Prozac Nationalism

moneytalk2

The SNP has a frustrating habit of overstating – and therefore of undermining – its own arguments.

It is probably right, for instance, to say Scotland would remain a member of the EU after independence. But under precisely the same terms and conditions it enjoys now, as part of the UK? Given the hostility of major European states to the British rebate, that seems unlikely.

Likewise, nationalists are correct to dismiss the No campaign’s claim that North Sea oil has exhausted its potential. But that does not mean, as the first minister has indicated, Scotland will receive the full benefit remaining reserves. There is a reason multinational energy companies invest in our seabed resources, and it has nothing to do with the kindness of their executives’ hearts.

The party was at it again this week. After John Swinney announced that, under the SNP, an independent Scotland would borrow more to boost the economy, the Scottish government went on to say increased borrowing would not lead to higher deficits.
In one sense the government is right. If a sustained capital stimulus were to succeed in growing the Scottish economy, tax receipts would go up and the deficit would come down. But that isn’t going to happen straight away. It would be a few years before we started to see the effects of additional investment and, before we did, Scotland’s fiscal position would weaken.

The government’s refusal to acknowledge the downside of an otherwise excellent policy is all the more counterproductive because of the strength of its underlying point – that austerity has comprehensively failed.

It’s worth recapping the basics.

According to Oxford economist Simon Wren-Lewis, public spending cuts stripped 6 per cent – roughly £84bn – off the UK’s GDP between 2010 and 2013. You might think these cuts helped reduce Britain’s national debt (the debt the Tories insist caused the economic crisis). But no. UK debt has climbed steadily over the last four years and is due to peak at over 80 per cent of GDP in 2016.

Neither is there any meaningful sign of the recovery Osborne promised. As the New Economics Foundation has explained, recent increases in employment have done little to ameliorate the “severe and prolonged” post-crash squeeze on real wages. Indeed, average weekly earnings grew by just 0.7 per cent in the last year, well below the 1.8 per cent inflation rate. Improved jobs figures, in other words, disguise an explosion of low paid and insecure work.

So the economic case for higher spending – to lift Scotland out of what is shaping up to be a decade-long slump – is sound. But there is some political manoeuvring going on here too.

As I wrote in the New Statesman on Wednesday, the battle for working class votes is heating up. Having complacently allowed its base to seep away for years, Scottish Labour is finally trying to re-establish its left-of- centre credentials, hence the return of Gordon Brown over recent weeks and Johann Lamont’s pledge to raise taxes on high earners (using, she says, the new powers Scotland will gain if it votes No in September).

However, Scottish Labour is hog-tied by UK Labour’s 2015 strategy. In order to win the next year’s general election, Ed Balls believes Labour has to demonstrate it can be trusted to run the country’s finances. This means sticking to rigid spending constraints and securing “credibility” (a favourite word of austerians everywhere) with the financial markets. If Labour does win – and that is by no means certain – it intends to implement every one of Osborne’s planned 2015/16 departmental cuts.

Labour’s embrace of Tory austerity allows the Yes campaign to consolidate its control of the progressive ground in the referendum debate. The dividing line is clear: do Scots want continued Westminster rule and a shrinking state, or self-government and increased public investment?

But there is an added complication – one that relates to the SNP’s neurotic desire to scrub every last element of risk from the independence project.

The creation of a post-UK sterlingzone will come with stringent conditions, not least a limit on the amount of debt an independent Scotland could build up and a cap on the size of its deficit. These rules would form the basis of a “fiscal stability pact”, something the SNP talks approvingly of. In fact, in 2012, the first minister told the BBC that, within such a pact, “over the long-term your borrowing should not exceed 3 percent of GDP. I would argue that is no more than the fiscal discipline that a sensible country would have in any case.”

Yet Scotland’s 2012/13 fiscal deficit (including capital spending) was 8.3 per cent of GDP. At what point, then, would Scotland’s deficit have to start coming down? When Edinburgh decided it should or when London decided it should? More to the point, how do you reconcile a London-imposed and policed deficit cap with two or three years of deficit-financed expenditure? The sums, I’m afraid, just don’t really add up.

