A Risk Assessment for future of the UK
The Yes option on the ballot continues to be portrayed as the option of ‘hope’, of ‘risk’, of ‘passion’, and, to the mudslingers again, the choice for the ‘naive’ among us.
Like most of you, I don’t hold any truck with mud chucking, so let’s try to untangle these assumptions and put some things straight, let’s look at the whole picture, the risks, as well as our hopes and, for some, our histories too.
The UK is a risk. Independent Scotland is a risk. The best debates I’ve had with No voters are the ones where we’ve come to this conclusion. The pattern of these discussions suggests that those who claim to be more risk averse, have more of a desire to stick with the union. Understandably, we all want to think with our ‘heads’.
Dear UK, #wejustdontknow.
No one can predict the future, but armed with some facts and precedents from historical scenarios, we can make a pretty good risk assessment that, compared with the unknown of an independent Scotland, the UK is a very high risk bet indeed, and not the safe choice you might think.
There’s much research that proves that humans are not very rational when we’re making assessments of risk. Markets themselves are not rational, as much as economists might urge us to believe, because people are not rational, they act on things like purpose, inspiration, and yes… fear.
It turns out that it’s human nature to be more risk averse when it comes to our gains than our losses. Within the field of economics, Prospect Theory by Kahneman and Tversky shows in experiments that we find it easier to accept losses and much harder to bet on gains, even when the odds are exactly the same. We are biased against the probability of success, we are more driven by fear than we are by logic. That shouldn’t be surprising when you think about it, that’s the same motivation that keeps people in abusive relationships, makes us give unprecedented weight to past failures and stop ourselves from reaching a little higher or trying to make things a little better. It’s harder to dream. It’s harder to take the failure of a possibility than it is to accept the erosion of our lot and we would rather choose to side with losses day by day by day than to pitch for something that is equally as probable but could bring us benefits.
The case for independence has been plagued with the search for ‘answers’, for guarantees and certainties about the future, for this very reason. My mathematical mind is perturbed that we don’t give the same scrutiny to the risks on the other side, because they are many and they are significant. As other commentators have posited, is this because we assume a No vote is a vote for the status quo? It’s called Cognitive Dissonance, when you know something in your body, but the words people say to you, the words that form the narrative of ‘sense’ pretend that what you know isn’t true. There is no status quo, there is no possibility that things will remain the same. Mathematically speaking, it is impossible. There is only change. There are trends, which can help us predict what will be more or less probable, but there are no guarantees of anything with a vote to stay in the UK.
So let’s look at trends, let’s do a risk analysis of the UK:
On economic stability:
The UK is currently rocking a -5.6% current account deficit (including all oil revenues). That is, annual income from exports is 6% less than what the UK buys from foreign sources. This isn’t an outlier figure, the UK has held a current account deficit for the last 30 years. From the OBR figures I calculated the mean deficit since 1997, as that’s as far back as I could get with the detail I was looking for: That’s a trend of -2.13% EVERY YEAR for 17 YEARS.
The UK has a debt to the US federal reserve, to China and others, of £1,286 billion. No amount of austerity is ever going to pay that off.
There is no way that this data can be spun any other way, this is not a lie. The UK is bankrupt.
The UK has a policy of selling off, at fire sale prices, profitable public services such as East Coast Rail, which last year made £255 million for the government. This makes no economic sense. Public services like the NHS are hugely efficient in economic terms because of the massive buying power they have; as near monopolies with no shareholders they can get suppliers very cheaply indeed. Compare this with contracted out NHS services to whom the UK government gift a monopoly; they are free to hike their prices as high as they like to make as much as they can for their shareholders, who comprise our esteemed members of Parliament themselves, their friends and party donors.
Cap that trend off with a penchant for keeping the infrastructure in public ownership, so the taxpayer will continue to pay for the maintenance and development of the electricity grid, the railway lines, while private companies basically get free profits for absolutely no investment at all. Not a penny of their money is invested into the UK, they simply run payroll for services that we ran more cheaply when they were publicly owned, bringing the taxpayer all of the burden, none of the profits and inflated prices to boot. This is a trend that will continue unless the Westminster elections return a government committed to renationalising our profitable industries.
