Scotland’s referendum: Yes equals faith in politics, No means faith in management

Scotland’s referendum, whatever its outcome, won’t tell us much about Scotland’s future. A little more independence won’t much matter. The forces beating down on northern Europe won’t abate. The outcome, however, will reward business as usual or test the proposition that we can still innovate politically without blowing things up.

Personally, I’m a republican federalist who believes my piece of North America could be more influential and interesting within a wider American federation, but I don’t feel trapped to cheer for the No side tomorrow.

Federalism is the mechanism that allowed for the emergence of America as a great power. Europe warned it couldn’t work but; then, along with American postwar relief, they progressively adopted federalism to restore general prosperity and peace. Federalism allows for powerful government, while leaving us less fearful of one another and the world outside.

Yet, the No voices in the Scottish referendum debate decided to dwell on a nostalgic, extreme vision of national independence. This is a litmus test they imposed on Scottish voters but not on themselves.

Two Canadians famous in London — historian Margaret MacMillan and central banker Mark Carney — have vividly made their case: Scotland cannot be “sovereign” and use the pound as Scotland’s currency. And England and the rest of the EU countries will be too annoyed and nervous to let Scotland into either NATO or the European Common Market.

In effect, the Scots will pay terribly for humiliating Labour and Tory politicians in Westminster. Scotland can’t become another successful interdependent 21st-century nation-state because that would set a dangerous precedent.

In rejecting the leap of faith of the Scottish independence movement, MacMillan and Carney ask us to make a different leap of faith, not about what we cannot know, but against what we do.

In fact, today, the Bank of England has only a modest degree of independence to support an independent UK economic policy. Neither Scotland alone nor the UK whole can defend themselves, cope with the next big recession, fight terrorists, or save the planet. In the event of a Yes vote tomorrow, the Bank and the British Government, before dawn on Friday, will be phoning all over London, Berlin, Brussels, and Washington assuring investors and allies that British commonsense and pragmatism with keep both the pound, London’s market, and everyone’s assets in Scotland afloat.

MacMillan’s mastery of the motives of the men and women that made European history seems to have been set aside or stopped with the launch of the European Union and the Eurozone. She understands why they came together, not how their federation will progress.

The No side's campaign has chosen to appeal to fear but little is said about what it fears. My hunch is, they are afraid to ever go back to first principles. They fear that if they had to make real changes, everything would unravel. 

Westminster surely can acknowledge, after two centuries of disdain, that numerous genuine federal arrangements, including forms of sovereignty-association, are working on both sides of the Atlantic.

Federalism and our mixed economies were never designed merely to manage the status quo. They beat authoritarian systems not because they run smoothly but because they’re built to cope with change constructively. That will atrophy if we keep rewarding politicians, public servants, and intellectuals who can’t say Yes.

Don’t take your Scotch straight!

The Scottish campaign for political sovereignty and economic association with the rest of the United Kingdom and the European Union updates the Quebec independence playbook. Effectively, not only are we a little nicer than they are, we’re smarter. Scotland can be as competitive as England and, at the same time, it can be more socially enlightened as an independent unitary state.

The Scots gave the world Adam Smith’s mind and Canada’s banking culture. Naturally, their sovereigntist government wants to keep the Pound, their common currency with Britain and their 40-year-old free trade association with the European Union as well.

The response of England’s political, bureaucratic, and business leaders now effectively mimics Canadian federalist "no" campaigns in Quebec’s two independence referenda. This shouldn’t, however, make Canadian federalists proud. Cameron, his ministers, and their Bank Governor (Canada’s former Bank Governor) Mark Carney, and now backed by England’s business leaders, are hammering those careful Scots with that terrible word: instability.

Carney first advised the Scots that their wished-for independence would be highly circumscribed in this interdependent world of easy nervous flows of capital. The "no" campaigners insist, too, that what’s left of the United Kingdom could, in fact, refuse to let Scotland stay in the Pound currency area and, as well, that the EU might be reluctant to allow them to stay in the European common market as an independent nation. They could destabilize politics in Europe and cause uncertainty about the stability of the Pound.

