The End Of Britain? Ctd

Scotland’s independence movement has the wind at its back. But the increasing likelihood of a Yes victory sent the Pound tumbling yesterday. And the economic consequences of independence don’t end there:

Douglas Flint, the Scottish-born chairman of HSBC (HSBC), predicted that uncertainty over Scotland’s currency arrangements could “prompt capital flight from the country, leaving its financial system in a parlous state.” Independence advocates haven’t said whether Scotland would establish its own currency or maintain an informal link to the British pound. Whatever approach is taken, Flint wrote in a recent column for the Telegraph, “Scotland’s borrowing costs and those of its businesses and consumers would rise, at least in the near term.”

Should Scotland secede, Drum suspects the country will get its own currency soon enough:

The pro-independence forces probably feel like they need to support continued use of the pound for now, just to take it off the table as a campaign issue. But if independence succeeds, there’s a good chance that Scotland will adopt its own currency within a few years for all the reasons Krugman brings up. Being stuck in a currency union is so obviously dangerous that it will probably be abandoned once things shake down in an independent Scotland and the new government has time to focus on it.

Yglesias agrees that “the most sensible option might well be for independent Scotland to have its own central bank and its own currency that would trade freely on global markets”:

Other small developed countries (Norway, Iceland, New Zealand, Sweden) do this successfully, and it appeared to work well enough for Denmark and Finland in the past. Small countries are inevitably very exposed to developments in the global economy that are outside their control, and currency flexibility can help cope with that. … The downside of creating a new currency is that it would have no track record, and might be catastrophically mismanaged and destroy the value of everyone’s savings. Independence campaigners appear to feel that these fears are widespread, and have not made the creation of a new currency part of their proposal for Scottish independence.

But this all assumes the Scots vote for independence in the first place. Justin Wolfers has doubts:

In contrast with the polls, traders at the British betting exchange Betfair.com currently assess the “No” vote as the likely favorite, assigning it a 72 percent chance of winning. To be sure, that still suggests a sizable 28 percent chance that a majority of Scots will vote for independence, but the odds that it will happen seem a lot weaker than polls would suggest.

And, even if the polling is taken at face value, the goodies Westminster is promising Scotland might boost the No vote. But Fraiser Nelson wouldn’t bet on it:

So Gordon Brown has spoken, and the unionist parties are in agreement: if there’s a ‘no’ vote then more powers will be given – we’re told – ‘to Scotland’. And why? Because there’ll be another commission and another Scotland act and the Great Broon announces that the results will come out on Burns Night! Neeps and haggis all round! To me, this is only a little better than the Treasury telling Scots that they should vote ‘no’ because they’ll be able to afford more bags of chips. It’s patronizing, not credible and I doubt will make very much difference. This so-called Devo Max should have been offered six months ago; to offer it in the last few days of the campaign smacks of desperation.

Indeed it does. Peter Geoghegan remarks that the “No side might still be the favorite to stumble across the finish line first in the coming referendum, but it has singularly failed to make an emotional case for the United Kingdom”:

A Better Together activist told me recently, “It is like a business transaction. I look at the sums, they don’t add up, so you don’t do it.” This might be a good reason to reject independence, but such instrumentality hardly bodes well for the union’s future health — and such sentiments leave plenty of room for uncertainty about what will happen on September 18. Nationalists have won the argument that Scotland could be a separate state. The question now is whether they can persuade their fellow Scots that it should be. If they can, what seemed unimaginable just a few months ago could become a reality.

Should that happen, Robert Kuttner imagines that other independence movements around Europe will take notice:

If the Scots actually become independent, it’s not Britain alone that is affected. Also threatened are such venerable unitary nations as Spain, France and Italy. That’s why the leaders of the E.U. have signaled that an independent Scotland would not be welcome as a member. If Scotland secedes, Catalonia will be next. And if Catalonia, why not Brittany and Northern Italy? Why not Wales? Not to mention Quebec.

Most major nations were created by acts of conquest and often brutal suppression of ethnic and linguistic minorities. Irish schoolchildren got their knuckles rapped for speaking Irish in school. In Catalonia, kids caught speaking Catalan were warned, “Habla Cristiano!“—as if Castilian Spanish were the language of Christ and Catalan the idiom of Satan. But it is absolutely startling to see hundreds of years of political history unwinding.