The economic policy of the UK government is to run a currency at an artificially inflated value which makes it impossible for home industries to trade competitively, and this trend is increasing so that UK businesses and industry will dwindle until we have no exports left. Except financial services -ah yes, our basket case financial sector that is leveraged on average 20 times beyond the asset base they actually hold. The City of London is an international tax haven, a tax-free zone, where the productivity of the rest of the UK is devalued in order to protect the profits of the shareholders of our banks. Banking boom and bust comes in nine-year cycles, so we have approximately three years until the next one. Given that the UK has experienced a six-year recession, and the banks have already lost every single penny of the £46bn with which the taxpayer bailed them out, it is almost certain that the next crash is going to make the 2007 crisis look like a sunny day on a beach.
There’s more, but those are the bullet points. There is nothing in this risk assessment that says ‘stability’, nothing that suggests ‘security’, the trends all point to catastrophe. There is no way of softening this blow. The UK is locked into free fall, and the only thing that *might* bring it out of this decades long dive is to deindustrialise, invest in infrastructure and devalue the pound to increase its trade value. Given that this would scare the hedge funds off, how likely do you think that course of action is, when our elected members have personal fortunes invested? Knowing what we know about human nature, and going on past performance, a turnaround is highly improbable.
If we are looking for an analogy, the UK is Spain – no substantial exports, overly dependent on financial services and a ridiculously over-inflated property bubble. If the UK’s creditors cut off the supply, we will be lucky to end up like Spain or Greece, our balance of debt is the second highest in the developed world. How long can the UK limp on like this before the most profound financial and humanitarian crisis hits?
I am. I’m very, very scared, of how impenetrable the fortress of Westminster City and how pointless my vote in a UK General Election is. Quite simply, I am powerless to do anything to stop this or reverse the situation. The entire democratic will of Scotland can’t do anything in the face of this – it was designed this way.
Compare this to a risk assessment of an iScotland:
Scotland has run a current account surplus for the past 30 years (if you include a share of oil revenues). The real value of Scotland’s exports could be as much as double what is actually recorded against Scottish income; because the majority of our big industries such as whisky and tweed are shipped from ports in England, they’re counted as English exports.
Scotland’s house prices have remained stable or in negative equity since 2007, so prices are more realistic and less vulnerable to the ‘bubble’ effect. Currently we don’t get to ‘keep’ our income to cover our expenditure, which we would – plus a variable surplus – in an independent Scotland. Currently spending on public services in Scotland is higher than the rest of the UK, but our tax receipts are higher. Whilst Scotland currently has control over spending in health and education, the amount received by Westminster has already been cut by 6.8% (HM Spending Review 2010) and when the NHS is privatised in England and Wales this will mean that the Scottish share of the budget from Westminster is reduced in line with spending down south.
Despite what the Better Together literature tells you, Scotland’s NHS WILL be eviscerated by what’s happening with budget cuts down south and even more so if the UK signs up to the TTIP as they are set to do.
I’m not making projections of risk on the basis of ‘lots of oil’ or ‘lots and lots of oil’, because the amount of oil in either voting scenario will be the same. Voting No doesn’t get us any more oil, but we do see that there are no plans from the UK to do anything about the oil running out. The SNP and the Greens are fully committed to developing renewable energy in the first few years of independence to plan for the long term future and fluctuations in oil revenues OR, my personal hope, LEAVE THE OIL IN THE GROUND. Do we want a future? Yes we do. Scotland is more profitable than the UK, it has good exports, there are no additional risks that an iScotland might face that wouldn’t be faced in the other scenario. IScotland is a lower risk than staying in the UK.
