Wednesday, January 20, 2010

On Scottish nationalism and the collapse of the Irish economy

Liking this post from Johann Hari where he points out that Cameronomics has already been tried out to destruction on the Emerald Isle:
"Throughout the nineties and the noughties, Ireland was held up as a poster child by the right. People like John Redwood and (yes) David Cameron said its model of low taxes and almost-total deregulation showed the way forward for Britain. In fact it produced the most corrupt and over-extended banking sector outside Iceland. Just one bank – Anglo Irish – is now on course to receive a €30bn extended bailout, equivalent to every penny of tax collected in the country in 2009. The Celtic Tiger had its claws ripped out, and it's shaking at the back of its cage."
To be honest, I hadn't been particularly aware that the neo-Thatcherites had done this because if you live in Scotland, the politician one most associates with cant about the 'Celtic Tiger' is, of course, Alex Salmond. Take the following (please) from the Hootsmon around this time last year:
"What is the way forward for Scotland? What should be our inspiration? And what examples should we follow? First Minister Alex Salmond is in no doubt: Ireland."
That he should have gone quiet about this now is understandable - what is frustrating is how few journos or politicians have been able to nail him down on this point. The 'arc of insolvency' quip coined by the Scottish Secretary Jim Murphy went some way to wiping the smirk from Salmond's face - but even the best soundbites by definition lack specifics, and it's these that Salmond and the SNP should be made to answer.

Johann's points about Cameron don't apply to Salmond in the sense that the latter does not advocate deflationary budget cutting - but still, his advocacy of the Irish model should be exposed for what it was - a shallow appropriation of a seemingly successful economic model that has little or no relevance to Scotland.

For example, Salmond made much of - indeed made explicit in election campaigns - the Irish experience of attracting footloose capital by competitive rates of corporation tax. It was part of the reason that the excruciating Braveheart was filmed largely in Ireland. Salmond has never, to my knowledge, been made to address the fundamental problem with this sort of policy - namely it assumes the neighbour that you're freshly independent from is happy to oblige by keeping its corporation taxes at a helpfully uncompetitive level. And don't mention the potential erosion of national tax bases by such competition; Salmond, despite being a nationalist, doesn't care to consider such inconvenient questions.

Then there's membership of the EU. Good for Ireland because their relatively large agricultural sector meant they received considerable transfer payments courtesy of the CAP. Also, membership of the Euro meant until recently lower borrowing rates than Britain. Now, Ireland was always going to gain more than Scotland given the size of its agricultural sector - but after the enlargement that took in the ten Eastern European states, neither Ireland nor Scotland can expect to receive the level of subsidy that they had hitherto become accustomed to. The question of the Euro can be, I think, largely ignored as an entirely superficial and opportunistic attempt by the SNP to base the future of a country's constitution on ephemeral economic conditions.

Finally, there is the more fundamental secular trend in Ireland's economic development to consider. Their growth rates in the last two decades of the twentieth century can be attributed in part simply to the fact that they were experiencing classic catch-up from relative backwardness. You had a fairly young and well-educated population ready to move from the land into modern industries in a way that most European states had experienced some decades earlier. At the risk of being offensive with such a summary: once Ireland realised there was more to life than Catholicism and Kerrygold butter, they were bound to grow - but this is not an experience that is relevant to the rain-soaked workshop of the world's first industrial superpower.

It's not that these details are important to the nationalists. They are - or I should say were - happy to use the example of Iceland, which isn't even a member of the EU, still less the Eurozone, if they thought it suited their argument. Because despite their leader being an economist, the SNP represents the politics of pure identity - all the rest of this is window-dressing. It's naive of me, I dare say - but if they were pressed on one or two of these points, this would become increasingly obvious.

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