The SNP’s glazed insistence that independence offers only good things – that, after a Yes vote, we can borrow more without ratcheting up the deficit, or that we can exercise fiscal discipline and end austerity ¬– is Prozac nationalism at its worst. It encourages cynicism among an already cynical electorate. A bit more realism wouldn’t go amiss – sometimes the best way to win an argument is to begin by acknowledging its weaknesses.

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  1. RevStu says:

    Agree with almost all of that, but surely the EU rebate is to all intents and purposes a UK asset and will be negotiated with the UK, not the EU?

  2. Tony Philpin says:

    Surely the message of neoKeynsian investment announced by Swinney as an alternative to more austerity has to be presented simply to avoid the panicky reactions already seen. The SNP do have to justify these costs and not simply wish them away. Another £2.4 bn of expenditure by a post Independence government as an alternative to more austerity at 5% is under £25 a head annual interest – or under 50p a week for every person living in Scotland to avoid more austerity. The KISS principle has to be better absorbed by the YES campaign to put forward a proper case to the alternatives to neo-liberal decay.

  3. Peter A Bell says:

    It’s the march of the straw men!

    The Scottish Government has never claimed that Scotland’s continuing membership of the EU would be on “precisely the same terms and conditions” as the UK.

    The Scottish Government has never suggested that oil companies would not continue to take their profit from exploitation of Scotland’s resources. The very idea is ludicrous.

    And John Swinney most certainly didn’t say that the deficit would be reduced “straight away”.

    Is it not enough that we have the UK Government, the British parties and Better Together misrepresenting the Scottish Government?

  4. Les Wilson says:

    Oh what good does this do?

    It is all down to Westminster policies ( no matter who is in charge) and us being able to sort things out ourselves, there will be obstacles but all will be resolved in time.
    So, it really goes to who you trust, look at the record of the SNP and the policies of Westminster again, who would you trust the more.

    For me anyway, the SNP, by way of no contest.

  5. I thought the UK “rebate” was simply the money the EU formerly passed directly to the regions (sic) of the UK, now routed to the Treasury in Westminster?

    1. TheBabelFish says:

      Yes, and Scotland actually sees so little of it that even though the terms of the UK rebate are relatively generous, we would in fact be better off without the rebate, but getting our full national entitlement back. Sounds strange, but true. Scottish farmers get the lowest subsidies in the EU.

    2. Ronkers says:

      The UK rebate reduces the UK contribution to EU funds. It is based on the size of the UK economy. Remove the Scottish economy from rUK’s and the rebate is automatically reduced. What’s more, as an EU member state, an independent Scotland would find that its contribution to EU funds would be higher that its ‘share’ of the current UK contribution – because it would in effect be paying towards the rUK’s rebate!

  6. Phil Holmes says:

    Excellent Article.

    On the EU rebate, as I understand the calculation, the ‘Scottish’ portion of the rebate would effectively revert back to the main EU budget under a Yes vote. The rebate is calculated based on the net of the UK contribution to the EU relative to the amount received back. After a Yes vote, the rUK contribution would decrease by the amount of the Scottish element, and it would likewise lose access to the inward funds on the same basis.
    So the Scots element would fall outside the scope of the rebate caculation, effectively staying within the EU.

    Scotland would of course make its own contribution and receive its own funds once it gained entry.

  7. Alasdair Frew-Bell says:

    It’s all a gamble, a risk. The future is uncertain. Events in the MidEast could, if the autocratic Saudi régime were toppled, spark an energy crisis. The Ukraine festers on as does the systemic problems of the EU. The British state is going cap in hand to an internally troubled China seeking investment for much needed infrastructure and has itself significant, and growing, social problems. Could an independent Scotland be any worse than its neighbours? At the very least we would be entirely responsible for any mess. Oh the burdens of being a real democracy. No more passing that buck.

