Independent Scotland must take a different approach to trade

Further, with 8% of the UK population we have 70% of UK fish landings, 60% of the UK’s timber production, 96% of the UK’s crude oil, 63% of the UK’s natural gas, 90% of the UK’s fresh water, 26% of the UK’s renewable energy generation, 90% of the UK’s hydropower, 32% of UK landmass, 62% of the UK’s maritime area, 34% of the UK’s natural wealth, 10% of Europe’s wave potential and 25% of Europe’s offshore wind and tidal power.

Did you get all that? If there was one country that was ever ready and spoiled to become independent, it would be Scotland.

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However, there are a few nitpicks I have with the book which go against progressive macroeconomic thinking.

In the opening of the book, Believe in Scotland ask the reader to consider various factors for what makes a nation prosperous. One factor they include is the ability to export goods, writing: “In highly developed economies such as Scotland’s, it takes technological advantages, or natural wealth we have just seen, to develop specialisms that create high-value export demand and higher prices. This in turn creates new jobs of a higher quality, and pay higher wages than would otherwise be the case.”

There are two problems with this argument. First, this analysis seems heavily based on a microeconomic level, but fails to consider the wider macroeconomic picture which this article will go on to detail. Secondly, the common obsession to export resources is one also adopted by Unionist opponents who attack Scotland’s overall trade balance.

Unionists often deploy the argument that Scotland’s trade deficit, along with the notional government deficit, would place Scotland in a disadvantageous position. As the argument goes, net exports add to our aggregate demand, further increasing our GDP and national income. This can result in increased employment for servicing exports, thus generating wages and profits. On this basis, developed countries often push for export mania when domestic policies fail to reach full employment.

Let us consider the wider implications of Scotland’s trade position as it is currently.

In real macroeconomic terms, Scotland’s exports are a cost and its imports are a benefit. When Scotland’s real resources, including our labour, are used to produce output to the foreign sector, the domestic sector loses out to either consume or use these resources for investment goods. As Nobel Prize-winning economist Paul Krugman (below) writes: “Running a trade surplus isn’t a ‘win’; if anything, it means that you’re giving the world more than you get, receiving nothing but IOUs in return.”

Therefore, imports mean we accumulate real goods which we do not have to produce. Scotland’s position as net importer places us in an advantageous position of trade.

However, there are various caveats we need to consider, especially with the shift towards a more green and resilient economy in the face of climate change.

First, producers take greater priority on the income they receive from their services or goods, rather than who purchases them. If a producer sells their goods domestically, they will receive the domestic currency to cover costs for their next sales. If a producer sells their goods into the foreign sector, the buyer will need to exchange their domestic currency for the new Scottish currency (often done through Transmate). Either way, the seller receives the currency, but when goods and services flow to the foreign sector then the people of Scotland miss out on the fruit of their own labour.

Believe in Scotland might counter this argument by pointing out that the previously unutilised resources and the unemployed have, through a trade surplus, found an income. Workers now receive wages and firms increase their profits margins, so what are we complaining about?

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First, higher government spending can result in increased wages, profit margins and growth – we do not need to ship off our resources to achieve it. Having a domestic growth model better enables Scotland to respond to potential market (domestic or global) shifts which can be potentially damaging and still enjoy the fruits of our labour. Creating jobs and using our resources for domestic consumption results in greater net-benefits than sending our resources abroad.

Another counterargument from Unionist opponents would be that an independent Scotland can enjoy all the real resources it wants, but we would still be faced with transaction costs with trade. This argument might hold up more if it were not for the obvious fact that transaction costs are a normal part of global trade.

If transaction costs were such a burden, then you would expect Canada to be lobbying Joe Biden to support the introduction of a North American dollar or surrender sovereignty over to Washington. Yet it seems Canada still enjoys monetary sovereignty despite transaction costs. Neither would we expect Ireland, which isn’t monetarily sovereign, to suddenly surrender democratic control to the UK because of transaction costs.

If we look at Eastern European countries with their own currencies, such as Poland, Hungary, and the Czech Republic, we find that they’ve had the fastest growth compared to their Euro colleagues since 2002. The Euro may have removed transaction costs for many European countries, but Euro members also suffer higher levels of unemployment, political instability, and interest rates. Unionist scaremongering of transaction costs simply don’t stand up to macroeconomic reality.

This does not mean that an independent Scotland should shut itself off from the rest of the world and deny other countries our resources. Westminster has cut funding to UNICEF to support children across the globe by 60%, whilst also cutting 85% of its funding to the UN Population Fund's family planning programme. On top of this, billions of pounds worth of aid are still to be cut that would go to humanitarian projects at the UN. Whilst Westminster isolates itself from the rest of the world, an independent Scotland should stand tall on the international stage and proudly commit to supporting humanitarian projects.

Sending resources to countries in need to rebuild communities, develop modern health care and expand education is not only a representation of an independent Scotland’s values, but more importantly it is the morally right thing to do.

Trade is not a competition or a game – it is a power relationship between different interest groups. An independent Scotland must recognise this, or it will simply stay on the path Westminster has set us down.

An independent Scotland can use policy tools and institutions to increase equality, develop a humane welfare system and reach full employment, whilst still challenging international free-market ideology by supporting humanitarian aid, promoting high ecological standards and focusing on workers’ rights for future international agreements.

We can support developing countries in building public-led industrial policies that produce long-term infrastructure and green technology that is both sustainable and efficient. This technology includes solar panels and wind farms to countries that may lack oil and gas, whilst also building on hydroponics for far warmer countries. This in turn will reduce our carbon footprint as we shift our finances away from extracting fossil fuels that threaten our planet’s long-term survival.