Thursday, October 16, 2008

Alex Salmond: mugged by reality?

Some people have effectively one answer to just about every political and social problem. Two of them haven't done very well out of the banking crisis, one being the state-shrinking fraternity and the other being the Scottish nationalists.

I don't like the purely economic arguments that are used by both pro and anti-Unionists but since Alex Salmond and the SNP are so fond of using them, I'm finding it's impossible not to enjoy his present discomfort at the way his inclusion of Iceland in his "arc of prosperity" is now being used against him.

Some of us have been frustrated by the way in which Salmond and the nationalists have used the examples of other countries to serve as a model of the prosperity that Scotland could enjoy were it independent, without providing any sensible argument that the prosperity of these countries is a function of their independence.

Add to this the inconsistency with regards to the whole business of membership of the EU and the Euro. Ireland - the 'Emerald Tiger' - was held up as an example of what Scotland could be as a small nation operating in the Euro-zone. The closest Salmond ever came to explaining the time-lag between Irish independence and its take-off in the nineties was membership of the EU and then the adoption of the Euro. He chose to ignore the fact that Scotland would never receive the level of subsidy Ireland did following the enlargement that included the eastern European states. He argued for the Euro on the grounds that the interest rates set by the ECB were lower than in Britain. Never mind the fact that these lower interest rates were probably not appropriate for the Irish economy at that time.

He also suggested that Scotland could follow Ireland's beggar-thy-neighbour cuts in corporation tax. He didn't bother to answer the question as to what would happen if Westminster chose to eliminate this competitive advantage by following suit. This being because no one asked him. They should have. Now he's going on about Ireland acting decisively to guarantee bank deposits - ignoring completely the fact that Ireland's unilateral action was almost certainly in breech of EU competition law.

Finally, you could ask what the 'levers' the nationalists think they would have available to deal with the economic crisis are exactly when monetary policy is set by the ECB and where the scope for fiscal expansion is limited by membership of this monetary union.

But Salmond only ever used the EU membership argument when it suited him - as is demonstrated by his inclusion of examples of countries that are not in the EU. He didn't pick these randomly, as some have suggested. Rather some point of similarity was identified in each case. Iceland, for example, was and is like Scotland in that it has a large financial sector. That this isn't exactly a selling point in the present circumstances would be something of an understatement.

Then there's the perennial fall-back for the nationalist economic argument: oil. Trouble here is that the price of this commodity seems to be falling somewhat and even if it weren't, isn't it a little late to be suggesting that Scotland would be in the same position as Norway is today? They've got a thirty year start on us after all.

Now the nationalists could, and will, argue the toss about a number of these points. Some of these arguments will even be plausible. But here's something I don't think they'll be able to wriggle out of. What I dislike about the nationalist argument is the simplistic way in which the nation is used as a repository for all that is good, while the lack of independence thereof is used as an explanation for all that is wrong with our country. Retarded economic growth? This wouldn't be happening if we were independent, the nationalists always insist. For inequality, poverty, poor educational performance, or whatever, we are always invited to insert the same answer: "This wouldn't be happening if we were independent." It is this formulation, this easy answer, that has been dashed on the rocks of reality. They'll continue to try and sell this line in relation to the banking crisis no doubt - but with less conviction, and to a smaller audience.

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