  8. Jamie. Gordon Brown and Johann Lamont left of centre? Are you kidding? One, the most disastrous U.K.P.M ever, the other, the worst Scottish Labour leader, ever. How anyone could believe any words that these two so-called socialists speak, is beyond me. Both are a disgrace to the true Labour movement, and as for the latter’s “promise” of more powers if we vote No, that is just jam tomorrow, except when we get there there will be no jam, and very little bread. I wish L.F.I, and other socialist parties all the best in an independent Scotland, but this pair, along with their fellow travellers, have so poisoned the atmosphere of the left, they will face an uphill battle.

  9. John Page says:

    I thought this was a very perceptive article. Thank you. It will be really tough for a newly independent Scotland and we should not kid ourselves or others about this……..a No vote and a minority Tory govt in 2015 supported by UKIP MPs would be immeasurably worse

    1. yerkitbreeks says:

      Tough, but don’t ignore the national excitement factor. Look what ScotGov have managed with just a bit of devolution.

  10. YESGUY says:

    Thank you Alex Beveridge

    the thought of Brown or Lamont in a post indi Scotland would be a disaster. And picking holes in the Snp or YES movements policies are fine if you can predict the future . No one knows how anything will turn out and even the best Guestimations are out by a long way.

    We can make our own minds up to which way we want the country to be run and any of these two would can stay well out of it. We don’t expect it to be plain sailing but we can at least decide for ourselves.

    Austerity has meant food banks, brutal cuts to the disabled and infirm. Whilst the Westminster MP’s get a huge payrise. Huge gaps between the rich and poor. We vote YES for another option. The SNP have outlaid what they want to do and the voters will decide if they want the country to go that way.

    Me i want independence first… then i’ll decide on a party. like everyone else.

  11. jimobewon says:

    Reblogged this on jimobewon and commented:
    Love the creative pic!!~~!!

  12. Clootie says:

    I didn’t find the article balanced. It lacked comparison with the alternatives.
    I always find it frustrating when people throw rocks without being constructive.

    The objective of the YES campaign is to change people’s lives not win over voters. This reads to me as a “London bubble” perception of the world.

    Obviously you are a Labour supporter and along with many of your colleagues you still see the party “as they should be…” and not ” as they are”

    A fair society, an end to excessive wealth gap, will never be achieved under Westminster rule.
    England is moving to the right and Labour is chasing after them.

    I would rather have an ambitious policy and fall short, than a mediocre policy that simply marks time until the next change of rosettes at Westminster.

    “Reach for the roof and you may touch it, reach for the sky and who knows how far you will go”

  13. Dr Ew says:

    I’m one of those awkward Greens that so exercise Peter A. Bell and a handful of other nationalist hair-shirters when we express other possible pro-independence approaches or even have the temerity to campaign for our own policies and party as in the recent Euro elections. Most ordinary SNP members and friends I work with in the Yes campaign are pretty relaxed about alternative Indy views, but amongst certain Yes/SNP strategists there appears to be a controlling strain who react when such as Pat Harvie or Carolyn Leckie or Robin McAlpine diverge from their orthodoxy. In that context “neurotic” is a fairly apt description, Jamie.

    That said, I appreciate we operate in an unhealthy political culture in the UK (indeed in most Western democracies), loathe to accommodate anything less than absolute certainty in every last syllable of a debate. I also understand the SNP has evolved into a battle-hardened, election-winning machine which in many respects I admire. However, this is NOT an election.

    The groundbreaking grassroots of Yes is ready, willing and able to talk with people on a more human level; discuss uncertainties and alternative takes in a normal voice that contrasts with the shrill hysteria of the media – even a lot of social media – and the dull invective and ludicrous posturing of Tory, Labour and LibDem politicians. This morning I helped to host a ‘Yes Cafe’ this morning. In a small town we had around 40 people through the door, more than half of whom were undecided or in need of some affirmation of their intention to vote Yes. It was just the right kind of environment to allow open, honest discussion and I genuinely believe people are ready to look beyond the competing economic claims to focus on more profound matters – improving accountability and transparency of our politicians and institutions, and the deep implications of a written constitution that declares the sovereignty of the people.