Currency, Banks, Trade
We’re all sick of this one, so I’ll be fast. YES, we can keep the pound. Yes, it’s in the short-to-medium-term interest of the entire British Isles for us to do so. Stabilise the markets, avoid a run on the pound – after all, the pound is backed by oil which won’t belong to rUK anymore, and iScotland won’t have any banks domiciled in Scotland with which to be a credit risk, the risk is entirely the rUK’s. No financial crash is going to come about from Scotland entering a currency union with the UK. Osborne faces a crash if he doesn’t pull his finger out and stop the bully-boy bluffing.
Is a currency union a good idea in the long-term? Not a terrible risk, as we’d not be doing any worse than if we were in the UK, but it isn’t the best option. We could do much better if we created a different economic and industrial policy to rUK (and I sincerely hope we do) to stimulate production and exports, and in this case we are going to need a currency that can be devalued so that we can sell cheaply enough to be attractive to international buyers. This means that we want to diverge from UK economic policy, and thus we’ll want to have our own floating currency (The White Paper’s plan C). All in good time, we won’t need that straight away, A phased transition is best and it’ll be some time before we’d want to do that.
Banks are all domiciling in the UK but keeping operations here. Bonus. No job losses, no loss of corporation tax, but the removal of bank failure risk from the Scottish balance sheet. It’s the UK’s problem, so we don’t NEED A LENDER OF LAST RESORT. Hear that – we don’t need a central bank with a reserve big enough to bail our RBS if the RBS is no longer registered as a Scottish company. Thank you, RBS, you are ever so welcome to take your toxic liabilities elsewhere, THANK YOU.
Instead of those broken, basket case banks, we can start a state-owned investment bank and run a German-style local banking system. Robert Peston from the BBC estimates a £15bn share of the UK national reserves, which would provide ample capital to start an investment bank which would invest in infrastructure development in an iScotland and provide a buffer zone for fluctuations in revenue due to oil. Trade in Scotland is currently better than the rest of the UK, but we could be doing so much better. Investing in infrastructure, renationalising and reindustrialising could make the country truly competitive on a world stage – certainly the will is there from SNP and Greens, so it has a reasonable probability of this coming to pass.
There’s been some excellent work on economic policy by the New Economics Foundation and the Common Weal project www.allofusfirst.org which propose a tried-and-tested set of policies which would in all reality be a workable solution to the financial crises facing the entire Europe. I’m not going to go into them at length here, but these are proposals that can be taken on by any of the political parties in an iScotland.
Scotland doesn’t have any debt as a ‘successor state’. There is no debt agreement with a legal entity that did not exist when debt contracts were taken out, so it CANNOT DEFAULT ON ITS DEBTS. Credit ratings, as confirmed by Moodys and Standard and Poors, would be excellent as a new state with a current account surplus, £15bn in the bank and NO DEBT. As previously stated iScotland shouldn’t need to borrow funds from elsewhere, but if in a crisis scenario it did, it has oil as an asset to underwrite any debts and the interest rates would be comparable or, if not, only 1% higher than current UK debt borrowing.
iScotland has the opportunity to do something really unique here, it isn’t beholden to the debt spiral that plagues so many other countries, and we won’t be held to ransom by toxic banks that are entrenched in the global zero sum money game. This is our only chance to escape the freefall.
Given that the UK borrowing trend is ongoing and increasing relative to GDP year on year, a small amount of time-limited borrowing for an iScotland is really a drop in the ocean in comparison. If, as part of the negotiations with rUK, iScotland agrees to pay something towards the UK debt (morally we feel this is right, but legally there is no obligation whatsoever), payments towards such debt are already included in Scotland’s current account balance, so this is affordable. If iScotland negotiates to make payments to rUK to cover a share of that debt, it isn’t in the form of a ‘loan’ so it doesn’t need any security against it – it’s simply an agreement for a schedule of payments… I love the suggestion in Robin McAlpine’s blog www.cmonscotland.com that Scotland should choose to make those payments in the form of infrastructure funds for the North of England, NI, Wales, and Cornwall… put the money into generating industry and exports and try to mitigate against the ruin that City of London is spiralling the entire UK towards… It is probable that we are the only hope for the entire UK, by leaving we could genuinely begin to repair the UK economy and influence their political landscape by creating a viable alternative.
