Paul Krugman Warns Scotland to Vote Against Independence From UK
With only 10 days left before the referendum on Scotland’s independence from the United Kingdom, arguments for both sides have reached a fever pitch. The latest polls indicate that Scotland is almost evenly split on the question of independence, with the “yes” camp showing a 51% to 49% lead. As the fate of the country and the entire UK hangs in the balance, Paul Krugman asks whether an independent Scotland could be economically viable.
His answer is a resounding no. Though the “yes” camp’s recent surge in the polls is due in large part to their successful efforts to assuage voters’ economic fears, Krugman warns that Scotland could “end up becoming Spain without the sunshine.”
The crucial problem for Krugman is that an independent Scotland would remain closely integrated with the economy of Great Britain, maintaining the pound as its currency. This means that in times of economic instability—like the recent financial crisis that devastated vast swaths of Europe—the government could potentially run out of money and the country would be unable to bail out its own banks. Hence the comparison with Spain, one of the countries that was hardest hit by the housing crisis, which then fueled years of stringent austerity measures and record levels of unemployment.
Though he ignores the many decades of seething cultural tensions that have strained the ties between Scotland and British leadership in London, Krugman’s message to Scottish voters is to take a look at their neighbors and realize that the same crises could very easily befall them.
"Everything that has happened in Europe since 2009 or so has demonstrated that sharing a currency without sharing a government is very dangerous. In economics jargon, fiscal and banking integration are essential elements of an optimum currency area. And an independent Scotland using Britain’s pound would be in even worse shape than euro countries, which at least have some say in how the European Central Bank is run.
"I find it mind-boggling that Scotland would consider going down this path after all that has happened in the last few years. If Scottish voters really believe that it’s safe to become a country without a currency, they have been badly misled."