Alberto Mingardi  

Will Scottish secession be a disaster?

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Is secession a recipe for disaster? There seems to be an emerging consensus on the point, at least in the case of Scotland. I shall confess I am biased in the opposite direction. I read this piece by Murray Rothbard ages ago, and that convinced me that "every group, every nationality, should be allowed to secede from any nation-state and to join any other nation-state that agrees to have it," or form its own. It doesn't take an anarchist to favour secession over maintenance of the government boundaries as they exist. The Ludwig von Mises Institute has conveniently assembled here a few quotes by Ludwig von Mises on secession, that exemplify rather clearly the classical liberal rationale for secession. It is an argument based on self-determination, on the fact we should be free "to stay with whom we like and who like us," as Italian political scientist Gianfranco Miglio put it.

As always, the real world is different. We know that secession may go together with the creation of almost toxically homogeneous communities, that make life difficult, almost impossible, for anyone with a different background. We know that some secessionist groups may actually be practicing an exercise in nostalgia: nostalgia for smaller, simpler, less open and less tolerant face-to-face societies. We know that sometimes, in the great theatre of politics, secessionist groups may be puppets in the hands of foreign powers, more interested in bringing confusion to the enemy than to aid the cause of long suffocated nationalities.

Not all secessions are alike, and yet I would maintain that, in the broader context of our relatively open societies, there are good reasons secession should be allowed. A very simple example: it was for the sake of the values of our open society, that we thought Kosovo was to be granted the right to secede from Serbia. Not being forced to share a meal with somebody you despise: isn't this, simply, freedom?

I find it difficult to assume that the above mentioned concerns apply to Scotland, or Catalonia. Do we really think that Scots and Catalonians want to secede to close down borders and persecute dissent? For one thing, they have repeatedly pledged they want to stay within the EU, a goal that doesn't seem compatible with claustrophobic localism.

And yet opinion leaders in the Anglo-Saxon world are getting increasingly vocal about Scottish secession. The arguments seem to be of two kinds. One are the bluntly "nationalistic" ones. There is not much reasoning in that. A good example was provided by George Robertson, former chairman of the Labour party in Scotland, in the FT. Before forecasting financial Armageddon, the death of the welfare state, Nato and the EU closing their doors to the Scots, Robertson tells this story:

My taxi driver in Glasgow last week told me the had switched from No to Yes. I asked why. He listed the reasons and I countered, to little avail. Then he delivered the killer blow. Of course there would be difficult negotiations after a Yes vote. Of course there were a lot of risks. "But," he added, "the negotiations will be done by the likes of you and Gordon Brown and Alistair Darling. You guys will sort it out."
I was stunned. He was prepared to break up my country; unpick three centuries of integration; face unquantified risks and the costs of setting up a state - yet he wanted defenders of the union to save him.

Note, for one, that the "reasons" the poor man gave for secession are not even listed by Mr Robertson. He wants to ridicule his taxi driver, who had nonetheless understood that the Scottish referendum is not the movie Braveheart: indeed, there will be long negotiations, and compromises to reach. The taxi driver was perhaps naively assuming that politicians could be trusted in acting for the common good, even if they lose at the ballot box. Mr Robertson's article is no good publicity for his like.

Robertson's reaction is rooted in an understandable longing for stability and keeping the status quo, no matter what, and perhaps in affection for the Union Jack. These are not despicable sentiments, per se: but they are sentiments indeed. One may long for one flag or another. Can we objectively state that for Mark it is better to love Pamela than to love Christine? Are our opinions on that matter enough to prevent him from divorcing one to marry the other?

The other kind of arguments against the Scottish secession is the one economists are making. For them, a currency union "à la euro" with London would be very bad for the Scots, that should thus vote "no."
Paul Krugman expressed this argument with great clarity:

Could Scotland have its own currency? Maybe, although Scotland's economy is even more tightly integrated with that of the rest of Britain than Canada's is with the United States, so that trying to maintain a separate currency would be hard. It's a moot point, however: The Scottish independence movement has been very clear that it intends to keep the pound as the national currency. And the combination of political independence with a shared currency is a recipe for disaster.

You may agree or disagree with this statement, depending on your understanding of the euro crisis. However, is it really a good argument against secession? It looks to me at best an argument against currency unions, based upon a certain understanding of what a currency should be used for (on the opposite side, Harold James suggested the Scots should join the euro).

