WOULD Scotland's economy have coped better if a referendum had already been held, a "yes" vote obtained and sovereignty secured?
An obvious answer might be expected from Alex Salmond, whose background as an economist should make it easier for him to make a detailed case for an independent Scotland being better placed to weather the current financial meltdown.
So where bette
r to start than ask the Scottish Government, you might think. However, our enquiries were met with generalities. A spokesman reckoned that "having the maximum economic levers at our disposal would give Scotland the best possible opportunities to secure jobs, investment and stability".
He added: "Independence would give us the tools we need to achieve our full potential."
What was conspicuously lacking, despite some pointed and protracted enquiries, were practical examples of what those tools were, or how an independent Scotland could deploy them to tackle the virulent short-term problems created by the intense turbulence in the financial system.
The heart of the problem for the SNP is that this is a global problem over which it cannot pretend to have any control. Salmond has fulminated against the "spivs" in London, but he is largely powerless on this issue – even regarding proud "Scottish" institutions.
HBOS and RBS are in difficulties partly because of bad timing but primarily because they have invested unwisely and are now over-leveraged, whether through massive overexposure to the domestic property market or as a result of the Royal Bank's controversial acquisition of ABN Amro. This has an impact on their share price and, in the current credit crisis, their ability to borrow funds essential to their short-term survival. Yet there are some measures an independent Scotland could take.
Salmond is on record as saying that he would have followed Ireland's lead and explicitly guaranteed all savings in Scottish banks for a set period (although Unionists could counter that Alistair Darling has already effectively guaranteed all savings in British banks).
The SNP's other main idea for ameliorating the effects of the credit crunch concerns jobs. An independent Scotland, they say, could vary the rate of corporate taxation sufficiently to ensure that, if HBOS is taken over by Lloyds TSB, for instance, jobs would be saved by providing enough incentives for there to be no question of the merged company's headquarters being anywhere but Edinburgh.
An independent Scotland would, however, also be part of the euro, so there would be little scope for reacting to a downturn with an immediate cut in interest rates, although if recent history is any guide these would be lower than those in the UK anyway.
An independent Scotland might also be able to react more quickly, as Norway did during a previous crisis. Then, Norway effectively semi-nationalised its banking system in a move which is acknowledged as one of the most effective piece of government interventions into a country's financial system, and is now the blueprint for Darling's latest actions.
Just whether smaller countries are better-placed to take remedial action is a moot point, according to economist John McLaren, who worked for the Labour/Lib Dem coalition Government at Holyrood. Size, he points out, is not important in itself: Iceland and Ireland are in dire straits, but the US isn't looking too clever either.
While many of the developed world's best performing countries are approximately the same size as Scotland, many have economies based on one or two niche sectors, which can make them very vulnerable. Scotland's likely dependence on a commodity as volatile as oil would certainly bring it into that category.
The Armageddon scenario emerged during a discussion with a senior Edinburgh banker.
Asked what would have happened had Scotland been independent when this crisis hit, he said: "HBOS would have gone bust and RBS would have followed five days later. The Scottish state simply wouldn't have enough money to rescue two banks of that size as Iceland has done. As it would have been a Scottish problem rather than a British one – they'd both have gone to the wall."
The full article contains 680 words and appears in Scotland On Sunday newspaper.
