ON the first day of Scotland’s first economics festival, one economist urged Scots to support the adoption of a new currency and face being “a grown-up independent country”.
Steven Hail from Torrens University spoke from Australia to an online and in-person audience in Dundee about currency on a panel with Dr Tim Rideout, hosted by Kairin van Sweden.
The currency question, as it came to be known as, has dominated the independence debate, and is considered one of the key weak spots in the 2014 referendum argument.
During Scotonomics day one, Hail put forward an easy-to-follow analogy for Scots when it comes to the currency question.
He said: “It’s a bit like being a young person leaving home. It’s comforting to stay at home. It’s comforting to stay with the Bank of England and with the pound, it’s what we’ve had for a long time.
“Or it would be comforting to go somewhere else, where there is a big brother, Germany and the European Central Bank to look after you but if you really want to be the master of your own destiny, if you really want to be independent – you have to make your own decisions and that means having your own currency as soon as it is practical floating that currency.
“It can be for ill, as well a good, I’m not guaranteeing the Scottish Government is always going to make great decisions but learning to live with a floating exchange rate and managing the consequences of that, is part of being a grown-up-independent country.”
Later in a separate conversation, Alex Salmond admitted multiple fronts of the independence debate, including currency, were “overwhelming” for politicians and that is why the strategy in 2014 was to argue for Sterlingisation.
At the time, Salmond believed a major change such as a new currency, in addition to major legal changes tied to breaking the union was too much to argue at once to the Scottish electorate.
Hail also explained the benefits of having a floating currency for the Scottish economy as well as how to manage the anxiety driving fluctuations that come with flexibility.
The professor of economics said he didn’t expect the Scottish pound to decline after independence due to the Scottish diaspora.
“I think Scotland has such an enormous diaspora of people who see themselves as Scots, or partly Scottish, or who have Scottish ancestors, I think you might face an issue of upward pressure on the Scottish pound – which no one seems to be anticipating. It’s at least an equal possibility [to the Scottish pound declining]."
During the panel, the audience was asked whether they supported using a new currency or joining the euro. Only two people said they supported the euro.
Hail responded by saying: “They won’t let you use the euro anyway. That option simply doesn’t exist. To use the euro, you first of all have to have your own currency and fix your exchange rate against the euro for long enough to obey the EU rules and then eventually your lent the euro if you want to join.
“It makes sense to join the euro if you are a small economy, and Scotland is that, but also if your main trading partner is Germany. If you are a northern European county like Estonia, Belgium, Latvia, then it makes a lot of sense to join the euro but in terms of Scotland – you just have to look at Ireland.
“Ireland is still in the euro, and they went through devastating problems through the GFC, and if you are in the euro, you are in a system where you have no influence over currency issues, particularly as a small currency.
“If you had a leader of a newly independent Scotland, you’re lucky if the president of European Central Bank even picks up the phone – you basically have no influence at all, and the same with the Bank of England – if there was a crisis in Scotland and the Scottish Government needed help from the Bank of England, it either wouldn’t come at all or with a lot of strings attached.”
