV debate with Cameron display a sad failure to fully understand what is going on. While it suits the anti-independence media to portray Salmond’s insistence on debating with Cameron as “grandstanding” it would be deeply unfortunate if too many in the Yes camp fell for this propaganda line.

          There are two essential aspects to this issue. The first is a matter of simple protocol. Salmond and Cameron are political opposite numbers and it is entirely appropriate that they should debate with each other. Cameron is well aware of this. The British civil service is nothing if not not a stickler for matters of protocol. Salmond is doing no more than insisting that protocol be followed. It is not only right but essential that he do so. He holds the office of First Minister of Scotland in trust. It would be grievously improper, and set an unwanted precedent, were he to fail to demand due respect for the office that he holds. He cannot be seen to allow Cameron to demean the office of First Minister of Scotland.

          Then there is the matter of political tactics. Salmond would be well aware that Cameron was all but certain to dodge a debate. As already noted, he had to demand that debate anyway as a matter of protocol. So, being a supremely adept political operator, he would look to gain as much advantage from the situation as possible. Which is precisely what he has done.

          The nature and tone of Cameron’s speech in Manchester and the stuff being carried by the unionist media should not fool anybody. The more they trumpet that Salmond has somehow been damaged by this, the more certain we can be that it is, in fact, Cameron who has been profoundly embarrassed. By the way he has handled the situation, Salmond has not only seriously undermined Cameron’s credibility as defender of the union, he has also created a stick with which to beat Darling – who can now never be anything other than the British Labour MP who is content to be a mouthpiece for a cowardly and inadequate Tory Prime Minister.

  11. Crubag says:

    “While it suits the anti-independence media to portray Salmond’s insistence on debating with Cameron as “grandstanding” it would be deeply unfortunate if too many in the Yes camp fell for this propaganda line.”

    It’s not grandstanding, it’s party politics. The public don’t trust politicians (scored lower than bankers in 2011!) and I’d contend party politics are a big part of that – politicians regurgitating what the party line is rather than what they might believe.

    “The first is a matter of simple protocol. Salmond and Cameron are political opposite numbers and it is entirely appropriate that they should debate with each other.”

    They’re both leaders of their parties, but that is where the comparison runs out. Cameron may be playing a smart game by keeping the debate between Scots, rather than making it a Scotland vs England debate, but Salmond’s opposite number in government terms would be Peter Robinson or Carwyn Jones, if we were going by protocol. England has yet to set up a devolved administration, other than London (I might even watch Alec vs Boris).

    1. Peter A Bell says:

      Your insistence on talking utter drivel makes it difficult for me to avoid remarking on the fact.

      Robinson and Jones would be Salmond’s opposite numbers in the other devolved administrations. They are the leaders of their respective governments. Salmond and Cameron are leaders of their respective governments in PRECISELY the same way.

      I’ll just have to risk the appearance of taking the pish and point out something so elementary when I remind you that it was not Peter Robinson or Carwyn Jones who put their signatures on the Edinburgh Agreement alongside Salmond’s. It was David Cameron.

      And it now seems that you are even more gullible than was at first apparent. Not only have you been totally taken in by the unionist propaganda line regarding putative TV debates, you’ve now fallen for Cameron’s gibberish about “keeping the debate between Scots”. Gibberish that was dripping off one fork of his serpent’s tongue while from the other oozed all that stuff urging English Tories to involve themselves in the referendum campaign.

      I wonder if there is any British nationalist propaganda that you don’t take as gospel.

      1. Crubag says:

        I think Cameron is boxing clever in keeping the debate between Scots. You could say it is not fair to leave Alec Salmond without an opponent, but that’s party politics for you. Whatever weakens the other guy.

        The Edinburgh Agreement was between a sovereign state and a sub-state actor. If it had been between two sovereign states we wouldn’t be needing a referendum, would we?

        1. Peter A Bell says:

          It is clear that you will resort to increasingly ludicrous distortions of logic in your desperation to defend Cameron’s cowardly dereliction. But your hero-worship of Cameron goes too far with the plainly idiotic assertion that he has somehow contrived to leave Salmond without an opponent. I leave you to wallow in your own folly.

  12. Crubag says:

    As the lead representative of a sub-state actor, Salmond needs others to lend him credibility. Whether that is Cameron (Scotland is one of four main parts of the UK), Barroso (Scotland is one of 300+ regions), or Obama (busy). Cameron is playing a smart move by denying Salmond the platform.

    But I think that the SNP dominating the campaign, whether moving their staff into Yes Scotland, or making their lead man the voice of the campaign is probably counter-productive. It won’t reach the unconverted and may actually harden their opposition.

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