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Scotland is, actually, a cold and dank place apparently suited to
little more than fishing and cabbage. Nevertheless, it became a
birthplace of the Industrial Revolution and our modern economy,
including mechanization, mass production, and finance. Adam Smith
wasn’t English – he was a Scot.
Britain, today, is basically Spain or Italy plus the financial
industry centered in London. Britain has been in decline for a long
time. Eventually, the financial industry will locate elsewhere, most
likely Shanghai.
Or, perhaps, Scotland. I think Scotland could again become a world
leader in commerce and finance, as it was in the 18th century –
along with other unlikely places like Holland, Hong Kong, Japan and
Switzerland … or New York … who also had their time in the sun,
until they blew it.
But, first Scotland would have to get off the sinking British ship.
Here are six great things an independent Scotland could do to become
one of the most prosperous places on Earth:
1) Get a rational tax system. There
are two basic questions to answer regarding taxes. One is: how
much, as a percentage of GDP, do we want to raise in the form of
tax revenue? I suggest that about 15% (total government) is a good
number, which can provide most of the government services we value
today, while also presenting a very manageable burden upon the
private economy. Singapore
(14%) and China (17%) serve as good examples here.
The second question is: how to raise this amount of revenue in a
fashion that causes the least harm and distortion to the private
economy? Hong Kong’s flat-tax
environment again provides an excellent example, although
there are other modalities that could work, including systems
based mostly on consumption-related taxes.
2) Get a rational currency policy. As a small
country, with a high degree of trade, Scotland would have
difficulty with a fully-independent currency. The exchange-rate
fluctuation with other major world currencies would be
troublesome. However, Scotland could adopt an “open currency”
model – in other words, people could officially use any currency
they see fit.
Into this “open currency” environment, Scotland’s government (or
private entities with government sanction) could introduce
gold-based currencies, which people could also use as they
wished – or not use, if that is appropriate. In this way, Scotland
would be providing an alternative to today’s fiat-currency
madness, which people could adopt voluntarily if they felt it was
helpful. Or, they could stick with dollars, euros and pounds if
they felt that was best. After a few decades, I think many would
find that Scotland’s gold-based solution was superior, and would
either adopt the Scottish “gold sovereign” as an international
currency, or imitate it.
3) Remake public social services. I’ve argued
that Japan’s current fiscal problems, related to public pensions,
healthcare, and other welfare services, are mostly characteristic
of welfare programs that were invented in the late 19th century,
and were appropriate for the 1950s and 1960s, but are no
longer appropriate today. Independence would be a chance to
introduce new public policy structures that are appropriate to
today’s reality of long lifespans and low birthrates, without
being too expensive. Hong Kong, formerly part of the British
Empire, provides universal public healthcare at a cost of 3% of
GDP.
4) Get a “competitive advantage” versus other
financial centers. Financial surveillance and taxes in the
U.S. are becoming intolerable to about everyone. Europe is not
much better; besides, people are at risk of being “bailed-in” at
any moment. Switzerland was once a haven for wealth and free
finance, but that is not so true today. There’s a great market
need for a place today that could be what Switzerland, or New
York, was in the past. Singapore seems to provide about the best
alternative at this point, along with places like the Cayman
Islands.
5) Get a great environmental policy. Scotland
used to have one of Europe’s great fisheries. In the 13th century,
the natural oyster beds of the Forth covered over 129 square
kilometers. Alas, by 1957, the Firth of Forth was found to have no
oysters at all; they had been harvested to biological extinction.
The nice thing here is that oysters (or other fishing) are no
longer an important industry, so nobody cares if you ban fishing
altogether. Perhaps, after forty years or so, Scotland will have
again one of the most bountiful marine environments in Europe, if
not the world.
Today, prosperity and abundance don’t
necessarily have an environmental cost at all. The
coal-burning factories of 19th-century Scotland need not be
recreated. Additional progress could be made by phasing out
personal automobiles by way of high taxes on petroleum and cars,
much like Singapore or Britain today. Essentially, this would be a
return to the train-centric arrangements of Scotland in, for
example, 1890. Although Scotland is a major oil and gas producer,
domestic energy efficiency would allow both greater energy
independence and also more revenue from export sales.
6) Respect freedom and liberty. Tired of the
surveillance state of Britain, the U.S., and (following close
behind) the Eurozone? Move to Scotland.
This should be a familiar list. Indeed, it was the Scottish “worldly
philosophers” who put much of it into words, a long time ago. The
world then was also characterized by oppressive, militaristic
statism, notably in the case of Louis XIV of France (1638-1715) and
also James II of England (1633-1701). The Scots took a different
path, along with Britain, and began their first era of world-beating
success.
Scotland (population 5.3 million) could become much like Singapore
(5.4 million) or Hong Kong (7.2 million), or even Monaco (36,000), a
popular alternative to oppressive statism and economic decline
throughout the developed world.
Along the way, Scots could get rich. What’s not to like about that.
Or, Scots could spend the next few decades following Britain down
the rathole into some kind of police-state version of Italy, in the
process proving once again that crushing taxes and currency
debauchery don’t actually prevent sovereign default.
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