    If my, admittedly anecdotal, experience is anything to go by, I think the Yes campaign can take the initiative on the constitution. Last week’s launch was smothered by a No spoiler and studied indifference from the media – that much was expected.

    My view is it would be mistake to let this lie. Talking about a profound shift in people’s perception of their position and power within their nation will help take this debate to the oft-mentioned “higher ground”. Moreover, the No campaign would hate it. Sovereignty makes them recoil, mainly because they don’t like people to question just how democratic we can be when sovereignty lies with “the Crown in Parliament”, that fundamental fault line between England and Scotland.

    So how about a short, pithy (say) 8-point summary of the principles of a new written constitution? Not as crass or cynical as the much-praised 1997 Labour pledge card but, maybe, just as effective.

    If it isn’t about Alex Salmond, or the SNP, or – let’s be honest – even the White Paper, then lets focus hard on what it IS about: An empowered people in a New Scotland.

  14. Auld Rock says:

    Without going into all the ‘legal clap-trap’ when Scotland becomes INDEPENDENT the relationship between Scotland and England/Wales reverts to the position before 1707 when the Parliaments of Scotland and England/Wales voted themselves out of existence and then voted for what became the Union of 1707. Now this is a point that so far to me seems to have been ignored. As the rebate from the EU covers the whole of the UK and as I see it rUK will also have to renegotiate their position or find some formula with the EU (Given Westminster’s lack of skills in this area, very unlikely) to cater for Scotland’s share of this. This again poses the basic legal question who is the successor state or as I see it both are successor states, rUK just because it is the larger portion gives it no exceptional rights in law to claim this right solely for them selves.

    Auld Rock

    1. yerkitbreeks says:

      I fully agree with you over the Successor State issue, but it has the potential to seriously muddy the waters, given the proposed timeframe, and to let Westminster adopt the mantle may be pragmatic – we shall see.

  15. Bystander says:

    No, the successor state would be the UK, that point is pretty well established under international law. In fact we saw it in action recently (cf Crimea/Ukraine). There are long established legal principles regarding self determination and successor states (e.g. IrelandUK, Confederacy/USA), the parent entity remains in existence, and existing treaties remain valid. It is not about relative size, it is about the right of iScot to secede, but also the right of the UK not to be forcibly dissolved without internal consent.

    It’s possible to dissolve the parent (cf Yugoslavia), but that would be a very different vote to the one we are having in September and usually only happens where the parent government ceases to exist. If there was a possibility of the UK ceasing to exist as an entity, there would be an awful lot of noise, as you would imagine (security council, G7, NATO, EU etc)

    As the EU rebate is based on net contributions rather than population or geography, it would (should?) adjust automatically once iScot contributions and grants were no longer running through the UK.

    The French would certainly love to use this as an excuse to try and strike down the rebate entirely, but given the upcoming EU referendum I would not expect them to rock the boat. Much as they hate the rebate, the UK remains the second largest EU contributor after Germany, and losing that would hit areas such as the CAP very hard indeed. With most EU countries now being net receivers, they cannot afford to lose any major net contributors. Which incidentally is one of the big reasons iScot would likely be quickly welcomed back into the EU post any Yes vote.

    1. MBC says:

      It’s by no means certain that rUK would be the successor state. International law is a vague discipline and there is no court that would decide.

      1. MBC says:

        The UK is not the parent body but the offspring of England and Scotland.

      2. Bystander says:

        The United Kingdom is the culmination of 3 acts of union, the England/Scotland one being the first and largest. There is a near identical precedent here also, we had a secession in 1925 when Ireland left the Union, this did not dissolve the other union acts, and the UK remained a successor state (albeit with an alteration of name). All UK treaties and international agreements remained in place.

        A Yes vote has the power to create a self-determined Scottish sovereign state, but not the power to ‘uncreate’ the existing union of England, Wales and NI. Once again, principles of self determination apply in the other direction, those unions may only be dissolved by the parties in question.

