My column in The National yesterday was promoted by them in this tweet (the link is live in the tweet):
'It is time the SNP revised its view of post-independence economics' // @RichardJMurphyhttps://t.co/gYlUSuDT0W
— The National (@ScotNational) June 24, 2021
I based the article on a theme developed from the post I did here yesterday that showed which parties had borrowed more, and repaid most when in office at Westminster since 1945.
I argued three things initially. The first was that the Tories pretend the data is not true. Second, Labour does not challenge the Tory narrative, and third, all parties borrow. From this foundation I suggested:
Fourth, and most worryingly for Scotland, the SNP leadership still does not seem to understand this. Despite the fact that all the assumptions in its Growth Commission report having been blown asunder by Covid, they seem to remain dedicated to the ideas within it. And that includes the assumption that post-independence Scotland will run budget surpluses to build up foreign exchange reserves before deciding when it might be possible for Scotland to have its own currency. That means, in effect, that the SNP would have a policy of repaying debt.
This, of course, is not actually going to happen. The SNP will borrow. All parties do. As I concluded:
It is time the SNP revised its view of post-independence economics. It has the excuse to do so. Covid provides all the cover it needs. And the fact that almost no government has managed Covid without running big deficits and having directly or indirectly (in the case of eurozone countries) the ability to fund those via quantitative easing, provides the justification for a massive change of heart.
As I add:
There is just one further requirement to make that work. That is that Scotland must have its own currency from near enough day one of independence in that case. Nothing else will work.
It really is time for the SNP to develop a credible economic policy.
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Considering what is at stake I’d put it more prosaically: It is tine for the SNP to wake up and be truly independent, period. Enough of this orthodox shite.
Absolutely.
They do not know how to fix the mechanics and the politics of the currency issue; to the point the whole project has stalled. It is as simple as that.
“That is that Scotland must have its own currency from near enough day one of independence in that case. Nothing else will work.”
It might be necessary to allow a slightly longer period but, you are right, nothing else will work. There are lessons to be learned from the Irish experience of independence and their reluctance to avoid their currency being too closely linked to the UK pound.
But the voters didn’t want that in Ireland for many decades and they don’t want it in Scotland now. This is why the SNP do appear to be backwards on the issue in MMT terms.
The same argument includes moving towards adopting the euro by trying to align with it prior to an independent Scotland applying to rejoin the EU.
Broadly I agree but I’m nervous.
Support for independence is finely poised. It’s not far off 50/50. So any change in the economic offer to Scots has to also be accompanied by consideration of its political risk.
An economic policy that borrows to finance post-independence public spending will see opponents of Yes argue that we’re mad, we’re reckless that we think there’s a Magic Money Tree.
The risk is that some voters will accept those claims and decide not to vote Yes on the basis of them and that the number so doing will outweigh those drawn in by our generous new spending commitments.
The poster child of this in recent years has been Andrew Neil roaring “but how are you going to pay for this?” at a series of progressive politicians. He did it to Natalie Bennett when the Greens adopted UBI in 2015 and completely wrecked her. He did it to Corbyn, in fact regularly does it to Labour which might help explain their timid policy platform.
People are anxious, people are loss averse. The narrative, phoney though it be, that generous public spending must be paid for by harsh taxes that will impact pay packets is really powerful.
That said integrity also matters and the Growth Commission clearly does not reflect what a post-independence economy would look like. Offering it as our policy is basically lying to our voters.
Another point is that at conference in 2019 the SNP rejected the Growth Commission. https://www.theguardian.com/politics/2019/apr/27/snp-votes-for-scotland-having-its-own-currency-if-it-leaves-the-uk
That’s binding isn’t it? How can the SNP leadership overrule that given rule 20.1 of the party constitution:
“20.1 National Conference is the supreme governing and policy-making body of the Party.”
I hope we will clarify the currency issue at this year’s conference. And if we are to have our own currency asap then government borrowing is more or less a given isn’t it? That’s why countries have their own currency.
“People are anxious, people are loss averse. The narrative, phoney though it be, that generous public spending must be paid for by harsh taxes that will impact pay packets is really powerful.” As an Englishman, I won’t presume to comment on the Scottish currency issue, although I understand how important the issue is for Scotland. That sentence of yours is also very important for the UK as a whole, as fear of, and exploitation of, the “pay for” false narrative is very widespread. The question is, how long it will take for understanding of a fiat economy to reach critical mass? And, how much injustice and hardship will be suffered until it does. I believe more and more people are understanding, or at least questioning the orthodoxy, all the time, but i don’t know when it will make a breakthrough. It looks as though The Deficit Myth has been hugely influential in the USA.
