SMALL NATIONS ARE STRONG ENOUGH

Dave Coull · SMALL NATIONS ARE STRONG ENOUGH

From the Herald, Friday 24th October 2008

SMALL NATIONS ARE STRONG ENOUGH TO TACKLE THIS CRISIS

Eamonn Gallagher

(Eamonn Gallagher is a former director-general of the European Commission and former EC Ambassador to the United Nations.)

For all the uncertainties in the international financial markets, there is one thing we do know - the storm has hit us all. Everybody's in trouble, let's face it. Global economies are coming to terms with years of loose credit, looser regulation, high debt and financial instruments whose complexity beggars belief. In these times, it behoves us not to criticise each other, but to figure out what needs to be done.

In the rush to analyse what has been happening around the world, I have been particularly surprised to see some commentators in Scotland and the UK mischaracterising the situation in neighbouring economies. And if some of the press comments have been surprising, the comments from the new Secretary of State for Scotland, which have been echoed by Labour MPs such as Anne McGuire, which implied that Ireland was somehow insolvent, were unwarranted and unhelpful. I have no idea how much Mr Murphy knows about the Irish economy (I suspect little) nor how much he thought about how such comments would be perceived in Ireland (I suspect he thought about that even less).

The facts are that Ireland has experienced many of the same difficulties as the UK and the US in terms of a housing asset boom followed by the pressures of the downturn. Ireland is in recession now. Gordon Brown himself has now predicted that the UK will join us in recession soon.

I am familiar enough with Scottish politics to understand that the comments of some UK politicians have probably been based on party politics and a desire to construct a case for the "bigness" of the Union by decrying the "smallness" of countries such as Ireland and Norway. But far from being insolvent, Ireland is considerably wealthier per person than the UK. It also has one of the lowest percentages of national debt as a percentage of GDP in the EU. Norway (also wealthier than its British neighbour) has no net public debt at all. In fact, it's one of the few countries in the world that can make that claim. (And it's hard to imagine a more enviable position than sitting on a £200bn oil fund.) It's true that Iceland is a wealthy country with very particular difficulties at the moment. If there are lessons we can all learn from this country whose population is smaller than the capital cities of Ireland, Norway or, indeed, Scotland, then they are ones of regulation and risk management. And as the United States's Secretary of the Treasury, Mr Paulson, has learned - these lessons are painful and powerful, regardless of a country's size.

It was extraordinary that in the midst of an international financial crisis - and even as his own country is slipping into recession - Gordon Brown chose to argue that somehow global banking problems mean that Scotland should dare not consider questions of good governance any further. Is this not a rather curious assertion from the man who has held the reins of financial power in the UK for the past 11 years? The argument seems to be: "Things have gotten really bad on my watch - best to let me keep handling things."

It is hard to see how this argument can work for very long, particularly when unemployment figures leapt recently by almost a full percentage point in one month. And the UK's borrowing numbers for the first six months of this fiscal year grew to £37bn. I'm not arguing that the UK is insolvent - it's clearly not. What I'm saying is that perhaps now is not the time to be throwing stones in political glass houses.

Mr Murphy and Mr Brown seem to be asserting that Scotland would somehow uniquely be incapable of taking decisions and marshalling resources to handle the domestic consequences of the current global economic crisis if it were independent. The logic is lost on me. The question of Scottish independence is one the Scots can and should answer for themselves. The debate should be based on facts, though, not misrepresentations of what is happening to neighbours.

Because here is what we do know about independent countries have done: Ireland led the way in guaranteeing bank deposits - an action copied by countries from Germany to Australia. Norway, a country of fewer than five million, has announced the capacity to fund almost £35bn for its banks if necessary - a number strikingly similar to the UK's own announcement. And Sweden - home to eight million people - announced a £120bn banking package this week.

It's worth noting that Mr Brown's plan to recapitalise the banks was copied from a similar Nordic model 15 years ago. And that's good! We should all learn from each other. Because we are all in the same soup.

And while we're learning, it's probably best if politicians focus on how to strengthen their own national balance sheets without trying to knock each other's.

Aventinian

"It was extraordinary that in the midst of an international financial crisis - and even as his own country is slipping into recession - Gordon Brown chose to argue that somehow global banking problems mean that Scotland should dare not consider questions of good governance any further."

No, I rather feel he was making the point that the union is the best governance Scotland can have, thus in fact he was furthering that debate.

"Is this not a rather curious assertion from the man who has held the reins of financial power in the UK for the past 11 years? The argument seems to be: "Things have gotten really bad on my watch - best to let me keep handling things.""

If it is being seriously suggested that Scotland should become independent because of the silliness of one prime minister, then I can only despair of the level of debate and the Herald's editorial policy. Although it seemed to be broadly what Salmond implied on Question Time too.

Either way, it's ridiculous. Gordon Brown made an argument about the inherent strength of a united kingdom, something which has been going on for three hundred years quite successfully, not his own time in office, which seems to be rather limited.

"It is hard to see how this argument can work for very long, particularly when unemployment figures leapt recently by almost a full percentage point in one month. And the UK's borrowing numbers for the first six months of this fiscal year grew to £37bn. I'm not arguing that the UK is insolvent - it's clearly not. What I'm saying is that perhaps now is not the time to be throwing stones in political glass houses."

We're in a recession, it's what happens. I don't see why that should preclude the matter being discussed by unionists and pointing out that, under an independent Scotland, the country would be in a worse position.

"Mr Murphy and Mr Brown seem to be asserting that Scotland would somehow uniquely be incapable of taking decisions and marshalling resources to handle the domestic consequences of the current global economic crisis if it were independent.
The logic is lost on me. The question of Scottish independence is one the Scots can and should answer for themselves. The debate should be based on facts, though, not misrepresentations of what is happening to neighbours. "

I seems amazing that someone has the temerity to accuse others of misrepresentation in the same breath as that. Messrs Murphy and Brown have never made that assertion, nor do they seem to be making it except perhaps in the deluded minds of some fringe nationalists. The argument they of course made is that an independent Scotland would not have the resources to handle the current economic issues as well as the UK government has.

Indeed, it seems quite odd that anyone could believe this point, founded as it seems to be on an awkward bit of double-think. Both of the men concerned are, of course, Scottish; if they think themselves capable of making the decisions on a UK level, presumably they could assume similar things on a Scottish level.

Red Justice

It seems many unionist sympathisers are all too willing to ignore the fact that countries with control of oil revenues or energy resources start from a better economic base and economies in better shape.

It is not all about size. For instance Norway has started with an economy in better shape to weather the storm of this world recession and with an oil fund surplus.

Russia a larger country has come from the humilation of the collapse of the Soviet Union to build it's economy over at least ten years and is now a major energy supplier in the world.

The UK is pathetic with an oligarchy all too willing to throw money at wars and the rest of capital at bailing out banks.

I would have been better off being born in Russia than the mess of a system in the UK.

Holebender

Shagpile

I just can't understand why that poor part of an English territory which gained independence from the UK has risen to be the second richest country in the EU, without oil mark you.

The rich part which remained in the UK still receives the highest spend/head of population than any other part of the UK.

Still, I shouldn't think they'd be knocking on the door for readmission to the union. They already know that the UK could not afford their terms. Right? Laughing