        A simpler analogy may be if one of the founder states of the USA was to secede. This would not invalidate the USA as an entity. Once again, we have multiple examples of this in law, I think Ireland being the best example. There is a reason you are not seeing any discussion in the EU or anywhere else of the need for rUK to renegotiate or refresh any international agreements such as Double Taxation Treaties, Free Trade Agreements etc, there is no serious line of mainstream legal thought which says the UK would cease to exist come Sept 19th.

        The good news for an independent Scotland would be the plethora of existing UK treaties will make an excellent base for negotiation. Some countries will simply copy existing treaties across to iScot, others will use them as a starting point for negotiation. Much easier, faster and cheaper than being a fresh nation state

    2. MBC says:

      Northern Ireland is no longer an integral part of the UK by the 1998 Good Friday agreement. Wales did not enter the UK by treaty because the UK did not exist when England annexed Wales. Wales was also a principality not a kingdom. Wales therefore became part of England, not the UK. It is only part of the UK now because England is. The UK was established by the treaty of union with Scotland in 1707, a union of two kingdoms, which were equal in terms of their legitimacy. If Scotland chooses to leave this union then the UK will no longer exist. If Scotland leaves there is no longer a United Kingdom if Great Britain, but England and the Principality of Wales.

      1. MBC says:

        If existing treaties will simply be negotiated across to Scotland, as you say, then this de facto implies that there are two continuator states, Scotland and England. It does not require the permission of England for the kingdom of Scotland to leave the union and dissolve the UK. A better analogy is the Kalmar Union between Denmark, Sweden, and Norway which was established in 1397 and which Sweden resiled from in 1523, and Norway, eventually, in 1814.

  16. manandboy says:

    Ah Jamie, a young man’s mistake: getting way ahead of yourself.

    From the first word, you are putting the SNP and the Yes Campaign down.

    This article will spread a lot of pleasure among the No campaign.

    The time to attend to your grievances is not now – and not in the public forum.

    So don’t do it any more please.

    Wait till we have a Yes result. Then will be the time.

    Should the result be close, your piece might just have done it for the No’s.

    Independence is just too important for even a little bit of self indulgence.

    1. Bystander says:

      That depends what the objective is.

      Are we trying to do something better here? Then this is exactly the sort of discussion that is necessary.

      Are we just trying to win, then work out later if it was a good idea? Then keeping quiet and hoping nobody looks too hard is the way forward.

      I prefer the first, the latter is the position of the cynical politician and the idealogue. Happy to see an iScot if its the right choice, but you do not get to the right choice by telling people to be quiet when they see issues. That is the route of ‘independence at any cost’, which does not serve Scotland or anyone very well.

      Scrutise both sides in depth. Ask difficult questions. If this is the right choice for Scotland, it will be quite clear.

    2. Smallwhitebear says:

      Agreed, we have not achieved Independence, yet we are already unpicking the argument, for the satisfaction I am sure of the NO campaign.
      Such navel gazing had a place 2 years ago perhaps to try and set the scene, but not when the vote is imminent.
      Attempts at this point in time, to weaken the base of YES campaigners and dismantle their arguments is surely suicide.

  17. MBC says:

    There are so many ifs and buts. If the price of oil goes up, then the receipts from oil will be greater, but so too will the cost of living if petrol prices increase too. If UK regains its AAA rating then its costs of borrowing and therefore the size of its deficit will reduce.

  18. MBC says:

    A huge component of UK rising deficit and increase in the National Debt is the cost of housing which is added on to the welfare bill. The economic modelling is crazy. If you earn only £150 a week in London as a low skilled worker you cannot make ends meet, so housing costs are met by additional welfare payments. The welfare bill thus rockets. And rockets. As money floods into the London property market house prices rise, thus rents in the private rented sector rise, thus the welfare bill rises, thus the National Debt rises. Put another way, failure to keep housing costs and rents low and pegged to real wages means a straightforward transfer from the public sector to the private sector. Russian oligarchs buying London property just get richer and richer at the expense of the British tax payer whilst the British worker gets poorer and poorer in real terms. In an iScotland the aim must be to keep basic costs like housing low, to avoid the welfare bill exploding exponentially. We need to restore the link between rents and housing costs and real wages.

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