All posts by thomas

Barroso does an Osborne

EC President José Manuel Barroso taking the floor
EC President José Manuel Barroso taking the floor, a photo by European Parliament on Flickr.
In my recent post about Osborne’s bullying session in Edinburgh, I wrote:

By ignoring [the alternatives to a currency union] and by failing to explain why rUK politicians would opt for a solution that might harm rUK businesses, he shows that his sole purpose is scaremongering. He didn’t make this speech to provide visibility for rUK businesses (which would have been prudent), but to bully Scottish voters into voting No.

This morning the President of the European Commission, José Manuel Barroso, opted for a very similar approach when he was interviewed on the Andrew Marr Show:

Of course it will be extremely difficult to get the approval of all the other member states to have a new member coming from one member state… I believe it’s going to be extremely difficult, if not impossible, a new member state coming out of one of our countries getting the agreement of the others.

As many EU experts have discussed at length in the past, there is no precedent for this type of situation, and there are many options available to the EU in order to reach a pragmatic compromise that everybody can live with — see for instance Yves Gounin’s article, either my summary or the full translation.

Indeed, as Yves Gounin writes, the EU has a lot to lose too:

As soon as the Rubicon of independence has been crossed Europe would have everything to lose by putting these states into quarantine: its entrepreneurs could no longer invest there; its young people could no longer study there; its workers could no longer travel freely there; its fishing fleet could no longer fish in their waters, etc…

Barroso is a spokesman for the governments of the EU member states. He’s not elected to represent the European Parliament nor the EU Court of Justice. It’s therefore hardly a big surprise that he finds it hard to resist when he gets asked by David Cameron or Mariano Rajoy to lend them a wee hand, especially given that his stint as Commission President comes to an end in early summer, so dealing with a Scottish Yes vote will be somebody else’s problem anyway.

It’s therefore very clear that Barroso has done an Osborne, trying to bully the Scottish (and Catalan) voters to reject independence rather than expressing an informed opinion about what actually will happen after a Yes vote.

Actually excluding Scotland from the EU would not just go completely against the Union’s founding principles, it would also deeply harm the EU and its citizens, as well as quite possibly being illegal according to EU law. In the past, the EU has always found a pragmatic solution when needed rather than adopting a legalistic approach.

Osborne and Barroso both want us to believe that they’ll cut off their noses to spite their faces after a Yes vote. In reality, they’re just trying to bully us into voting No.

What George Osborne didn’t talk about

Chancellor visits Ealing Studios
Chancellor visits Ealing Studios, a photo by HM Treasury on Flickr.
I had expected George Osborne’s speech today to rule out a currency union and then discuss why a free-floating Scottish currency wouldn’t work either (I think it would, but that’s obviously not something he’d admit).

Curiously, however, both his speech and the paper the Treasury released at the same time (PDF) practically ignore an independent Scotland’s alternatives to a currency union, and instead focus on comparing a currency union with the status quo (see for instance the graphs on page 34 in the Treasury’s paper).

The Chancellor also looked rather uncomfortable when the BBC asked him how much rUK businesses would pay extra because of his refusal to contemplate a currency union:

It seems George Osborne was thinking that if he ruled out a currency union, voters would naturally vote No to independence. I’m not sure it has occurred to him that we might vote Yes in spite of his speech (or even because of it).

As I pointed out yesterday, a currency union is likely to benefit the rUK more than Scotland, so it’s still very likely Westminster will climb down after a Yes vote and agree to a currency union after all.

However, even without a currency union, it’s by far most likely that an independent Scotland will be using the pound. We might either simply use the rUK pound without an agreement, or we might issue Scottish pounds that are linked in a so-called currency board to the rUK pound. I believe the latter option is much more likely (see yesterday’s blog post for more details), and the average voter really won’t care so long as the pound in their pocket is worth the same as before.

In fact, most Scots will probably prefer having a Scottish pound linked to the rUK pound, because it means we’ll have Scottish banknotes and coins, and we’re used to this type of arrangement already. In reality, it would just mean that Scottish notes would be issued by the National Bank of Scotland rather than three commercial banks, which surely wouldn’t be a bad thing.