In a paper by Alberto Alesina, you may find a very different view. Alesina begins with a rather obvious, and yet underrated, point. Borders are man-made. Governments' dimensions should be also part of a learning process, unless we pretend to know already what the "optimal dimensions" should be.
True, it was pre-euro-crisis, but Alesina quotes an article from the Financial Times arguing that

(...) the existence of the European Union lowers the cost of independence for small countries by providing them with a free trade area (...) and by creating a common currency which will relieve the Scots of the need to create one for themselves

By the way, note that the article says that the existence of the EU should "lower", not eliminate, the costs of secession. On the costs of Scottish secession, I recommend this remarkable post by Jason Sorens.

More generally, Alesina argues, "ethnic and cultural minorities feel that they are economically "viable" in the context of a truly European common market, thus they can "safely" separate from the home country." Therefore, going back to the fear of secession leading to homogeneity, intolerance, and isolation, it is precisely the fact that these secessions may happen in a more economically integrated world, that vaccinates us against such risk. Put in other terms, now you can have the pride of waving your own national flag, the opportunity to experiment with your vision of what services government should supply, and yet still reap the benefits of economic integration.

I'd like to add two further considerations.

First, I think it has been extremely civilised of the British government to allow the Scots to have this referendum. Whatever the results may be, it is a great testimony of respect for people's right of self determination, and a great act of faith in democracy, which is considered apt to sort out questions such as this.

Second, it is not perhaps by chance that the strongest opponents of Scottish independence appear to belong to the Labour Party, or to sympathise with it. It has been argued that "The results are so strongly one-sided in Scotland, in fact, that there is a significant electoral advantage to be had for the Conservatives in letting Scotland go - although few will admit it". It would appear that parochial self-interest is not a monopoly of the advocates of secession.


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CATEGORIES: Eurozone crisis




COMMENTS (14 to date)
ThomasH writes:

Who knows about the long run evolution, but the economic assumptions being used by "Yes," that it would be desirable to use the English pound is so faulty as to make other judgments of "Yes" proponents suspect.

AriT writes:

I think a lot has to do with the Scottish wanting to be more of a Nordic welfare state and the UK being more of a class-society.

We can achieve scale advantages with higher level coordination but I think on general level regions should be given autonomy. I understand where nationalism comes from but I think it is kind of stupid to try to keep national borders when people don't want to be there. I think it serves the political power a lot more than it serves the people on either side of the border.

MikeP writes:

...that it would be desirable to use the English pound is so faulty...

This is a curious statement. Why is that desire faulty?

I would think that using a currency would pose serious trouble only if (a) the issuing bank is incompetent or (b) the government is going to run unsustainable deficits. Frankly, that goes for any currency, foreign or domestic, public or private. Having a domestic public currency may be more desirable by some only because (a) can help address the problems caused by (b).

In any event, the Bank of England is not demonstrably incompetent. And I would hope that Scotland is not seceding solely so it can run goofy budget deficits.

Greg Heslop writes:

Good post! Particularly the discussion of Alesina's paper.

One advantage of independence is that the Scottish Parliament would decide how to finance the services they provide. As far as I understand things, they can only alter some taxes by a maximum of three percentage points up or down at the moment, and receive most (all?) of their funds from Westminster.

Another advantage may be increased competition between governments, simply due to the doubling of them within the same geographical area. It is reasonably easy to vote with one's feet when one won't have to learn a new language (except maybe in the very north of Scotland). Also, there are quite a lot of social ties established across the border already to ease migration.

Still, I have no firm opinion on this issue. The "No" camp have some valid concerns, many of which are in this blog post. Ladbrokes are predicting a "no" vote, although the "Yes" camp may get close to fifty per cent (link).

Andrew_FL writes:

Secession is a political act, with political ends. Which, to me, makes the relevant question: what are the ends, exactly, both intended and actual?

Part of me entertained, from a position of complete ignorance of UK regional politics, a romantic notion of the home nation of Adam Smith returning to it's capitalist roots. A lot of what I have learned since seems to suggest the exact opposite is the actual end, intended or actual. Sad indeed. If Scotland intends to become a more thoroughly Socialist country, then secession is bad for Scotland. Conversely, it may be good for the rest of the UK, in much the same way it would be good for most of the US if the coastal counties of California were to break off to join Mexico. I would scarcely expect a left wing Democrat to win the Presidency again without those electoral votes.

Mark V Anderson writes:

I think I've said this before, but I will repeat:
It doesn't make logical sense for a region of a liberal democracy to break off to create its own country. Sure it is good thing for regions to have this right, but that doesn't make it the right thing to do. The reasoning for this is right in Alberto's posting:

By the way, note that the article says that the existence of the EU should "lower", not eliminate, the costs of secession.