I hope you can see from this comparison that staying in the UK is by far and away a much higher risk and the UK has a severe probability of extreme financial collapse having a debt ratio of around 400% of its annual GDP… whereas an iScotland, in a worst case scenario, might find itself accumulating a bit of debt to start with.
This is not an overly optimistic assessment of the risks, this is as real as I can get from the source data I’ve uncovered over the past two years.
The political risks of the UK are massive, for all the reasons you already know – increasingly right-wing, increasingly committed to the madness of austerity, increasingly corrupt and with vested financial interests. The first past the post voting system means that there is no real choice at election time and subsequently party policies have narrowed to the extent that the opposition is basically the same policies dressed up in different coloured ties.
We don’t know what Scottish government we’ll get in an independent Scotland, but three things are for sure:
1) it’ll be the government we voted for
2) there will be a spectrum of parties representing the proportional percentage of votes cast, and
3) there’s real choice in policy from a robust Green party with new momentum in its sails, an SNP that would have to redefine itself without its home-rule agenda, many independents from the grassroots movements, and newly invigorated and refocused Labour, Tory and LD parties. You choose the policies, but guaranteed, it’ll be a renaissance of politics and a true choice of vision.
It shouldn’t need to be said anymore, but this decision and this risk assessment is not about (the many) nationalism(s), and it’s not about identity, it’s about democracy.
The Westminster-run campaign has underestimated us. It belittled our individual capacity for leadership when it failed to inspire us with its lack of a positive vision for the UK, and it belittled our intelligence when it failed to engage with our questions and failed to provide a compelling economic case. It’s underestimated the extent to which it can convincingly ‘spin’ data, when it is now faced with a population armed with tiny devices capable of finding the source of every piece of raw data, and the ability to film and capture the reality on the ground and distribute this very quickly. Sousveillance. We are Watching Them.
We’ve all become generalists.
They bring out the ‘specialists’, get the ‘Good Will Hunting’ guy to do the sums that tell us that we’re better together or that the world will fall into a deep recession. But the one thing we all know is that those nerdy types don’t really know much about how things work beyond their narrow field of study. They’re don’t have an overview of the big picture – they are not generalists.
It is not just about affinity. The Yes campaign is not naively optimistic. It’s pragmatically optimistic because the only way you can create something different is to use your imagination. Imagination is the most powerful tool we have. Imagination is serious stuff – it is the human capacity of ‘play’ that allows us to learn and evolve complex strategies. It is play and imagination that have ensured our survival and the thriving of humanity. Art is an inherently political act, it’s the space of creation. So the fact that the the Yes campaign has focused on a collective imagining of a new future is not a failure of intellect. Instead, I would argue, it makes it the most important project of our times.
We simply cannot go on as things are. We risk the ruin of the entire future for our entire nation. All scientists are now equivocally agreed that we shuttling towards climate change. If you look at the UK balance statement you will see that for at least 30 years we have been shuttling towards economic ruin and the UK has no plan to avert economic disaster. I’m not making this up. You can read it here in the Economic Review from Office of National Statistics 2014.
I stayed up all night writing this, because it feels like this is the last important thing I might be able to do to help others understand the real risks of the choice we’re facing.
I have no vested interests. I have no investments. I have a mortgage that is with English bank (they’ll all be English banks) and since I already have a contract to pay in pounds sterling tracking the BoE base rate, my mortgage payments will remain the same as anyone else in the UK. If I had a pension, it would also stay in line with everyone else in the UK.
I’m don’t have a narrow vision. I am a generalist, so I see the big picture and am not speaking as someone who needs to protect my own over-leveraged bank, or defend my own futures-trading fund and it’s narrow mathematical calculations. Like many of you that spend your time researching online to understand this world a bit better, I know a lot about economics. My motivation is not to make money, I want to make a future for my children possible.