By ignoring these options and by failing to explain why rUK politicians would opt for a solution that might harm rUK businesses, he shows that his sole purpose is scaremongering. He didn’t make this speech to provide visibility for rUK businesses (which would have been prudent), but to bully Scottish voters into voting No.

To share or not to share a currency

woc813 Great British enamelled coin cufflinks
woc813 Great British enamelled coin cufflinks, a photo by wowcoin on Flickr.
Everybody is expecting the Unionist parties to state tomorrow that they will never accept a currency union with an independent Scotland.

They’re shooting themselves in the foot if they do, because there’s good reason to believe that a formal currency union will benefit the rUK more than Scotland because it’s good for currencies to be anchored in natural resources (such as oil) and exports (such as whisky) rather than being dependent mainly on volatile financial services.

However, if they really want to cut off their nose to spite their face, there’s nothing an independent Scotland can do to save them from themselves, and it’s probably prudent to come up with a plan B.

Economists seem to talk mainly about three options: (1) A formal currency union (pound or euro); (2) using another currency without a currency union; and (3) creating a separate currency.

Nobody wants to introduce the euro just now (and even if we wanted to, one of the necessary preconditions is to have a separate currency that can be linked loosely to the euro), and if Westminster vetoes a sterling currency union, that means (1) is out of the picture.

Using the pound informally would be possible, but it’s an option that is normally used by rather small countries, and I can’t see it being a sensible long-term option for Scotland (although it might be a good idea for a transitional period), so that rules out (2), too.

Creating a separate Scottish currency sounds scary to many voters, but it actually isn’t. What’s important to understand here is that currencies can be either free-floating or linked to another currency, and those two options are as different as night and day.

A free-floating Scottish currency would indeed be a bit scary, especially at first until Scotland has had time to build up a relationship with the financial markets.

On the other hand, a Scottish currency linked to the pound sterling isn’t scary at all. In fact, that’s exactly what’s already happening at the moment when the Bank of Scotland, the Royal Bank of Scotland and Clydesdale Bank issue their own banknotes. They basically have to store one pound from the Bank of England every time they issue one pound, and that’s exactly how a currency board (which is the technical name for a linked currency) would work.

To put it simply, the National Bank of Scotland will put one pound sterling into its vaults (or more likely, into an electronic account) for each Scottish pound it issues. In that way, a Scottish pound is exactly as safe as an rUK pound because the National Bank of Scotland has the means to replace the one with the other if needed.

A currency board would bring many advantages. The person on the street would think of the Scottish pound as a normal pound, just looking different (exactly like today, except that it’d involve coins as well as notes). However, if the rUK economy collapsed at some point, or if the euro suddenly started to look attractive again, it would be easy to break the link and do something else, either floating the currency freely or replacing it with a link to the euro.

Most people will not really care whether we’re in a formal currency union or using a Scottish pound linked 1-to-1 to the rUK pound, so if Westminster tomorrow rules out a currency union, it’s obvious what the Yes campaign’s plan B will be.

Scandinavia isn’t perfect

DSCN6161, a photo by Hunter-Desportes on Flickr.
In the past couple of days, Denmark seems to have got (in-)famous for slaughtering a giraffe in public and feeding it to the lions, but until recently, many people seemed to think that Denmark and the other Scandinavian countries were some sort of paradise on Earth, which is probably why the criticism of Scandinavia published in The Guardian a couple of weeks ago attracted so much attention.

As a Danish emigrant, I’ve never thought of it as perfect, and I do agree with many of the points raised in the article. That doesn’t mean we can’t learn many useful lessons — we just need to be selective about what to copy and remember that sometimes we should be teaching them instead.

Anyway, I thought it’d be useful to address some of the points raised in more detail, so here goes:

Why do the Danes score so highly on international happiness surveys? Well, they do have high levels of trust and social cohesion, and do very nicely from industrial pork products, but according to the OECD they also work fewer hours per year than most of the rest of the world. As a result, productivity is worryingly sluggish. How can they afford all those expensively foraged meals and hand-knitted woollens? Simple, the Danes also have the highest level of private debt in the world (four times as much as the Italians, to put it into context; enough to warrant a warning from the IMF), while more than half of them admit to using the black market to obtain goods and services.

