independence Archives - the patient investor

September 28, 2014

The Scottish Question Has Not Been Answered

Peter Geoghegan writes on the impact of further devolution in Scotland:

At present, England has no devolved legislature similar to Scotland’s. Instead, all laws for England are made at Westminster. Consequently, non-English MPs often vote on issues that only affect England. Any change to this policy would likely be fiercely resisted, particularly by Labour which has a large contingent of Scottish and Welsh MPs.

Labour, ironically, could be the biggest loser in Scotland’s referendum. It has traditionally been the party of central Scotland — of the post-industrial towns and villages that ring Glasgow and Edinburgh and hold much of the country’s 5 million people. In Glasgow, there was long been a saying that you could shave a monkey and get it elected on the Labour ticket. But in the referendum, almost 40 percent of Labour voters chose independence….

September 8, 2014

David Cameron can’t help the No campaign…. | The Guardian

Charle Brooker on David Cameron and Scotland’s independence referendum:

Cameron can’t help here, of course. In Scotland, David Cameron is less popular than Windows 8. He’s the physical embodiment of everything a fair percentage of Scottish people hate: a ruddy-faced old Etonian walking around like he just inherited the place, sporting a permanently shiny chin as though he’s just enjoyed a buttery crumpet in front of the cricket….

August 26, 2014

Scottish Independence | Cato @ Liberty

From David Boaz:

Some scholars argue that the Act of Union in 1707 made the Scots part of a larger and more advanced nation and opened the way to the Scottish Enlightenment of David Hume, Adam Smith, and other scholars. And perhaps those modern ideas and the connection with England made possible the achievements of the inventor James Watt, the architect Robert Adam, the road builder John MacAdam, the bridge builder Thomas Telford and later Scots such as Alexander Graham Bell and Andrew Carnegie.

But whatever the benefits of union might have been in 1707, surely they have been realized by now. And alas, the land of Adam Smith has become one of the poorest and most socialist parts of Great Britain…

August 24, 2014

Tom Devine: Why I now say yes to independence for Scotland

Tom Devine, Scotland’s most celebrated historian of recent years, reveals why he now intends to vote in favor of independence on September 18:

I come from a Labour background that includes my grandfather, mother and father and I was very much anti-independence at the start of the campaign. For me, the catalyst for change has been how threadbare the union has become since the early 1980s and linked to that is the transformation of Scotland. I wouldn’t have voted for this in the Scotland of the 1970s or 80s. It’s the Scotland that has evolved since the late 80s and 90s that is fuelling my yes vote. It now seems to me to be in a fit condition to run a successful economy. There is a list of reasons for this.

There has been a Scottish parliament which has demonstrated competent government and that parliament has also indicated, by the electoral response to it, that the Scottish people seem to be wedded to a social democratic agenda and the kind of political values which sustained and were embedded in the welfare state of the 1950s. In fact, you could argue that it is the Scots who have tried to preserve the idea of Britishness in terms of state support and intervention, and that it is England that has chosen to go on a separate journey since the 1980s.

There has been an enormous increase in a sense of Scottishness and pride in Scottish identity which has itself been sustained by an explosion in Scottish writing and creative arts since the 1980s, especially in relation to my own subject. We now have a proper modern history of Scotland which we didn’t have until as late as the 1970s and 1980s. We now have a clear national narrative sustained by objective and rigorous academic research. In 1964, one of my great predecessors Professor Hargreaves said that the history of modern Scotland is less studied than the history of Yorkshire.

There has also been a silent transformation of the Scottish economy. As late as early 1980s it was not sustainable owing to the continuing domination of the dinosaur heavy industries. The problem there was simply that labour costs not be sustained in an emerging global economy where goods and machines could be made cheaper elsewhere. Of course the process could have been managed much more sensitively and more thoughtfully by a Labour government, instead it was the radical surgery of Thatcherism and Toryism that had its way. What we have now – and this has been the case since the mid-1990s and de-industrialisation – is a diversified economy in which heavy industry, light manufacturing, the electronics sector, tourism, financial services have come together. And the vibrant public sector is important in terms of employment. We now have a resilient economic system.