This is why artists have had a lot to contribute to these discussions. The ecology of art-making is much like a scale model of society. I work between ‘big picture’ scenarios, and the nuts and bolts of ‘making things happen’, I work with all kinds of people here and overseas, and I have seen the real effects of systems work and the real impact of policies on people’s lives and behaviour. That Scotland’s creative minds have contributed much to this debate, this movement, is not due to a deficit of specialists or intellectual talent that would otherwise be leading the way – creatives are leading the way because that is the unique role we play at these times of great flux and change. I wrote earlier about the human tendency to underestimate risks in ‘holding your position’ and overestimate the risks of pitching for something better… we need our visioneers to help us see what better world might be possible, help us prioritise and realise our mutual purpose, help us sift through all the information to see that actually, it is possible to make a change for the better.
The power of the imagination has always been potent. The birth of theatre in ancient Greece was as a political space for the examination, discussion and realisation of the political issues of the day. Politicians were playwrights and playwrights politicians. It is no accident that as the centuries progressed and governing power in Europe leaned further towards dictatorship, that under Roman rule ‘entertainment’ diverged fully from art, and the bread and circuses were used to keep the people mesmerised. These days the harnessing of the power of imagination has diverged further, into advertising and persuasion. From Sigmund Freud to his nephew, Edward Bernays, the architect of the American consumerist dream and founder of the real life Mad Men. We have seen the power of political campaigns run by Charles Saatchi in the UK. Images, signs and performance in advertising are the same materiality as art but used in a different way, not to open up possibilities, but to close down and form identities promoting particular ideologies.
Unlike advertisers or career politicians, the purpose of the artist is not to persuade. You don’t choose to be an artist to command great power – art chooses you because you are driven to ignite the imagination of civic society. Art’s currency is not that of the carrot or the stick, it is that of the gift. And the paradox is that choosing to be an artist in our hyper capitalist economy is choosing to be powerless, financially destitute, to have no vested interest except to make people’s lives better.
Art is an experience that happens to you and the effect and the affect of powerful symbols at play brings to light our cognitive dissonances and creates a fertile space for re-sowing new concepts and understanding. That is an immensely powerful process that even the disempowered, the disenfranchised and the politically disengaged can enter into. It’s the stuff that can change the future. It activates the capacity for social invention, and it is this ‘inventiveness’ and the capacity to leap into the unknown, (despite our biases to measure that risk disproportionately high) that makes humans more evolved and adaptable than other animals.
Artists are ideal politicians in many ways because we work with power, and yet we don’t want it for ourselves. We can take much about creating a new society from art and artists – the processes of art-making provides alternative models for success, models that are not beholden to a top-down hierarchy. Artists are highly adept at working collaboratively, consensually, engaging with very stuff of conflict whilst simultaneously working to create the world anew. We work within diplomatic contexts, within tight budgets and we work practically, with pragmatism, within societies. For artists, the process of building real life utopias isn’t a pipe dream, is the reality of what we do every day. For arts producers, ‘making the impossible happen’ is our job. We are the visioneers and the producers of future worlds.
So for those who think it’s impossible to imagine our world working differently, I tell you I know it’s possible, I’ve seen it done. On my scaled down model, I’ve done it. Imagine if the new world on my ‘human scale’ was to combine with the new world of yours, and yours, and yours and on and on and on till we realise… it’s not difficult any more. It’s possible.
Politics is too important to be left to the politicians. If you can imagining the world differently it gives you power. The power to choose whether to let change happen to you, or the power to be that change. Either way, change is always coming, the choice is whether you’re going to hold your power in your hands or let someone else wield it over you.
Look at the risks. If we don’t do something to change our society, we risk losing it all for the sake of being afraid of a short period of disruption. Use your heart, use your head, and then use your imagination. On Thursday the 18th September, for the first time you truly have the power in your hands, and you can choose to keep it or give it away again. Imagine what we could do, it’s too much of a risk not to.