This is rather misleading. Yes, Danes have a lot of debt, but they have lots of assets, too, so if you look a net debt I don’t believe Denmark is worse than many other places. And of course moonlighting exists, but I don’t think it’s particularly widespread there. I’m also curious why using the black market would make you unhappy (unless you get caught, of course).

The real reason Danes top happiness surveys might have more to do with how to express the word “happy” in Danish (link in Danish), and the fact that Danes don’t like to admit they’re unhappy.

Perhaps the Danes’ dirtiest secret is that, according to a 2012 report from the Worldwide Fund for Nature, they have the fourth largest per capita ecological footprint in the world. Even ahead of the US. Those offshore windmills may look impressive as you land at Kastrup, but Denmark is the EU’s largest exporter of oil, and it still burns an awful lot of coal. Worth bearing that in mind the next time a Dane wags her finger at your patio heater.

This is not even mentioning the widespread use of wood-burning stoves in Denmark. 🙂

It’s certainly true that Denmark and the other Scandinavian countries are no saints when it comes to energy, but it’s a very mixed picture.

Denmark for instance taxes cars to a ludicrous degree (close to 200% on top of the cost of the car), which on the one hand means a lot of people use bikes or public transport instead of cars, but on the other hand it means a large number of the Danish cars are extremely old and would have been scrapped years ago in other countries. My dear wife once remarked about Copenhagen that although there was almost no traffic compared to a similar-sized city such as Glasgow, the air actually smelled worse.

A more positive example is the way Denmark uses the heat generated from crematoriums and from incinerating rubbish to heat houses.

I think energy and pollution is one of those areas where we can learn many lessons from the Scandinavian countries, but they can possibly learn more from us!

I’m afraid I have to set you straight on Danish television too. Their big new drama series, Arvingerne (The Legacy, when it comes to BBC4 later this year) is stunning, but the reality of prime-time Danish TV is day-to-day, wall-to-wall reruns of 15-year-old episodes of Midsomer Murders and documentaries on pig welfare.

I agree, Danish TV is generally dreadful. It’s Danish film-making that is wonderful. I guess it’s not a bad idea to invest what money you have in producing a few world-class films and TV series, rather than spreading the money out evenly.

The Danes of course also have highest taxes in the world (though only the sixth-highest wages – hence the debt, I guess). As a spokesperson I interviewed at the Danish centre-right thinktank Cepos put it, they effectively work until Thursday lunchtime for the state’s coffers, and the other day and half for themselves.

Although Danes on paper have very high taxes, I believe this is just a ploy to scare away potential immigrants. The official tax rates published include council taxes, national insurance and church levies, and most Danes have sizeable deductions that reduce their taxable income dramatically (for instance you get tax relief for mortgage payments and for commuting to work).

Once you taken all of the above into account, my guess is the typical Dane pays a wee bit more in tax that the typical Scot, but if you deduct the the high welfare payments (subsidised nurseries, generous unemployment benefit and all that) and you also remember that ordinary Danes typically have much higher incomes than their Scottish peers, I reckon most Danes are much better off.

As an example of the higher salaries in Denmark, apparently a check-out operator in the UK makes £9,262 a year but according to Ekstra Bladet, the average salary for this job in Denmark is £25,813 a year. Danish taxes would have to be insanely high to remove all of that difference!

The Cepos people he has been talking to are part of the right-wing think-tanks that are hell-bent on dismantling the Danish welfare state and turning it into a country Thatcher would have been proud of. It’s very sad that many Danes today don’t appreciate the wonderful system they’ve built up. I hope that seeing an independent Scotland building exactly this kind of welfare state might make them realise how unique the system is before it gets lost.

According to the OECD’s Programme for International Student Assessment rankings (Pisa), Denmark’s schools lag behind even the UK’s.

It’s Finland’s schools that have been highly praised for years, not Denmark’s. In my experience, Danish primary schools aren’t great — I was bored out of my skull for most of the nine years. They aren’t bad when it comes to teaching modern languages, though, and that’s not included in the headline Pisa measurements.

