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I am the Scottish Socialist Party spokesperson, former MSP for the Lothians. A founder member of the SSP I have been a political activist for 30 years.

Sunday, 28 April 2013

EXAMINING SCOTLAND'S CURRENCY OPTIONS


I recently received an email at my SSP account asking me to explain my views on the currency Scotland should adopt after Independence. I replied to say that this is one of those occasions where the question asked was admirably short but the answer could not be. Here’s the gist of my reply.

First I should point out that all four options raised so far assume the maintenance of a wholly capitalist model of economics and finance for Scotland. I’m in favour of an Independent socialist Scotland with complete democratic control and accountability of all our own economic decisions. Nonetheless, and since I would not want to appear to be ducking the question, I will outline my own view of the options presented so far in this debate.

There are, as you know, four currency options an Independent Scotland might consider after the 2014 Referendum and they are; either to keep the present arrangement with the pound remaining Scotland's currency, to move to what is termed a 'Sterling zone' where we share the pound with the rest of the UK but have control over our own fiscal policy, adopt the Euro or introduce our own new currency.

All four options are complicated including leaving things as they are since that would mean our Independent sovereign Government would be at the mercy of decisions taken beyond our control by the Bank of England and the City of London. And since, to a greater or lesser extent, all four options recognise all countries in today’s globalised and interdependent world, where enormous capital volumes are traded on a daily basis and moved in a millisecond, must have effective controls with which to defend their economy and currency from malicious speculators.

We must therefore approach this debate by asking what currency option gives Scotland most control of our economy and best protects us from the predatory instincts of financial speculators and hostile Governments. There have, after all, been many instances in recent years where speculators have attempted to undermine healthy economies and stable currencies for short term profit and that remains a very real feature of the modern world.

Of the 4 options mentioned each has its drawbacks. It goes without saying that keeping the Pound or establishing a 'Sterling Zone' means handing over a considerable amount of power and control over Scotland's economy and spending options to the Bank of England and the City of London. And many will inevitably ask what then is the point of Independence? On the other hand joining the Euro, as those who insist EU membership would compel us to do, means we would simply replace the Bank of England's control over our economy with the European Central Bank in Frankfurt. Given the terrible state of the ‘Eurozone’ and the collapse of economies like Ireland, Greece, Portugal, Italy, Spain and Cyprus - which all borrowed way beyond their ability to pay it back - this option would be politically impossible to sell. And perhaps for that reason alone it is probably the easiest to disregard at this stage.  
 
So, on balance, after weighing up all the issues involved and recognising that many other small Independent countries such as Norway, Switzerland and Iceland prefer to use their own currency - because it gives them more control of economic and financial decisions – this option seems to make most sense.

And I notice the ‘Greens’ agree. The SSP’s other partners in the 'Yes Scotland' coalition however, the SNP, currently prefer the 'Sterling Zone' option. They have it’s fair to say changed their mind on this issue often but their latest view seems to me entirely in keeping with their softly, softly, and dare I say conservative approach to selling Independence as a whole to those they believe are frightened by the concept of change. The SNP argue, as I understand it, that the transition to Independence should involve as little disruption as possible to people's day to day experience. I suspect they may well advocate a new Scottish currency being established in Scotland in due course.

2 comments:

  1. I agree. An independent Scottish currency seems the best long-term approach for truly unshackling us from neoliberal masters. There are two somewhat decent summaries of the matter:

    The capitalist Business for Scotland site: http://www.businessforscotland.co.uk/euro-pound-or-scottish-pound/ - tends to agree with the SNP's approach.

    The left-leaning Bella Caledonia: http://bellacaledonia.org.uk/2013/04/28/the-pound-in-your-pocket/ - A short bit of history, then sets out the stall for the first independent Scottish Parliament.

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  2. I pretty much agree with the above but I recognize the stability of remaining in Sterling for the short-term to

    - avoid significant reprogramming of software platforms
    - maintain market confidence

    Medium term I'd support transition to a Scottish currency

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