Monday, August 4, 2014

The British Government's sterling claims: a "'lurid collage of fact, conjecture and fantasy"

"The Treasury case against a post-independence currency union between Scotland and the rest of the UK has been dismantled as 'misleading', 'unsubstantiated' and 'the reverse of the truth' by one of the world's leading economists. Professor Leslie Young, of the Cheung Kong Graduate School of Business in Beijing, accused the UK Government of relying on a 'lurid collage of fact, conjecture and fantasy' in making its argument." (The Herald, 23 March 2014)

George Osborne says there won't be a currency union. The Scottish Government has made its position clear as to why it says that, assuming a Yes vote, it would clearly be in the UK's interests as much as ours to have a currency union. The unnamed UK minister, Philip Hammond, says that of course there will be a currency union as does (or to be scrupulously fair, did) Alistair Darling and as does the Nobel Prize winner Sir James Mirrlees of the independent Fiscal Commission working group .  The British government doesn't want us to vote Yes so of course it will say, now, that it won't agree to currency union. But what will it do after we actually have voted Yes? How can we know whether it is Mr. Osborne who is right or Mr. Hammond, Mr. Darling and Sir James Mirrlees? Those claiming there will obviously be an agreement (like Mr. Darling and Mr. Hammond) cite a common, mutual interest in having one, after a Yes vote. If only there was an independent, expert economist who could give a view.

 

Well there is. And boy is he unhappy.



Professor Leslie Young is an independent, expert economist and he was commissioned by Sir Tom Hunter's independent Scotland September 18 site to assess the British government's claims. An independent expert commissioned by an independent think-tank. So what were his views on the British government's position?

Pretty clear. There are, he thinks:

"only two explanations for this stance by the UK Government, which has shaped the current debate on Scotland’s currency: either confused logic and inadequate economics, or a subterfuge to frighten Scottish citizens to vote against independence by raising the spectre of economic chaos immediately afterwards. Neither explanation does the UK Government much credit."

He won't say it so starkly because he can't, but we can: the British government is either ineptly incompetent or it is lying to try to frighten us. Either way, it is not to be believed. Because:

"If Scotland votes for independence, then a currency union with rUK would be better for both economies than Scotland’s other currency options: unilateral use of the Pound Sterling, a currency board, an independent currency with a flexible exchange rate and joining the Eurozone.

I arrive at [this conclusion] via a comparison of how each economy would function under the various currency options if Scotland were subject to a reckless fiscal policy, or to financial instability, or to a drop in oil prices. Treasury presented these contingencies as reasons to oppose a currency union; they turn out to be reasons to advocate it over an independent Scotland’s other currency options. I then offer three general arguments in favour of a currency union: it offers microeconomic advantages to both economies that are likely to outweigh any macroeconomic advantages from the other currency options; it better insulates both economies from international disturbances; and it minimizes the massive legal issues that both economies would face immediately if Scotland switched to a new currency."


You can download Professor Young's full paper here.

We're in a political campaign and the British government (and all the British parties) are players in it, on the No side. They'll say, now, whatever they think will help them get a No vote. As Crawford Beveridge of the Fiscal Commission working group politely understated it: "we understand that political considerations will play a role prior to the referendum". However, once we vote Yes, the British government are not going to punish us for being so cheeky. And that is particularly the case if doing so would slash the UK's balance of payments, lead to a plunge in Sterling's value and result in tens of thousands of UK jobs being lost as businesses that trade with us (we're England's second biggest trading market) close.

Problem is, of course, not every claim and not every pronouncement by Better Together and the British government can be subjected to such detailed, independent scrutiny. There's not enough time, not enough money and would everyone read it anyway? Many people see only headlines in unionist newspapers. Still. "Misleading". "Unsubstantiated". "Confused". "Inadequate" "The reverse of the truth". "A lurid collage of fact, conjecture and fantasy".

A lurid collage of fact, conjecture and fantasy.

We can all bear all that in mind when we read anything else they say. But most especially, and most especially when we get to the ballot booth, this: "a subterfuge to frighten Scottish citizens to vote against independence by raising the spectre of economic chaos immediately afterwards". 


A subterfuge to frighten Scottish citizens to vote against independence. That, most especially.

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