Lots of eyes turning toward Scotland, with a keen interest in the outcome of the Sept. 18 independence referendum. Meanwhile, an excellent Paul Krugman column, focused on the issue of Scotland keeping the pound. Key point:
In short, everything that has happened in Europe since 2009 or so has demonstrated that sharing a currency without sharing a government is very dangerous. In economics jargon, fiscal and banking integration are essential elements of an optimum currency area…
I find it mind-boggling that Scotland would consider going down this path after all that has happened in the last few years. If Scottish voters really believe that it’s safe to become a country without a currency, they have been badly misled.
Dr Krugman makes a valid argument & it is indeed mind-boggling that Scotland would risk following Spain & Greece down this road. However, I find it equally mind-boggling that the UK Government has allowed this situation to deteriorate to where we are today. In my view, the fundamental mistake was made with Tony Blair’s “devolution” in 1999. This established legislatures in Scotland & Wales (I don’t know the current situation with Ulster) creating an asymmetrical structure of government in the UK which, far from reducing the alienation felt by the Scots, actually exacerbated it. Try this thought experiment. Imagine that the Government of Canada (with MPs from all regions as now) & the Government of Ontario were one & the same. Would the other provinces be alienated? Of course, it is absurd. And yet this is precisely the structure in the UK. The UK Government & the Government of England are the same. This creates the illusion that Scotland is governed by England. Tony Blair should have provided “the full Monty” & created a provincial-federal structure not just for Scotland, Wales & Ulster but also within England. (The north of England, for example, has always felt inferior to the south.) Hopefully, even after a yes majority, it will still be possible to negotiate this type of autonomy.