#mmt Scotland Independence politics economics

[itsveggieman]

Why Union Supporters Should Fear MMT

As the battle lines are drawn for the anticipated re-run of the Scottish independence referendum, it is clear that those favouring retaining the Union have much to fear from Modern Monetary Theory.

The question put to the Scottish Electorate will probably be a repeat of ‘Should Scotland be an Independent country?’ Although this seems binary and simple, the debate quickly diverges to ‘Could Scotland be Independent?’ The Union supporting voters, UK government agents and the media, who are virtually all against independence, made much of a claim of economic chaos in an independent Scotland.

Inferred doubts over pensions, mortgages, savings, currency-security and deficit sustainability glared from the front-page headlines every day. The Independence supporting SNP did little to quell any fears, advocating continuing with UK Sterling as a Scottish currency and an ‘everything will be alright on the night’ approach to pensions, mortgages etc.

In hindsight, it’s a wonder that 45% of the population were willing to vote for independence on that basis. The movement should assume retention of this vote and concentrate on building a solid majority through providing concrete answers to three main battleground questions:

1)      The currency

2)      The relationship with EU

3)      The border with the UK

Supporters of the Union have created confused and catastrophic narratives based on economic fallacies and half-truths which the SNP, the political arm of the independence movement, have found it difficult to rebut. The Government appears to be advised by the same breed of neo-classical economists, employed by the UK and have an extremely narrow view of economic potential.

Modern Monetary Theory does not pretend to have the answers to Scottish Independence. It is a framework to build economic policy on, a description of all economies, not a prescription of policy to turn to. The insights provide economic clarity, pulling the curtain back, exposing certain pillars of current political economy, to be convenient myth, facilitating unpopular policies.

The Pro-Union camp are waking up to the danger of exposure of the deception to the Scottish public, while the stench of corruption and entitlement emanates from Downing Street. The pushback is growing, with MMT being ridiculed and vilified on a daily basis on social media.

The foundations of modern monetary theory are sound. It translates directly to real-life outcomes, predicting accurately, in contrast to the orthodox mainstream who hide behind equations and models, based on unattainable assumptions providing unhelpful and erroneous economic policy.

So, what clarity does MMT offer the Scottish Independence cause?

The Currency

MMT economists highlight the difference between a currency issuer and a currency user. The crucial fact being that any entity, be it as large as a nation or down to individual citizens, that relies on a limited supply of currency from another authority, is constrained. All the household analogies, so beloved by politicians since the Regan/Thatcher era, hold.

Currency users must ‘find the money’ before projects can be implemented, goods bought or expertise acquired. The currency can be saved, borrowed or earned, but try to create your own, and you’ll experience the full weight of the law and a custodial sentence.

Currency issuers are a very different beast. As the monopoly issuer of the unit of currency it accepts as payment of taxes, the Government is never financially constrained and as such can never involuntarily default on any debt. A currency issuing government can never be forced into bankruptcy.

This is irrefutable logic. This does not mean that Government should create more currency than the economy can absorb. The limits are what is available to buy. The real resources that a country can employ form the national wealth of the nation. An educated workforce, natural resources, temperate climate and established legal and political infrastructure are vital and valuable resources.

MMT insights highlight that there is no choice on currency. Scotland must issue its own currency from the Scottish Central Bank. Scotland must be in full control of all financial operations to optimise the potential for and of the people of Scotland, and further afield.

The relationships Scotland forms internationally are also informed by the MMT framework. The need for financial control rules out any formal membership with the European Union. Policies of fiscal constraints are in place to stop EU members using the power of the public purse to alleviate social issues like unemployment. Scotland will need free-rein to apply deficit spending, to provision the economy optimally.

Taking EU membership off the table, allows, with a negotiated settlement on quality control, standards and migration, for an open border arrangement with the rest of the United Kingdom. The ability to close the border will be required, but only for emergency situations.

Should Scotland decide to forge a different path economically, the push-back from established orthodoxies, worldwide, will be immense. Like MMT economists, Scots must hold their nerve, trust in the verifiable truth and be open to incorporating evolving academic thinking.

Scotland can build respect through competent economic and environmental stewardship by the practical application of progressive policies. With two or three decades of financial and environmental data, Scotland’s contribution to advancing the human relationship with the wider ecosystems, can be analysed and assessed. Only then will we know the true value.

Modern Monetary Theory and the framework it exposes, knocks the slats from under the Union-supporters’ catastrophic assessments of Scotland’s economic potential. Scotland has a firm foundation of resources, on which, to build a secure and healthy nation.