Thursday, September 18, 2014

Scotland - the Brave?

I’ve spent big parts of the last 15 years working in Scotland, with probably 2 years in aggregate on the ground in the country. Any insight that I’ve picked up has usually only extended to tourism, but recently I’ve been asked to share any insights that I have on today’s Independence vote in Scotland.

I think that Scotland SHOULD vote for independence, but I think they probably WON’T vote for independence.

To most Americans, the UK, Great Britain, England, and Scotland are interchangeable. However, the constituent parts of the UK are more different among themselves than the difference between any two US states. (Say, California and New Jersey.)

There has always been a definite sense of nationalism in Scotland – when polled, the majority of Scots identify as Scottish while the majority of English and Welsh identify as British.
But for much of modern Europe’s history, regions have amalgamated into countries such as Britain for purpose of common defense and better, easier trade. With the advent of the EU and other post-WW2 developments, the security threat incumbent on small nations has greatly diminished and the barriers to trade have been largely eliminated. As demonstrated by a number of peer-countries, such as Norway, Denmark, Belgium, and the Czech Republic, small countries are viable in today’s world.

 (I should note here that many Scots business contacts that I speak with are voting “no” on independence exactly because they don’t think governance under a Scottish flag will be anything other than one gigantic mess. The government already dominates the economy in Scotland, being 30-33% of the economy. The Scots I speak with know that government is a TERRIBLE allocator of resources, and their belief is that this would only become worse with independence. )

Until now, the Scots have largely turned over important questions of governance to London. Should we go to war in Iraq? Should we join the EU? Should we have nuclear weapons? Should taxes be higher? On each of these questions, Scotland has a serious difference of opinion with London. As an independent country Scotland would be able to answer these questions differently, with answers directly reflecting Scotland. In this respect, I think government will be “better” with independence.
Small is good. Small makes for a more responsive government and while many people see efficiency in scale, I’m skeptical – my track record in business, politics, and life is that economies of scale are elusive at best, illusory at worst.

And smaller is feasible – just look at other successful countries of Scotland’s size (5m people).
The choice for independence, though, is not just for small and responsive government but against a distant disconnected government, in this case in London. As in The Hunger Games, the capital city is almost on it’s own planet compared to the rest of the less-economically successful countryside. Despite good intentions, London is largely out-of-touch with Scotland. (And just about as out-of-touch with other provinces of the UK.)

I think this London-first orientation is structural. With all decisions flowing through London, all new ideas and investments become far more complex than needed, and have a hard time escaping the London “gravity.” As an example, consider train and airport policy, which is set by the national government, and not on a commercial basis. It’s taken something like 7 years of political wrangling to set a plan to unify the country with high-speed trains, and even then, the plan stops short of Scotland. At the same time, the National government is trying to decide how to expand airport capacity in London. The decision of where to add a single runway is the subject of a 4-year government study, with wide-ranging effects.

Out-of-touch leadership in London is nothing new. It is what launched the USA, but amazingly, the urge to leave London’s orbit has only accelerated since 1776. The long ark of history has been to escape the political control from Planet London in favor of more local solutions. In this respect, Scotland’s vote is just the latest in a long line, including Ireland, India, Singapore, etc. The amazing part is that neither the UK political structure nor attitude has changed amidst the long ark of history.

However, I think that the Scot’s won’t vote for independence because lacking a big nucleating event like a war or some other injustice, it’s really hard to vote against the status quo. Sure, polls are showing a very close race, but I think that many voters on the bubble will default to the status quo, especially with the UK leadership offering to devolve more powers to Scotland. (Most polls show that a plurality of voters prefer the “Devo-Max” choice over “Yes” or “No,” but this choice isn’t on the ballot.)

I don’t mean this as an insult when I say that Scots are fundamentally conservative, and will embrace the status quo when in the voting booth. I think that they will collectively  put a scare into London with the vote, and have been, and will thoroughly enjoy watching the English squirm as a result.

Bonus thoughts:
-I’m amazed at how much angst there has been over the choice of a currency for Scotland and how independence equals macro-economic suicide, for both Scotland and the world. You’d think that Scotland were voting to reverse the Earth’s polarity and that with the wrong vote, we’ll all fly off the earth. I think the reality is that the transition and macro-economic consequences are drastically overblown. At best, Scotland represents .28% of the world GDP. For perspective, China will add about 4 Scotlands worth of GDP in 2014. It matters more to the global economy if China can add a 5th Scotland-worth of economic growth, or if it shrinks to only 3 Scotlands-worth of economic growth.

And as for the currency issue, the risk of using the GBP is overblown – sure Scotland wouldn’t have an ability to set monetary policy, or a lender of last resort but UK banks will still want to lend in Scotland, and it’s not like UK monetary policy really pays much attention to the economy more than 100 miles outside of London.

-On that note (pun intended), why is UK monetary policy set by the Bank of England and not an entity referred to as the Bank of the UK or somesuch? This is a small semantic issue, but possibly representative of how the UK attitude is fundamentally parochial and skewed towards the Capital. In other words, if you were really building a united nation, why wouldn’t your institutions be united in name as well?

-I’m stunned, though, at how the debate and polls are missing the larger strategic questions of “What’s the ideal form of governance for the 3rd Millennium?”  and “Why is there still a monarchy?”

The independence vote is basically “do you want three or four layers of government?“ Though not advertised this way, a vote for independence will just (effectively) extract the UK layer of government, leaving local national (Scottish) and EU governments to dictate things.

But is this even the right debate to be having? Re-arranging the local political deck chairs with independence won’t change the economy much (for better or worse). Of much more benefit to Scotland would be a question of what economic structure does Scotland want rather than a question of political structure. In this regard, a very wise move would be to structure the political economy in the form of an “Asian Tiger” such as Singapore, which could triple the growth of the Scottish economy, held back by the current social democrat political economy.

But most of all, it seems silly amidst all of the talk of independence that even with a yes vote, Queen Elizabeth would still be the head of state of Scotland. Monarchies are really the ultimate in legacy programs, staying around much longer than needed or wanted. (Since at least 1776 or even 1066.)

You've read this far - you deserve a treat - here's The Simpson's Groundskeeper Willie on the Independence vote. Free tip: don't mention Willie to a Scot.

Friday, August 15, 2014

Reasons to be cheerful - Matt Ridley

Warning: vaguely political post:

Global warming. Ebola. Poverty. War in Gaza, Iraq & the Ukraine. Just for once ignore the doom & gloomers and get some perspective on how the world is getting better at a phenomenal pace -  read this article by the brilliant Matt Ridley, and if you're ready for more, pick up his book "The Rational Optimist."

With my new friends on the Great Wall of China

With my new friends on the Great Wall of China
Click to go to my online photography

World sun clock

Uncommon Man's Creed

"I do not choose to be a common man. It is my right to be uncommon -- if I can. I seek opportunity -- not security. I do not wish to be a kept citizen, humbled and dulled by having the state look after me. I wish to take the calculated risk; to dream and to build, to fail and to succeed. I refuse to barter incentive for a dole, I prefer the challenges of life to the guaranteed existence; the thrill of fulfillment to the stale calm of utopia. I will not trade freedom for beneficence, nor my dignity for a handout. I will never cower before any master, nor bend to any threat. It is my heritage to stand erect, proud, and unafraid, to think and act for myself, to enjoy the benefit of my creations, and to face the world boldly and say, "this I have done." All this is what it means to be an American." -- Anonymous