A smaller country will simply do worse economically than a similarly situated larger nation. Being part of the EU will mitigate that but not eliminate it. The fact that Scotland will likely be further left than the UK will just add to their troubles.

The Scottish voting "yes" are doing this for emotional reasons, but they will pay for it economically.

Christian writes:

The Scots have never accepted the Margaret Thatcher neo-liberal economic settlement like the New Labour leadership of Tony Blair did. Instead they want to live under a perpetual social democratic state, and independence is the way to ensure this.

Until they have to take the responsibility for the consequences of this (think France/Sweden) without being able to blame the London government, their resentment against the English will only fester.

Some of us English who wish them the best are hoping they will secede just so that they can escape from this infantilised position (and maybe rediscover their Adam Smith). Grab the popcorn: you don't want to miss this.

From England's point of view the whole population of Scotland only represents about 15 years of UK population growth and it's less than a tenth of UK: maybe not really such a big deal.

Bring it on.

(Written in London.)

MikeP writes:

A smaller country will simply do worse economically than a similarly situated larger nation.

Huh?

To a first approximation a country will do well economically proportionally to the economic freedoms its people possess. Thus small Hong Kong does much better than similarly situated China, and small Singapore does much better than similarly situated Malaysia and Indonesia.

Luxemburg does pretty well compared to France.

The fact that Scotland will likely be further left than the UK will just add to their troubles.

This sad observation is much more telling on how Scotland will do economically.

But if goods, labor, and capital are free to cross borders, as remaining in the EU would ensure, the size of a country is not a materially important attribute in its economic performance.

Ted writes:
This is a curious statement. Why is that desire faulty?

The problem with Scotland continuing to use the sterling comes from an independent Scotland being essentially bankrupt should they continue in the same lifestyle they've been accustomed to, without the ability to print sterling.

At the moment the house of cards is stable because their budget is supplemented from Westminster, which borrows and prints to meet the existing deficit.

However it's far from clear how will an independent Scotland deal with adopting both an independent currency they do not control (be that GBP or EUR) along with presumably higher state spending (on welfare, state employees, more government programs, subsidies etc) and a smaller tax base, since many companies now based in Scotland have made clear their intention to move South of the border.

It doesn't add up. If they cannot print the money and at the same time they spend more than they make, how is that going to work? Who's going to give them the difference?

Peter H writes:

"A smaller country will simply do worse economically than a similarly situated larger nation."

Huh?

To a first approximation a country will do well economically proportionally to the economic freedoms its people possess. Thus small Hong Kong does much better than similarly situated China, and small Singapore does much better than similarly situated Malaysia and Indonesia.

This doesn't tell us anything about the case of a region of a larger country versus an independent country. While true, it's not an answer to the question faced by Scotland, nor to the assertion you quote.

Andrew_FL writes:

I don't follow the argument that a remaining part of a larger country is inherently an advantage for the economy of a region/would be independent country. So long as trade is allowed to go unrestricted across the border between them, the division of their economic statistics across the political boundary is entirely arbitrary. They may appear to do better or worse immediately because one region may have had higher per capita income than the prior united country as a whole, but this is simply revealing a pre-existing difference, not actually making the economy of the region worse off.

Duscany writes:

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Shane L writes:

Would an independent Scotland manage to stay out of the wars Britain fairly often wanders into? Here in Ireland I regret the bloody nature of the 1920s break-up with the UK, but I am grateful that we have avoided Britain's many wars. I hope an independent Scotland could leave NATO too.

I think a smaller country might be able to change policy more quickly. It's probably easier for Portugal to decriminalise heroin than the United States, or for Sweden to overhaul its economy as it did in the 1990s; there are fewer people needed to convince and politicians are closer to the electorates, representing fewer people.

My main concerns are that independence will produce short-term economic disruptions, that it might stir up nationalist separatism in Northern Ireland again, that there are concerns about Scotland-based nuclear weapons and other military issues, and I have a general (Burkean?) fear of a big political change having unexpected and unforeseeable consequences.

Mark V Anderson writes:

There have been a couple of comments that as long as goods, labor, and capital can cross borders, then a small country can do as well as a big one. Yes, that is true, but a big part of being a country is that one has control over the activities across borders, including the movement of economic factors. The EU is not a country. Goods, labor and capital will be inherently harder to move between Edinburgh and London than they are now, after independence. Because it will be harder to do business with England, Scotland will suffer economically.

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