Author Archives: Jim Walker

     

 

 

Fiscal Policy – The Real Difference

That leaves fiscal policy as the real difference between an independent Scotland and the rest of the UK. But what a huge difference that can mean. This is where choice, responsibility and independence of mind and spirit enter the equation. As Austrians, we would probably make very different choices from those set out in Scotland’s Future but, there again, we would make very different choices from those made in the UK, the US, Europe and elsewhere. (At the same time, we believe that we would have more opportunity to influence these decisions in a smaller administrative unit than we do today.)

We have a philosophical problem with the Scottish government’s commitment to policies such as “free medical prescriptions”, “free university education” and the retention of public ownership of the Health Service. But our issue is with terminology and blind faith, not with the choices. In fact, these are good examples of the priorities that Scots in general espouse relative to the rest of the UK. Provision of medical treatment for all people in society, a commitment to education for the young and a functioning medical care system. These are all strongly supported public services in Scotland. As Hayek would put it, an awareness of what our neighbors want – who are we to argue?

 

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The Currency – Sterling or Not?

For those of us living and working abroad, and especially in the world of finance, one of the most perplexing features of the debate on Scotland’s post-independence currency has been the misconception that somehow the successor state to the United Kingdom can stop Scotland using sterling as the medium of exchange. This has been the mantra repeated by leaders of all the major UK parties.

Sterling is a freely-convertible, internationally-traded currency. It shares those features with a limited number of other currencies – the US dollar, the euro, the Australian dollar, the Canadian dollar and the yen (to name most). As such, sterling is available to any country in the world as a transactions and reference currency. So, unless the UK successor state intends to make sterling non-convertible (with dire consequences for the City of London) we can safely say that ‘sterlingization’ is not only a viable option but an attractive one given Scotland’s strong trading relationship with other parts of the UK, and vice versa. In this sense, Scotland would be making the same choice as the independent Irish government did post-1923 (Ireland operated a currency board arrangement with sterling between 1927 and 1979).

 

ScotlandPNew-50Pounds-TRBoS-2005-dml_fPT: A 50 pound note issued in Scotland. Currently, Scottish banks have to deposit an equivalent amount with the Bank of England if they want to issue notes – about £3.6bn pound sterling notes issued in Scotland are in circulation at present.

(Image source: The Royal Bank of Scotland)

 

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It’s NOT All about Pounds and Oil

 

“We shall not rebuild civilization on a large scale. It is no accident that on the whole there was more beauty and decency to be found in the life of small peoples, and that among the large ones there was more happiness and content in proportion as they had avoided the deadly blight of centralization. Least of all shall we preserve democracy or foster its growth if all the power and most of the important decisions rest with an organization far too big for the common man to survey or comprehend. Nowhere has democracy ever worked well without a great measure of local self-government, providing a school of political training for the people at large as much as for their future leaders. It is only where responsibility can be learned and practiced in affairs with which most people are familiar, where it is the awareness of one’s neighbor rather than some theoretical knowledge of the needs of other people which guides action, that the ordinary man can take a real part in public affairs because they concern the world he knows. Where the scope of the political measures becomes so large that the necessary knowledge is almost exclusively possessed by the bureaucracy, the creative impulses of the private person must flag. I believe that here the experience of the small countries like Holland and Switzerland contains much from which even the most fortunate larger countries like Great Britain can learn. We shall all be the gainers if we can create a world fit for small states to live in.”

 

Friedrich Hayek, The Road to Serfdom (1944), Chapter 15 (emphasis added)

 

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