Ireland and Scottish Independence

I found this story interesting. Clearly, the underlying story is just that Ireland is being used a political stick to beat Mister Salmond with. Beyond that, though, the exchange raises some interesting questions. Why are Scottish opposition politicians so sure that an independent Scotland would pursue policies that would lead it towards fiscal troubles of the Irish variety? How could Mr. Salmond assure them that this wouldn’t occur? Do the Scottish opposition believe that the Republic would be better off economically rejoining the United Kingdom?

And what about the banks? Would those two disastrous banks with the phrase “Scotland” in their names have been defined as Scottish banks to be bailed out by the Scottish taxpayer?  Presumably not but this raises the question of how one defines the fiscal responsibility for banking measures as one negotiates one’s way out of a united country.

13 thoughts on “Ireland and Scottish Independence”

  1. It’s very dubious that Scotland in the UK could commit to independent Scotland following an Irish policy path. There is a much stronger tradition of socialism in Scotland than in Ireland – though oddly the socialists seem to be disproportionately ethnically Irish – and more to the point, a much greater expectation of income redistribution. If the consequent burden of state spending were internalised so that only Scottish taxpayers finance it, it would be difficult to follow a low-tax, low-public spending model which characterised Ireland’s development relative to Europe.

  2. @ Karl,

    Salmond made a rod for his own back. As the drop of a hat he would use Ireland as an example of a “strong, independent & vibrant small nation within Europe”.

    There isn’t a hope in hell of the Scots voting for independence.

    They missed the boat. The oil is nearly gone. They know it.

  3. With Mr. Salmon’s famous “arc of prosperity” turning out to be an illusion, there would be little support for an independent Scottish state at the moment. Now that the oil reserves are depleted, they’d want to be out of their minds to cut that umbilical cord and attempt to go it alone. They now have the best of all worlds with a cultural revival, healthy cash inflows from Westminster and regional support from Brussels. From talking to some of them over the years, they think that we were crazy to break away from the Union when there were net inflows, and the land question had been settled. Perhaps they’re right, but its too early to tell – although the wild men are still with us, they may be on the wane after this latest bout of insanity. The failure of their Darien Adventure back in the 17th century and the sale of their sovereignty to recoup the losses, still haunts them. To become a successful independent state is a very difficult undertaking and we above all others, only know it too well. Good luck to them!!

  4. The Irish economy has been growing much faster than the UK economy since 1958, apart from a few brief periods such as 1982-1986 and 2008-2009/2010(?). Since 1958, average annual growth in Ireland has been almost 5 per cent, while in the UK it has been just 2 per cent. Virtually all economic forecasters predict that the Irish economy will once again be growing faster than the UK economy from 2011 on. It might even start doing so before then. When it does so, in contrast to 1958 and 1986, it will start off from a position of being richer than the UK economy. By the middle of the next decade, it will be much richer. If ESRI’s growth forecasts fror Ireland’s economic growth from 2011 on prove accurate, by the middle of the next decade Ireland will be 25 per cent per capita richer than the UK (based on GNP).

    Alex Salmond is a very clever politician and knows that the middle of a global recession is not the best time to pursue independence for a small country. But, that global recession won’t last forever. Its on its last legs. When normal global growth resumes, and the export-oriented Irish economy is once again growing much faster than the UK economy, the question of Scottish independence will come back with a vengeance.

    The propaganda being churned out by the Scottish unionist parties (Conservatives and Labour) in relation to the two budgets last Wednesday is pathetic and smacks of economic illiteracy. Yes, the Irish budget brought in public spending cuts, while the UK budget didn’t. But, that wasn’t because the UK is in a better financial position and didn’t need such cuts. Au contraire! The UK needs them even more than Ireland because its budget deficit is higher than Ireland’s and its accumulated government debt is higher than Ireland’s. The reason the UK didn’t introduce similar cuts to Ireland’s last Wednesday is quite simple: there is an election due within the next six months.

    Nationalism isn’t all about economics, of course. There are other factors, although this isn’t the site to discuss them. But, on issues like health, education, housing, international influence and many others, Ireland is now way ahead of Scotland.

  5. @Karl
    “Would those two disastrous banks with the phrase “Scotland” in their names have been defined as Scottish banks to be bailed out by the Scottish taxpayer? Presumably not …”

    But what is the difference between this question and one I asked a long time ago on this site – what is it about the “Irish” banks which gives us the responsibility to bail them out. As I understand it there is no regulation which obliges the majority of shareholders to be Irish? So is it the name? Headquarter location, number of branches? At the time nobody answered it – so not being an economist – I assumed it was just a stupid question. Was it?

