Scottish referendum: why it matters

A pedestrian passes a pro-independence "yes" campaign sticker as is sits on an anti-independence Better Together campaign billboard advertisement in Edinburgh, U.K., on Tuesday, Sept. 16, 2014. The impact of Scotland's referendum debate has been felt more in the currency market with the pound tumbling and volatility surging on Sept. 8 after a YouGov Plc poll showed the nationalists overtook opponents of independence. Photographer: Simon Dawson/Bloomberg

A pedestrian passes a pro-independence "yes" campaign sticker as is sits on an anti-independence Better Together campaign billboard advertisement in Edinburgh, U.K., on Tuesday, Sept. 16, 2014. The impact of Scotland's referendum debate has been felt more in the currency market with the pound tumbling and volatility surging on Sept. 8 after a YouGov Plc poll showed the nationalists overtook opponents of independence. Photographer: Simon Dawson/Bloomberg

Published Sep 17, 2014

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The residents of Scotland have a momentous decision to make tomorrow – will they break away from the UK after more than 300 years as part of the country of Great Britain, and become an independent nation? A referendum will decide – and the consequences will reverberate for centuries.

Until the last few months, few analysts took the possibility of Scottish independence seriously – it seemed an incredibly unlikely prospect. But in recent weeks, opinion polls on the answer to the referendum question – “Should Scotland be an independent country?” – have narrowed to the extent that the vote is on a knife edge.

Nobody knows what Scotland will choose, but the independence campaign has gathered enough momentum to cause a panicky sell-off of sterling and prompt dramatic efforts by London-based politicians of all major UK parties to try to shore up the political union.

TOO CLOSE TO CALL

“We continue to think that... the answer will be ‘No’ to independence,” said Deutsche Bank in a research note for clients on Friday, “but in reality we are at a position where it is too close to call”.

It would be easy to dismiss the Scottish independence vote as nothing more than a local ethnic struggle between two nations that have been clashing for centuries.

It takes place seven centuries after the Battle of Bannockburn in 1314, one of the few occasions the small nation defeated an invading English army.

Few global observers pay much attention to Scottish history, and for most people around the world, if they know anything about Scotland at all, it is due to the 1995 Hollywood movie Braveheart, in which Australian actor Mel Gibson plays a 13th-century Scottish warrior who fended off the English.

Despite their history of conflict centuries ago, it would be a tragedy if Scotland broke away from England due to ancient animosity and centuries-old grudges. The UK, which includes England, Scotland, Wales and Northern Ireland, is a relatively successful, harmonious and prosperous nation.

CREATING DIVISION

Ideologies of nationalism and illusions of ethnic superiority have been enormously damaging over the past century. In our interconnected 21st-century world, we are all increasingly global citizens. It seems insane to create another artificial national boundary, and cause further fragmentation in an already divided world.

South Africa has shown that old conflicts and abuses need not blight a nation’s future – it is possible, and indeed essential, to move beyond the hatreds and clashes that shaped our past and find a way to move forward unburdened by the dead hand of history.

It’s also clear that if Scotland votes for independence, the short-term result would be economic chaos. “In our opinion Scotland would fall into a deep recession,” said Credit Suisse in a research note on Friday.

There are three issues at the core of economic arguments about Scotland’s prospects. Firstly, what currency would the new country use? All the main London-based political parties opposed to independence insist they will refuse to allow a currency union that allows Scotland to continue using sterling if it votes “Yes”.

The pro-independence movement claims they are bluffing, and that if Scotland is prevented from keeping the pound, they will retaliate by refusing to accept their share of the UK national debt. Whatever the outcome, there is no doubt that a vote for independence would cause short-term turmoil in currency markets.

ECONOMIC RISK

“Significant deposit flight would require Scottish banks to offer much higher deposit rates, which would in turn increase borrowing costs for Scottish entities and individuals,” warned Credit Suisse. “This, in our view, could increase the risk of a severe economic downturn in Scotland post-independence.”

This risk is exacerbated by a second factor – how many companies would abandon Scotland in the wake of a vote for independence, scared away by economic uncertainty and currency risk? The Royal Bank of Scotland and Lloyds Banking Group are among the firms that have warned they will shift their headquarters to England if the Scots break away.

The third economic issue is how much Scotland’s remaining oil reserves are worth, and whether they could help sustain a fledgling independent nation. Alex Salmond, leader of the independence campaign, says there are still 24 billion barrels of oil to be extracted, worth R27 trillion. Opponents claim this is a fanciful exaggeration, and say oil reserves will run out by 2030, leaving the country struggling.

SCAREMONGERING

Independence campaigners dismiss the economic warnings as scaremongering, and insist there is no reason Scotland cannot be a prosperous and successful nation. In the long term, they are right.

The question of whether an independent Scotland would be economically viable is “not an issue”, according to leading Scottish economist John Kay: “Scotland has income per head more or less the same as that of Britain as a whole, and is the richest UK region outside London and the south-east. At just over 5 million, it has a population about the same size as Denmark or Finland.”

But while Scotland would certainly be an economically viable country, it is undeniable that a “Yes” vote would cause significant capital flight, serious currency market gyrations, and severe uncertainty.

Yet the extraordinary thing about the debate is that most Scots are well aware that voting “Yes” would cause them real economic hardship in the short term.

Most also reject crude anti-English nationalism and ethnic insularity – as Jonathan Freedland wrote in the New York Review of Books in March: “It is not a blood-and-soil clash over identity and ethnicity. The Braveheart notion of Scottish nationalism – spear-carriers, faces painted in woad, crying freedom against the English oppressor – has been extinct, even as myth, for several decades.”

Despite this, polls show that around half of Scottish voters back independence, and there is a real possibility that they could win the referendum. They know that it would be a financially painful path to choose, at least for the first few years of independence, but nevertheless millions of Scottish residents want to take the risk.

MORE LEFTIST THAN UK

The reason is that a huge number of Scots are dismayed about the increasingly glaring deficiencies of British democracy in the 21st century. Scotland tends to be more leftist than the UK, favouring a society in which citizens – and particularly the rich – pay higher taxes in order to fund high quality education and health care for all. They feel disenfranchised and alienated by the corruption and shallowness of British electoral politics, and the lack of genuine choice – there is little real enthusiasm in Scotland for any of the main British political parties.

“Like most people I am utterly disenchanted by politics,” wrote English comedian Russell Brand in the New Statesman last year. “Like most people I regard politicians as frauds and liars and the current political system as nothing more than a bureaucratic means for furthering the augmentation and advantages of economic elites.”

This sentiment is widespread around the world. There is immense disillusionment with modern electoral politics and winner-takes-all capitalism, and yet there seem to be few obvious alternatives. The result is a global crisis of democracy and growing anger about the failures of politicians.

A FEELING OF PRIDE

Many Scots believe the solution is to break away and build a smaller, fairer, more democratic society, and they are willing to face significant economic risks in order to create a country that they can feel proud to be part of.

Whatever the outcome, the widespread rejection of the status quo in Scotland is profoundly important for all world citizens – including of course in South Africa, beset by its own problems of poor governance and corruption.

The vote is not an isolated local issue in a faraway country – it is the latest sign of unhappiness everywhere about the failings of politicians, and a yearning for something better. In the decades to come, this disenchantment will have a profound impact all over the globe. That’s why the world should be watching what happens tomorrow.

Andrew MacGregor Marshall is a Scottish journalist and author.

Follow him on Twitter: @zenjournalist

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