Danish high schools are good (or at least they were in my day), but they are essentially grammar schools, so it’s hard to compare them to schools here. One interesting feature is that you can select to deselect maths and science to a very large degree, which will probably harm Denmark’s average scores for these subjects.

Its health service is buckling too. (The other day, I turned up at my local A&E to be told that I had to make an appointment, which I can’t help feeling rather misunderstands the nature of the service.) According to the World Cancer Research Fund, the Danes have the highest cancer rates on the planet.

The Danish health service has many problems. It’s organised and funded very much like the Scottish NHS (or perhaps more like the English NHS these days, given that privatised services are becoming an integrated part of it), except that dentistry isn’t included. I don’t think Scotland can learn much from Denmark in this regard.

“But at least the trains run on time!” I hear you say. No, that was Italy under Mussolini. The Danish national rail company has skirted bankruptcy in recent years, and the trains most assuredly do not run on time.

In my experience, Danish public transport is more punctual that what you find in the UK, but just like here, partial privatisation experiments have caused lots of problems.

Most seriously of all, economic equality – which many believe is the foundation of societal success – is decreasing. According to a report in Politiken this month, the proportion of people below the poverty line has doubled over the last decade.

Indeed. Denmark is most decidedly heading in the wrong direction. I would suggest that most of the lessons that Scotland can learn from Scandinavia with regard to building an world-class welfare state aren’t based on current developments. It’s the development and extension of the welfare state in the ’50s, ’60s and ’70s that we can learn a lot from, and sometimes from the later consolidation, but in most regards Denmark has ever since been pruning and scaling back welfare provisions — not so much because they had become unaffordable, but more because people have actually forgotten what poverty means, and if you don’t remember what the welfare state is protecting you from, it gets easy to think it’d be nice to pay fewer taxes.

Denmark’s provinces have become a social dumping ground for non-western immigrants, the elderly, the unemployed and the unemployable who live alongside Denmark’s 22m intensively farmed pigs, raised 10 to a pen and pumped full of antibiotics (the pigs, that is).

Yes, Denmark is a very centralised country, and pig farming is big business. The recent giraffe debacle has demonstrated the rather utilitarian attitude most Danes have to animals.

I’m not sure it’s true that the provinces have become a dumping ground. What seems to be happening is that anybody with a university degree or any ambitions gravitates towards Copenhagen or one of the other cities, but that’s something we’re seeing in many countries at the moment.

There remains a disturbing Islamophobic sub-subculture in Norway. Ask the Danes, and they will tell you that the Norwegians are the most insular and xenophobic of all the Scandinavians

Xenophobia is a problem in many Scandinavian countries. The cause is probably that the societies have been culturally uniform until recently, which makes it hard to accept that other people might want to do things differently.

The Danes have been described as a tribe, and it is indeed very difficult to get accepted while being different in any way. Danes have even started talking about requiring immigrants to assimilate rather than just integrate.

Danes also have a real problem with understanding why anybody would emigrate, unless it’s to get filthily rich.

It’s an area where I must say I prefer Scotland to Denmark. I love the fact that Scotland has been a multilingual country for at least two millennia, and indeed differences and conflicts are an integral part of Scottish culture, whether talking about languages, religions, clans or football.

Scotland is also very much a country of immigrants and emigrants, a country where almost every family has a grandparent born outwith Scotland, or a cousin who moved abroad.

Of course you can meet xenophobia in Scotland, too — it would be strange if it didn’t exist at all — but it’s much less insular and xenophobic than any of the Scandinavian countries.

The Finns are epic Friday-night bingers and alcohol is now the leading cause of death for Finnish men.

Binge-drinking is a problem in most countries where the winters are too dark for comfort. If anybody was under the impression that alcohol wasn’t a problem in Scandinavia, they’re sadly mistaken.

Most of the Nordic countries have opted for a highly controlled system (similar to what they have in Canada, I believe), where alcohol can only be purchased in state-owned shops that look more like pharmacies than supermarkets. Denmark, on the other hand, is extremely liberal. There is a cultural norm that says that you start drinking at your confirmation (age 13 or 14), and Danish high schools routinely serve beer at parties (age 15 and up).