If the Scots vote to stay, these warnings will appear shrewd. If the Scots leave, these warnings probably will not survive the night the votes are counted.

Nothing about the future uttered in any election campaign can be totally refuted. Nevertheless, their warnings are both hypocritical and farfetched.

Britain’s precious Pound and Carney’s old Canadian dollar are highly influenced by what others think of their government’s fiscal and monetary policies. Neither Britain, nor Canada, nor a separate Scotland in the future would be free to do — or threaten to do — whatever it likes economically. Economically literate Scots know about the limits of economic sovereignty today as well — and possibly better — than anti-Europe and anti-American nationalists in either Britain or Canada.

Indeed, there exists no separatist sentiment in Scotland as nostalgic and as ambitious as Britain’s vehement keep-the-Pound-and-don’t-use-the-Euro majority to Scotland’s south.

If the rest of the United Kingdom refused to maintain its currency union with an independent Scotland, their citizens and businesses that hold equity in Scotland could lose a fortune, and Carney’s Pound would become even less stable in currency markets.

The "no" campaign says their threat is credible because keeping an independent Scotland in the currency union could threaten the Pound’s reputation. The Scots, after all, could turn around and act like the Greeks and those other places on the continent that still don’t speak English in the office.

This is truly bizarre.

Today, Scotland holds 59 seats in the UK Parliament. A Scot today has as much right as a Londoner to aspire to be Prime Minister of the United Kingdom or Governor of its central bank. Cameron, Carney, and the entire English establishment sleep soundly knowing: if the Scots vote "no" in the referendum, the Scottish electorate next year could determine who forms the next government of the United Kingdom.

They’re smart enough to influence the destiny of the United Kingdom. But they’re not competent to manage their own affairs?

Mark Carney: Can Canada’s Bank Governor be Canada’s Next Prime Minister?

Long ago, economist John Kenneth Galbraith warned that you couldn’t survive a career in commercial banking and be a human being too. Hopefully, he’d modify that charge today.

He might agree at least that Mark Carney, a former investment banker and now Governor of the Bank of Canada, is a first-rate human being.

That said, it‘s not likely that liberal economist Galbraith would endorse this Liberal campaign idea: turning Canada’s highly respected Bank Governor into a winning candidate for the Liberal Party’s leadership.

Liberal partisans in Canada have enjoyed a long, rewarding relationship with the commanding heights of Canada’s public sector. The political savvy you have to possess to be effective at the top of Canadian public service easily makes you a fellow traveller in the eyes of Liberal Party talent scouts. Indeed, senior public servants have been recruited as Liberal Prime Ministers and Cabinet Ministers.

Conflict of interest concerns matter, of course, if a Deputy Minister or a Bank Governor is cavorting with profit-making industries and commercial lobbyists. Public servants are unquestionably human; thinking about a future career in commercial banking might affect how you guard the public interest today. That’s why there are clear post-employment guidelines about where, what and when a senior public servant can go next.

Independence and integrity are even more important qualities for central bankers.

Being taken at one’s word is literally the working capital of a central banker. Today, he or she is the closest thing a national currency has to the gold standard. One reason gold is precious is that it has no political judgment or agenda. So, a modern central banker’s fragile assignment is always to be less human than his political masters.

Last summer’s Liberal recruiters didn’t see the point. Beating Stephen Harper with a less human Stephen Harper was hardly their plan.

Writing in MacLean’s, Stephen Gordon explains why important monetary policy decisions—raising and lower interest rates, for instance—need to be seen to be far removed from political considerations and, consequently, is unforgiving about the failed attempt to Carney into a politician:

“If we are extremely lucky, this episode will be quickly forgotten. But if by taking a run at Mark Carney, these Liberals have initiated a never-ending cycle of speculation about the possible political ambitions of future Governors of the Bank of Canada, they will have weakened — perhaps fatally — the foundations of Canadian monetary policy.”

