Sunday, June 12, 2011

Adam Smith and Scottish Independence

Sam Reeves (AFP) writes an article on Scottish Independence (and Adam Smith) HERE:

Scottish independence debate focuses on economy

[My comments are in square brackets]:

In Edinburgh's historic centre stands a statue of renowned Scots economist Adam Smith, a symbol of pride and Scotland's growing confidence that it can look after its own affairs.

The 10-foot bronze figure was erected in 2008 on the Royal Mile, the historic cobbled street leading from Edinburgh Castle down to Holyrood Palace, Queen Elizabeth's [official] Scottish residence.

[The Royal family privately own the Balmoral Estate in the Highlands, her traditional summer residence.]

But the statue is also a reminder of a key battleground in Scotland's independence debate.

[Adam Smith supported the Hanoverian Succession in the struggle of the Jacobite ex-king’s to restore this rule over England and Scotland. This is sometimes claimed to show Adam Smith as a supporter of the Union with England; however, the Jacobite rebellion was not a war for separating Scots from England, whatever later-day romantics claim (and ‘Bonnie Prince Charlie’ was neither ‘bonny’, nor a ‘prince’, but he certainly proved to be right ‘Charlie’ as a leader); the Jacobites claimed the Crowns of the Union and aimed to rule the Union of Crowns from London. For that reason, both the Jacobites and the Hanoverians were Unionists that supported the union of parliaments.]

The economy looms large over discussions about an independent Scotland, which have stepped up a gear after the resounding victory of the Scottish National Party (SNP) in May's election to the devolved Edinburgh parliament [within the Union.]

The triumph of the pro-independence SNP, which won the first overall majority in the legislature since it opened in 1999, has paved the way for a referendum on a split from Britain that had previously seemed unlikely. The vote is expected in the second half of the parliament's five-year term.

But with polls showing only a third of Scots backing partition, the SNP has a tough job on its hand to persuade their countrymen to support an end to Scotland's 300-year-old union with England.

The nationalists, led by First Minister Alex Salmond, view the economy as one of their strong cards.

They argue that Scotland can only flourish with independent control over its main industries, notably North Sea oil and gas but also other sectors such as whisky and fine foods
[and fiscal policy].

"Independence would give Scotland full responsibility for its own economic performance, and for all the policy mechanisms to encourage the optimum level of development," according to official Scottish government literature.

A long-standing complaint is that the tax revenues from the North Sea industry go directly to the Treasury in London. The revenues were £8.8 billion in the past year, official figures show.

The SNP accuses London of mismanaging the industry, and a row blew up in March this year when chancellor George Osborne slapped a £2-billion extra annual levy on the sector

[Without consulting the Scottish parliament.]

"North Sea oil has to be properly managed and there is not much sign that Westminster is capable of doing that," Salmond, a former Royal Bank of Scotland economist, told AFP.

But North Sea oil is running out, and the SNP has started to focus on green energy as a key driver of a future independent Scotland.

Scotland, with 6,200 miles of coastline and around 800 islands, is well placed to become a European leader in wind, wave and tidal power, Salmond argues.

The SNP aims for Scotland to produce enough electricity through renewable means to power the whole country by 2020. They believe they will also be able to export electricity to other countries.

But their opponents, mainly the nationwide British political parties who suffered heavy defeats in the Edinburgh parliament elections, argue an independent Scotland would be not just isolated but also poorer.

"Being part of that bigger economic unit gives us an enormous economic opportunity, in terms of being part of a bigger market of 60 million people instead of five million people," said Scottish Labour leader Iain Gray

[A rather silly statement, given the number of small countries in the European Union, and those outside the EU with free trade agreements; there being no reason to lock Scotland out.]

He also argues that the financial crisis that led to two major Scottish banks, Royal Bank of Scotland and Halifax Bank of Scotland, being rescued by the British government is further proof that Scotland would struggle alone.

[But would an independent Scottish government have allowed RSB and BoS to expand in England, America, and the Netherlands so recklessly?]

Economists have waded into the row, with a high-profile intervention last year from two Scottish academics, Professor Andrew Hughes Hallett and Professor Drew Scott.

[Both fine economists.]

They gave the SNP a boost by claiming that financial autonomy would lift growth rates.

But others argue many of the SNP's policies are not yet clearly defined, making it hard to judge at this early stage what impact independence would have.

"There is a reason why independence could be a good thing, there's a reason why independence could be a bad thing. We can't really it predict it meaningfully at the moment," said Professor Stuart Sayer, an economist from Edinburgh University.

[I don’t know Professor Sayer.]



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