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Tuesday, September 16, 2014

Could Independent Scotland Become a Haven for the Free Market?

Thoughts on prospects for breaking from Britain

By leaving the United Kingdom, Scotland has a chance to become one of the wealthiest countries in the world. These last few weeks have shown the Yes vote sitting at around 50 percent—an astonishing number considering that Scottish independence has for years merely been a pipe dream.

The future appears to be bright, but only if things don’t go as promised.

Those campaigning for the Yes vote have promised a currency union with England and a continuing supply of oil. Their economy would be tied to the oil and the security of the pound. If things go wrong, they say, the Brits will bail them out.

The English are in no way on board with a currency union, though, with several finance ministers, including Danny Alexander, the chief secretary of the treasury, insisting that there will be no union. The English have few incentives to enter a currency union, so the likelihood of one coming into existence is low.

If the currency union doesn’t work out, the Scottish National Party has stated that admittance to the EU, with access to the euro, is very likely. This appears to be a dubious claim as well, with several high-ranking European Union officials announcing in the last few weeks that Scotland will probably not be admitted, particularly without its own central bank.

This would leave Scotland with one option: to form an independent currency based solely on its own economy.

While this is the last thing the Scottish want—as it means they would be much more open to financial crisis—in the end it could be a very good thing.

The most prosperous nations in the world all have two things in common: They have small populations and smaller governments. Scotland has both of these things.

If Scotland has to depend on its own national currency, there will be two likely results:

One is they’ll have to lower regulations on the industries currently present in Scotland in order to make them stay. There is nothing more frustrating to a multinational corporation than to have to change up an already-working system, and so Scotland will have to sweeten the pot. This means incentives not only for companies to remain, but for new ones to set up shop.

Secondly, Scotland will be free from the giant Westminster bureaucracy. This would leave Scotland with a smaller government able to more nimbly adapt and adjust to changes. It would also mean that the government would be more accountable to the small population, which has always boded well as far as reducing waste goes.

The Scottish National Party, the primary driving force behind the Yes campaign, has also claimed that the oil fields in the North Sea will provide enough cash flow to build an economy mirroring that of Norway, a socialist utopia. This has become the crux of the campaign, and large numbers of critics have stood up to say that Scotland might very well soon run out of oil.

Like having an independent currency, running out of oil might play in Scotland’s favor. Currently, the oil is presented as being the crutch holding up the national economy. If this crutch were to disappear, then the economy might collapse altogether, according to critics. The answer to this is simple: If the Scottish economy is merely being propped up by oil taxes, etc. then maybe the taxes are the problem, not the oil disappearing.

Faced with shrinking oil production and an independent currency, Scotland may very well have to reduce taxes, regulations, and government spending on a drastic scale in order to ensure economic growth. In other words, Scotland might become a haven for the free-market, and with that will come wealth and prosperity for every Scotsman.

  • Robert Ramsey is the website curator at FEE. He loves cooking, writing, and hacking in his spare time.