You’ve repeatedly pointed out that government don’t need to borrow to fund their spending, they can create their own money. So borrowing is a political choice. And the evidence seems to show it’s more than a choice, it’s an addiction. So how do we cure politivians of their addiction?
An excellent question….
I do not believe it is an addiction, but whether or not politicians actually believe what they preach about borrowing and spending; what they do believe is that if the public did not believe it, the politicians, the Party and the Government will lose their control over the political narrative, probably forever. The spell will have been broken. Party and Government can’t afford to believe anything else (whatever they actually believe), or all is lost. Politics in Britain has no incentive to change the narrative; they need it; it is their comfort blanket, their reassurance that they have a future that is much like the past they know and need.
What is even more absurd, against that background mainstream economists actually still believe in rational choice theory.
I know you are right about the economic policy, Richard, BUT …what the SNP needs is a strategy to ensure the electorate will understand and also agree with your approach, enough to vote for independence.
How to present this new perspective to an electorate, half of which is poised to run back to the devil they know? Folks who will vote No at the merest hint of any economic change or upheaval. Keep in mind that ALL the media in Scotland–with the possible exception of The National–will support a ‘the SNP is reckless and clueless, we will all die’ narrative.
We have to win our vote for independence.
We didn’t lose the referendum last time because the SNP’s economic policy wasn’t radical enough! Instead, we were told that banks and businesses would leave Scotland, pensioners would lose their pensions, and etc. The Union is gearing up, as we speak, to throw this same kind of crap at us all over again. How will we pay for it? A Magic Money Tree? Oh, aye, right….
The currency issue was massive in 2014 because Alex Salmond kept insisting we COULD use the pound, and the UK government kept telling us we couldn’t! The fear among Scottish voters was that we would LOSE the pound–and Better Together played on those fears. Those fears still exist.
Despite the William Wallace painted face meme and the flag waving, the majority of Scottish voters are desperately risk-averse when it comes to their economic stability. Portray anything that looks risky to entrenched views, and we’ll lose again. It’s very frustrating.
I’ve worked on the stalls and done door-to-door canvassing (in an area that has actually been voting SNP for a number of years now) and I can assure you, this is an issue. A big issue. Any time something desirable is offered by the SNP, the response is ‘we can’t afford it.’ And when we tell them that a sovereign government (like the UK, the USA) with its own currency simply creates the necessary money, so we CAN afford it, they look at us as if we’ve grown two heads, and walk away, shaking theirs.
Please! Come up with a way to convince doubting voters–readers of the Sun, the Express, The Daily Mail, The Record, The Herald, The Scotsman, or watchers of any TV channel in the UK–which all come pouring out of the woodwork to pour scorn on any kind of ‘radical’ approach by the SNP. How do we counter that wall of negativity from the media, when, in many cases, we won’t even be allowed to speak within their pages or programmes? How do we convince doubters that it’s easy as pie to adopt a new currency and exercise borrowing that will not need to be paid back, because we’ll be borrowing it from ourselves and using it to get the economy flowing?
Figure out how to convince frightened people to vote for independence. We need an effective strategy for this–and we MUST win the vote this time. Against a wall of scare stories.
It’s not really the SNP you need to convince. They are paying attention to you, and are working hard on this issue behind the scenes. However, we do need to convince the voters who hate the SNP by default. People who still think Boris Johnson and Keir Starmer’s economic policies are fine. People who will run screaming off into the night if they’re told that hey, government finance does NOT operate like home finance, and there is, indeed, a Magic Money Tree.
MMT? Our own currency? You mean we’ll be giving up the Pound right after independence? OMG. Our economy will collapse. We’ll lose everything. We’re all going to die. The SNP are promoting economic fairy tales …better vote for the devil we know. Again.
To look at it another way, how would you frame your policy to get ENGLISH voters to accept it? And how would MMT win votes in an English election or referendum, against a wall of frightened English folk who will also be vulnerable to scare stories about losing all they have–especially the ones who don’t have much, and who would end up on the street, etc, if their small incomes and pensions were threatened?
So far, the MMT reality has not struck a chord with a majority of voters anywhere, has it? Folks are still being led to believe in austerity, in the sad need to ‘reduce’ the debt, etc. They still vote for parties promoting that view, and who believe the Pound Sterling is the best thing since sliced bread.
We need a STRATEGY to convert the doubters. And fast. The referendum is coming.
Ok
I will keep thinking about it