Effectively a one-party state – albeit supported by a couple of shadowy industrialist families – for much of the 20th century, “neutral” Sweden (one of the world largest arms exporters) continues to thrive economically thanks to its distinctive brand of totalitarian modernism, which curbs freedoms, suppresses dissent in the name of consensus, and seems hell-bent on severing the bonds between wife and husband, children and parents, and elderly on their children. Think of it as the China of the north.

I believe this is a consequence of the tribe mentality I mentioned above. Because everybody is similar and conflicts are frowned upon, it gets easy to go to far. Because nurseries are plentiful and cheap, it becomes the norm to send your children there all day every day, and once the norm has become established, it gets difficult to go against it.

The myriad successes of the Nordic countries are no miracle, they were born of a combination of Lutheran modesty, peasant parsimony, geographical determinism and ruthless pragmatism (“The Russians are attacking? Join the Nazis! The Nazis are losing? Join the Allies!”). These societies function well for those who conform to the collective median, but they aren’t much fun for tall poppies. Schools rein in higher achievers for the sake of the less gifted; “elite” is a dirty word; displays of success, ambition or wealth are frowned upon.

In my experience, it’s mainly Londoners (even if they were born in Scotland) who find that Scandinavians frown upon displays of success and wealth; it’s not really that different from Scotland. The Lutheran mindset wasn’t really that different from the Presbyterian one, I believe, so again the difference is more marked when you come from England (and especially London) than when you’re from Scotland.

I think the points raised here have shown that Scotland can learn a lot from Scandinavia, but there are equally many points where Scandinavia should look at Scotland. That’s how it should be, and it’s best neither to idolise nor demonise any foreign country.

Many of the Danish/Scandinavian problems are due to excessive homogeneity, a lack of both immigration and emigration for many years, and the insular outlook you easily get from speaking a language that isn’t shared by other countries.

Scotland has never been a homogenous country, it’s always been a country of immigrants and emigrants, and the native use of English is a good bulwark against parochialism. I therefore think it’s likely that Scotland can successfully import many of the successful elements from Scandinavia without succumbing to the Scandinavian malaise.

Tactics vs strategy

chess, a photo by irodman on Flickr.
Most modern politicians are great tacticians but lousy strategists. They spend huge efforts on planning the run-up to the next election, but they don’t often think about the longer-term consequences of their actions (presumably because they don’t expect to be in power for that long anyway).

However, the SNP and the wider independence movement are a great exception to the rule. Until very recently, nobody joined the SNP because it was a smart career move, but because they wanted to make Scottish independence happen.

I think this explains why most Unionist politicians have been so bewildered by the independence referendum. They assumed from the outset that the SNP wanted a referendum because they thought it’d be a smart tactical move, not because they actually thought it was the right thing to do.

As this excellent (but long) article argues, David Cameron agreed to the referendum because he thought it would tactically be a good way to shut up the SNP. (However, this tactic failed because he agreed to holding it in 2014, giving the Yes campaign plenty of time to convince the voters.)

The focus on tactics also explains why Unionist politicians so often talk about the short-term costs associated with independence. Of course independence is likely to be a very bad tactical move — within the first couple of years, the costs are very likely to outweigh the benefits.

However, as soon as we start looking further ahead, the transitional costs will be dwarfed by the huge financial and social benefits associated with independence.

The Unionists keep staring at the immediate costs and don’t understand why people aren’t scared. Meanwhile, the independence movement is full of people with strategic sense who can see why independence makes perfect sense as soon as you take the slightly longer view.

Or to victory!

I haven’t discussed the independence referendum opinion polls for a long time, mainly because they haven’t shown a clear picture.

Indyref opinion polls.
Indyref opinion polls.
However, the polls are starting to converge. To see why, let’s first look at the raw Yes/No results reported since the beginning of 2012 (see the graph on the right — click on it for a larger version; all data from Wikipedia).

