Independent Scotland needs to approach trade differently

SCOTLAND The Brief, written by Believe in Scotland, is a fantastic book for anyone interested in learning more about Scotland’s diverse and rich economic resources. These resources include energy, oil, gas, food, drink, finance, life sciences, chemical sciences, digital, creative, education, construction, tourism and even space.

Furthermore, with 8% of the UK population, we have 70% of UK fish supplies, 60% of UK timber production, 96% of UK crude oil, 63% of UK natural gas, 90% of UK fresh water, 26 % of UK renewable energy generation, 90% of UK hydropower, 32% of UK landmass, 62% of UK maritime area, 34% of UK natural wealth, 10 % of Europe’s wave potential and 25% of Europe’s offshore wind and tidal energy.

Did you get all that? If there was one country that was ever ready and spoiled for independence, it would be Scotland.

READ MORE: Scotland must transform its economy. Here’s How It Can Do It

However, there are a few nitpicks I have with the book that go against progressive macroeconomic thinking.

In the opening of the book, Believe in Scotland, asks the reader to consider several factors in what makes a nation prosperous. One of the factors influencing them is the ability to export goods, writing: “In highly developed economies such as Scotland’s, it takes technological advantages or natural resources that we have just seen to develop specialties that support high-quality export demand and higher prices. to create. This in turn creates new, higher quality jobs and pays higher wages than would otherwise be the case.”

There are two problems with this argument. First, this analysis appears to be based heavily on a microeconomic level, but does not take into account the broader macroeconomic picture that will be discussed in detail in this article. Second, the common obsession with exporting resources is one that is also being adopted by Unionist adversaries who are attacking Scotland’s overall trade balance.

Unionists often argue that the Scottish trade deficit, along with the fictitious government deficit, would place Scotland at a disadvantage. As the argument goes, net exports contribute to our aggregate demand, further increasing our GDP and national income. This can lead to more employment serving exports, generating wages and profits. On this basis, developed countries often push for export frenzy when domestic policies fail to achieve full employment.

Let’s look at the broader implications of Scotland’s trading position as it currently stands.

In real macroeconomic terms Scotland’s exports are a cost and imports a benefit. When Scotland’s real resources, including our labor, are used to produce output for the foreign sector, the domestic sector loses out in consuming or using these resources for investment goods. As Nobel laureate economist Paul Krugman (below) writes, “Running a trade surplus is not a ‘win’; if anything, it means you give the world more than you get, and receive nothing but IOUs in return.”

The National: US economist Paul Krugman has attacked the UK's economic performance in the New York Times

Therefore, importing means collecting real goods that we don’t have to produce. Scotland’s position as a net importer puts us in a favorable trading position.

However, there are several caveats to consider, especially with the shift towards a more green and resilient economy in the face of climate change.

First, producers give more priority to the income they receive from their services or goods, rather than who buys them. If a producer sells his goods domestically, he receives the domestic currency to cover the costs for his next sale. If a producer sells its goods in the foreign sector, the buyer must exchange its domestic currency for the new Scottish currency (often done through Transmate). Either way, the seller receives the currency, but when goods and services flow into the foreign sector, the people of Scotland miss out on the fruits of their own labor.

Believe in Scotland might refute this argument by pointing out that the previously unused resources and the unemployed have found an income through a trade surplus. Workers are now receiving wages and companies are increasing their profit margins, so what are we complaining about?

READ MORE: Ruth Wishart: We have to work to convince the switherers – regardless of their generation

First, higher government spending can lead to higher wages, profit margins and growth – we don’t have to ship our resources to achieve this. With a domestic growth model, Scotland can better respond to potential market shifts (domestic or global) that could be potentially damaging while still reaping the rewards of our labour. Creating jobs and using our resources for domestic consumption results in greater net benefits than sending our resources abroad.

Another counter-argument from Unionist opponents would be that an independent Scotland can enjoy all the real resources it wants, but we still face transaction costs in trade. This argument might be more valid if it were not obvious that transaction costs are a normal part of world trade.

If transaction costs were such a burden, you would expect Canada to lobby Joe Biden to support the adoption of a North American dollar or to relinquish sovereignty to Washington. Yet, despite transaction costs, Canada still appears to enjoy monetary sovereignty. Nor would we expect Ireland, which is not monetary sovereign, to suddenly surrender democratic control to the UK because of transaction costs.

If we look at Eastern European countries with their own currencies, such as Poland, Hungary and the Czech Republic, we see that they have experienced the fastest growth since 2002 compared to their euro colleagues. The euro may have removed transaction costs for many European countries, but members of the eurozone are also dealing with higher unemployment, political instability and interest rates. Unionist fear mongering of transaction costs simply cannot withstand macroeconomic realities.

This does not mean that an independent Scotland should cut itself off from the rest of the world and deprive other countries of our resources. Westminster has cut UNICEF’s funding to support children around the world by 60%, while also cutting 85% of funding for the UN Population Fund’s family planning program. In addition, billions of pounds of aid still need to be cut that would go to humanitarian projects at the UN. While Westminster isolates itself from the rest of the world, an independent Scotland should be on the international stage and proudly committed to supporting humanitarian projects.

Sending resources to countries in need of communities to rebuild communities, develop modern healthcare and expand education is not only a reflection of the values ​​of an independent Scotland, but more importantly, it is the morally right thing to do.

Trade is not a competition or game, it is a power relationship between different interest groups. An independent Scotland must recognize this, otherwise it will simply remain on the path that Westminster has charted for us.

An independent Scotland can use policy tools and institutions to increase equality, develop a humane welfare system and achieve full employment, while still challenging international free-market ideology by supporting humanitarian aid, promoting high environmental standards and focusing on workers’ rights for future international agreements.

We can support developing countries in establishing government-led industrial policies that deliver long-term infrastructure and green technology that is both sustainable and efficient. This technology includes solar panels and wind farms to countries that may not have oil and gas, but also builds on hydroponics for much warmer countries. This, in turn, will reduce our carbon footprint as we shift our finances away from extracting fossil fuels that threaten the long-term survival of our planet.

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