We also have considerable reserves of one of the most important things for an independent state and that is power; power through the assets of oil and also through the potential of wind energy. Scotland is disproportionately endowed with these, compared to almost all other European countries. So, in other words, because of this economic transformation, which has undoubtedly led to social dislocation for many communities – and let’s not forget that – we now have an economy that can sustain itself in a resilient way in world markets.

I support his decision, but am concerned that Devine doesn’t seem to realize that Scotland has a thriving and vibrant economy precisely because it has moved away from the welfare state policies of the 1950s and 60s. Oil will obviously play a part, but Scotland has no future as an independent nation unless it follows the Irish model of an open economy, encouraging global industries to locate there. Nothing would discourage global industry faster than a glimpse of 1960s-style British Labour policies.

May 27, 2014

3 Reasons to be suspicious of the inequality debate

My concerns with the inequality debate are twofold:

The poor are seldom rescued from poverty by redistribution. Raising taxes on the rich to bolster welfare payments increases dependence of the latter on government. While this may be a sound political strategy to garner votes, dependence on handouts robs people of their self-respect and foments other social issues. The welfare system should focus more on assisting the disadvantaged to become independent: teaching skills, improving access to higher education, and providing support for those striving to achieve autonomy.
Progressive taxes on the rich foster resentment at the unequal treatment and encourage tax evasion/avoidance. Raising income taxes also acts as a disincentive to produce further income. Any tax acts as a disincentive, but income taxes are particularly inefficient as the following chart from the Henry Review shows. Taxes collected from raising income tax rates often fall short of expectations, with higher taxes acting as a handbrake on economic growth. Past attempts at taxes on wealth, on the other hand, have proved largely impractical.

Marginal welfare loss from a small increase in selected Australian taxes

Marginal welfare loss is the loss in consumer welfare per dollar of revenue raised for a small increase in each tax (the extent of compensation required to restore consumer satisfaction reflects the distorting effect of the tax on the economy). Taxes at the top of the graph are the most inefficient in terms of outcomes, while those at the bottom achieve the greatest net benefit.

I should explain that my attitude to welfare is shaped by my own experience. My mother was widowed when I was four and faced the daunting prospect of raising children on her own. She went back to work and, because of her circumstances, was offered a partial interest rate subsidy (on a mortgage) by the local municipality. This enabled her to build a modest home and raise four children, who (apart from myself) grew up to make a useful contribution to society. Without assistance, I shudder to think how we would have fared. But I appreciate that the help offered was to restore our independence, rather than foster ongoing dependency and a sense of entitlement.

When I hear President Obama talk of the top 1%’s share of “our income” or their share of “our nation’s wealth” I do a double-take. It is not “our” income or wealth, but “theirs”. We have not earned it and have no claim to the income or assets of others other than that they pay their fair share of taxes. And shifting a disproportionate share of taxes onto them is just as misguided and immoral, in my opinion, as exploiting the less fortunate. For an economy to succeed you need a healthy partnership between the haves and have-nots, where both will benefit from prosperity. Not like the present tug-of-war, with abuses and mistrust on both sides. Raising taxes would drive a further wedge between the two sides rather than restore trust and cooperation. We need to seek a win-win outcome, rather than an outcome where all of us will lose.

In my opinion the inequality debate and higher taxes are a red herring, designed to distract the public from the real issue: globalization and the insidious partnership between large corporations and their Asian suppliers. Globalization opened up new export markets for corporations while lowering input costs through access to cheap labor. On its own, globalization is manageable, but politicians turn a blind eye to currency manipulation by Asian exporters like China. By saying much but doing little, they allow a continual drain of jobs to offshore markets. Many corporations silently welcome a weak RMB because it lowers the cost of imports while enabling others to make offshore investments and acquisitions cheaply with the strong Dollar.

Corporate profits as a percentage of GNP have soared…

Corporate Profits/GNP

…while manufacturing workers suffer from a shrinking job market and lower wages.

Employee Compensation/Value Added

If you want to fix inequality, don’t raise taxes. Instead, reduce progressive tax rates while closing many of the loopholes to create a level playing field. But, most importantly, end currency manipulation to ensure that the Dollar trades at a fair, market-clearing rate. That should help regain international competitiveness, go some way to revive a struggling manufacturing sector…

Employee Compensation/Value Added

… and restore jobs lost over the last two decades.