  6. @ Aidan

    No, not a stupid question at all. I guess the key things that make AIB and BOI “Irish” is that they are dependent on Irish people for their deposits and most of their lending is to Irish customers. You’re right that the other stuff is all besides the point.

    There has been a lot of talk about the need to keep “Irish banks for Irish people”. In truth, this definition of Irish banks — concentration of deposits and lending in Ireland — suggests that relying on Irish banks may be a big mistake. This is because when our economy goes south, it can threaten the financial institutions that we rely on for lending.

    If, for instance, our banks had portfolios more diversified away from Ireland and obtained their funding from international markets or from depositors in other countries, we would have been in a better position today.

  7. @Karl
    “If, for instance, our banks had portfolios more diversified..”

    Is that not then implying that really our banks were too small, rather than – as suggested elsewhere on this site – symptomatic of the “too big to fail” syndrome? Isn’t it possible that would have left us even more exposed, given the international nature of the crisis?

  8. Aidan McGrath
    I would add to Karl with the problem that the borrowers were Irish! They were being rescued, not the banks themselves. The liquidation of all that development land would have been shocking and awful, but it might have helped to reduce our costs and added to the impetus of stimulus given by crushing wage costs and the fiscal deficit.
    But who rules this country? Who made the decisioon to commit 100,000,000,000 Euro rounded up, to our great grand children as a debt? Who will avoid their fair share of this debt by passing it onto those who cannot avoid it?
    We also did for reputational purposes and I suspect, all transfers of money to others attracts a hefty secret commission payable to those ho decided where to place the actual borrowings! In other words we are also paying someone else’s pension fund accumulating in Bangkok or Singapore!

  9. Independence, freedom and self-determination don’t come for free. Neither does the assistance of large technocratic political unions.

  10. The UK are welcome to Bertie, Biffo and the rest of the shower of crooks up in the Dail. After that we want to have nothing to do with anything British.

  11. Karl,

    I thought it might be interesting to get the take of someone steeped in Scottish politics on the external commentary as to how the debate on Independence is shaping up. So I asked an old mate who lives and breathes his country’s politics what he thought of the recent IT article and your questions.

    As to why Scottish opposition politicians might be so sure that an independent Scotland could pursue policies that would lead to fiscal troubles of the Irish variety, my friend responded: “They’re not.”

    “This isn’t about a mythical future,” he said. “It’s about now. Regardless of who runs Scotland, would it be better or worse off economically inside or outside the UK is the debate. The Scottish Parliament operate as if they were the owners of a sweet shop, to which the suppliers deliver the sweets for nothing. They then debate who the sweets will be given out to. A cheque for £36bn turns out to be a cheque for £33.9bn next year. Cut the sweets’ supply – even slightly – and the game begins about whose to blame.”

    To the related question of whether the Scottish Opposition believe our Republic would be better off economically rejoining the United Kingdom, he says:

    “Of course they don’t believe that. It doesn’t even really occur to them. They can only be nasty about Ireland because they think Ireland will be OK in the longer run; that the Irish can look after themselves. Ireland is just a proxy argument. Salmond and SNP used the Great Irish Tiger to boost their case that Scotland could go Independent without any reduction in loot. Ireland and Iceland meant Scotland outside the UK would
    be richer than Scotland inside. He stuck the Tiger right up the nose of the
    Opposition – and the previous governments – given our lowly growth rates relative to yours. Now the Tiger is comatose, the Opposition are sticking it up his nose.”

    The banks issue is a thorny one, he admits.

    “Salmond worked for RBS for years,” he points out. “Other SNP Ministers worked for HBOS when it was just BOS. But the question presumes a seriousness which, in our sweetshop, is not there – not yet anyway. One would think the Opposition, if they wanted to put a proper boot into the SNP, would point out that two great Scotch banks turned out to be among the two biggest turkeys in the western world. But there are unwritten and
    chancy limits to the Opposition trashing “Scotland”. If they go over the
    invisible line – bang, its “talking Scotland down”, and it backfires. That stuff matters in the sweet shop.”

    The questions were excellent, he concluded, but questions of that ilk weren’t asked, even when Devolution was being framed back in 97/98.

    “As we look at the plans for a Referendum next year, it becomes
    obvious that these huge issues raised by your economist are unknown,” he says.

    Politics in Scotland runs along much the same lines as politics in Ireland, it seems.

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