In this blog I’m going to talk about something a little outside of my comfort-zone; economics.
I did, briefly, study economics at A-level, back in the late 80s. Owing to having to make a stark choice between turning up for a key exam or going to my girlfriend’s house when her parents weren’t in I obtained an ‘unclassified’ grade. I stand by my choice and have no regrets, but I hope you will excuse any minor errors in my economic theory and write them off to teenage hormones 30 years ago.
On Tuesday Ben Wray, the Common Weal head of policy, published this article. It lays out how an independent Scotland should manage its currency policy in order to prosper outside of the remains of the United Kingdom. The thinking rests upon the premise that, “a government with its own currency can never go bankrupt as it can, without cost, produce more money”.
This allows the article to swiftly move past the issue of £13bn deficit that Scotland would face without rest-of-UK (rUK) support; it would simply print enough money to bridge the gap.
Obviously there’s a serious problem with this, and that problem is why the rest of the article is so tame.
Why stop with simply bridging the deficit? If you’re firing up the ol’ printing-presses it’s hardly worth stopping them after the first £13bn, is it? Why not keep them cranking until you can reward every indy voter with a personal windfall of £1m?
That may seem like a pipe-dream, but think about it – the currency is being produced at, literally, no cost. and pumping that money into the economy would free up jobs (by encouraging people to retire early), create new jobs (to support the spending sprees of the newly wealthy) and, you’re thinking, through VAT, fuel duty, alcohol & tobacco tax, massively boost government revenue.
Wrong! You’re still thinking too small!
The is a political and financial cost to collecting tax. People don’t like it and you need staff, some of them very highly skilled, in order to prise money from your populace. On the other hand, simply deciding how much tax revenue you need and printing that much has absolutely no political or financial cost.
Even that, though, isn’t audacious enough. Why limit yourself to only printing what you would have got from tax? Hospitals in Scotland could be like palaces, schools could be like…different palaces, the trains could be liked wheeled palatial residences, every public service could be the envy of the world.
Speaking of the world, why not properly put Scotland on the world map? Its booming economy, zero tax rate and wonderful public services will mean that it will become the number one destination for companies and individuals worldwide, and proud Scotland can have its pick of the potential immigrants. At the moment it’s content to be a small part of larger efforts in space exploration, but when the top rocket scientists are keen to make Scotland their home, and when hi-tech businesses seek out Scotland’s massive public subsidies, its world-class transport links to Berwick, its near-English-speaking workforce and its predictably mundane weather, and when $5Tn is just a matter of a few weekends overtime for the lads at RBS (who can also print off their own bonus) then why not set our sights on a 100% Scottish manned mission to Mars?
To bring ourselves back to Earth for a moment, Wary does
explain mention that governments collecting taxes keeps inflation down, so a no-tax Scotland would need a different mechanism to achieve this.
The answer is achingly simple. Every year (I suggest on Scottish independence day) a new batch of all the money is printed, and notes from the previous year become invalid a week later. This gives the government complete control over the money supply, and stops selfish individuals hording their money, rather than keeping it moving through the economy.
If necessary, by printing slightly less than all the money, the government can even make inflation negative, helping to lower the cost of living for Scotland’s joyous population.
There you have it, then, by adopting Wray’s ambitious, yet flawless, scheme and by refusing to be bound by old-think on how money supply works it becomes possible to build a new Scotland. A Scotland with one foot in modernity, one foot in a brave new future and one swinging towards Mars, ready to kick it into the net of history.
What a goal!