Gordon’s point of view doesn’t seem to have legs amongst most political observers. It’s not cool in Ottawa to be harsh about nice people. Furthermore, good monetary policy today promotes growth and, therefore, is popular anyway.

But, Mark Carney’s popularity is circumstantial and not part of his job description. Inviting Carney to husband or cash in that popularity for a career in partisan politics was pure mischief.

Liberals should better understand the imperatives of institutions that they’d like to lead once again. Mark Carney only needs to be faster at telling flatterers to get lost.

Divided North Americans believe in European Union

North America’s sharpest minds insist that the European currency zone can—and must—survive. Our best (Lawrence Summers and Timothy Geithner, for instance) still argue that Germans and Spaniards, Portuguese, Greeks and Italians can overcome their differences and sufficiently discipline their individual actions to maintain a strong common currency.

While differences between Canada and the United States are no greater than those within the German or Italian republics, the same expansive intellects in North America are silent on our own disunion.

European unity must persist not because Europeans are naturally better at governing but because of the wealth they’ve created by pooling their economic resources. Silence about the very idea of a full-fledged North American union reveals how few accomplishments we have in common.

We are liberal continentalists abroad—and liberal nationalists at home.

Mark Carney, Governor of the Bank of Canada, elegantly asserts, “The European situation is fragile but fixable; manageable if it is managed.”

He goes on:

“Thus, European authorities must create time to re-found their monetary union based on credible fiscal arrangements and more flexible economies that can adjust quickly to inevitable shifts in internal European competitiveness. In our opinion, the existing European resources, including the European Financial Stability Facility and the European Central Bank facilities, can be used much more efficiently to create a multi-year window for these adjustments.”

Click on: www.bankofcanada.ca/2011/09/speeches/recent-economic-developments/

Despite the differences between the relatively poor economies in the south and the spectacularly sophisticated economic engines in the north, Europeans, Carney insists, should keep building one united European economy, one that is regulated and stabilized by continent-wide institutions and is fuelled by a common currency and flexible capital and labor markets. Yet, with a fraction of Europe’s bad blood and tribal differences, Canada and the US can’t go any further than doing away with tariffs and running a smooth border?

Of course, the governor of the Bank of Canada can’t think out loud about the future of the Bank of Canada. He’s an officer of the status quo. He’d be eligible for a big promotion or another illustrious career in business if the US Federal Reserve and the Bank of Canada were merged. The fate of his office, however, should be up for serious discussion by those who recommend big solutions for Europe, and who tell us that radical change awaits all Western economies.

No one is suggesting seriously that the US monetary union can’t work any longer because California’s finances are a mess, or that Ontario manufacturing shouldn’t be included in the same currency zone as oil-exporting Alberta. No one is suggesting that breaking up our two national currencies in order to make monetary policy more sensitive to the economic features of each region wouldn’t profoundly harm the common economy.

On the other hand, why not take up the logic of two continent-wide North American dollars and decide to make one?

Canadian monetary experts wouldn’t have their own currency to manage, of course. Yet Germans don’t now, and they certainly thought they were pretty good at it too.

With one currency, barriers to and arguments against full Canada-US economic integration of labor forces and capital markets would shrink. However, a true economic union would be more competitive globally and could accommodate real trade diversification as well.

It’s noteworthy that Germany, the European Union’s staunchest guardian, is also a great global trader.

“Germany’s exports to non-EU countries,” during the first half of 2011, “have gone through the roof. Exports to Brazil skyrocketed, increasing by 61.4 percent over last year, to China by 55.5 percent and to Turkey by 38.8 percent. And it wasn’t just exports; Germany has increased its imports from developing nations as well, especially China. In fact, demand for lower-priced goods has grown so much that China has replaced the Netherlands as Germany’s largest supplier of goods.”

Click on: www.thetrumpet.com/?q=7506.6074.0.0