At a first glance, the picture isn’t very clear. Some pollsters are showing a strong movement — for instance, TNS BMRB is showing an enormous fall in the number of No voters since early 2013 — but it’s hard to spot a uniform pattern.

Indyref opinion polls, DKs excluded.
Indyref opinion polls, DKs excluded.
To make the results more comparable, many experienced psephologists recommend excluding the undecided voters (see for instance this blog post by John Curtice from last September). If we do that, Ipsos MORI, TNS BMRB and YouGov move closer together, but there are still huge differences (see the graph on the right).

Very broadly speaking, it does look like Ipsos MORI, TNS BMRB and YouGov are in agreement, just as Angus Reid and ICM seem to concur, and Panelbase appears to be on its own. There’s no way to conclude at this stage who’s right and who’s wrong (we won’t know until the day after the referendum), but the gap between the first group and the second one is about six percentage points, and the gap between the second one and the third one is about three points.

Indyref opinion polls, DKs excluded, adjusted.
Indyref opinion polls, DKs excluded, adjusted.
If we adjust the opinion polls by this amount, it becomes much easier to spot common trends. Of course, nobody knows for sure which pollster to use as the target, so I’ve done this exercise three times, once for each pollster group. However, to save space I’ve only included the graph where Angus Reid and ICM were to chosen to be the target that the other pollsters were brought into line with (see the graph on the right).

When displayed like this, it becomes very clear that the support for the No side seems to have peaked around the summer of 2013, and that Yes has been rising ever since.

If we were to draw a trend line through the results since August 2013, these adjusted figures would lead us to expect a very respectable Yes victory (55% to 45%), and Yes should overtake No in polls adjusted this way around mid May (the trend line isn’t shown on the graph).

On the other hand, if we adjust Panelbase, Angus Reid and ICM to force them into line with Ipsos MORI, TNS BMRB and YouGov, the trend line leads to the conclusion that Yes will lose by a bawhair (49% to 51%).

And finally, if we adjust all the other polls to bring them into line with Panelbase, it looks like Yes will win by a landslide (58% to 42%) and that Yes will overtake No as early as late February.

To summarise, if Ipsos MORI, TNS BMRB and YouGov are right about the proportion of Yes voters, we should expect a very close referendum result if the current trends continue; if ICM and Angus Reid are right, we’ll see a solid Yes victory; and if Panelbase are right, we’ll get a Yes landslide.

There’s a lot of work still to be done for the Yes side, but it’s very clear why the No campaign is starting to panic.

Taking the long view

How will Scottish independence be seen by future generations?
How will Scottish independence be seen by future generations?
I get really annoyed at the way the No side constantly try to make people think that voting Yes is the equivalent of making Alex Salmond dictator for life. They also moan that it’ll cost a lot of money to buy a navy and duplicate certain shared institutions.

I just wish they would take the long view more often. How many people today are able to remember the names of England’s and Scotland’s leading politicians at the time the Act of Union was signed, more than three hundred years ago? And more to the point, do they actually care? Should people in 1707 have decided on the merits of creating the Union on the basis of whether they liked the political leaders of the day or not?

I’m not saying the Yes side never uses short-term arguments, but I do think the No side are the worst sinners in this regard. Focusing so much on Salmond is ridiculous — for all we know, he might decide to step down shortly after the independence referendum, and even if he doesn’t, it’s quite likely a revitalised Scottish Labour will win the 2020 Scottish General Election (or even the one in 2016).

It’s also silly to talk so much about the one-off costs associated with setting up an independent country. After a few years nobody will evaluate the decision to become independent based on these transitional costs; instead, they’ll look at how Scottish GDP developed over time after the referendum.

Whereas short-termism permeates the No campaign (probably because they know they have a very weak case when it comes to the longer view), it’s relatively sporadic on the Yes side. Of course we do get a lot of stories about how an independent Scotland will abolish the Bedroom Tax and such things, but that’s because they provide both a tangible benefit of independence and an example of how Scotland will do things differently, not because the short-term case is more compelling.

Next time I’m talking to a youngish undecided voter who says they’ll probably vote No because they don’t like Alex Salmond, I think I’ll ask them what they think their grandchildren will think of that in fifty years’ time.