(TAKAHASHI
Yoichi, PPPC President)
Media
are full of reports regarding the referendum on Scotland’s independence. BBC is
full of the news in eye of the voting on September 18.
Polls
suggest the results would be too close to call.
There
was a similar referendum in Quebec in Canada in 1995. At that time, while “yes”
side exceeded in the prior census survey, “no” side finally gained the victory.
This time, there is an optimistic view that Scotland finally stays for suggestions
of Queen Elizabeth or Prime Minister Cameron.
What
is the United Kingdom, from the first place? The U.K. is composed of England,
Whales, Scotland and Northern Ireland, which respectively sends the national
team to the World Cup soccer games. While I was staying in U.K. during the
World Cup, my friends told me not to call the national team as “British” in
Scotland, given the team was England.
The
national flag symbolizes the complicated history of the commonwealth. England’s
mark is the red cross on white background, Scotland is white cross on blue, and
Ireland is red cross on white, which all comprises the Union Jack.
The
reason I pay attention to the Scotland issue is from the perspective of
decentralization. According to the decentralization theory in the economics,
decentralization is superior to centralized regime in terms of efficiency just
like the market mechanism is basically superior to bureaucratic allocation of
resources. Yet, even in this case, it is premised that the central government
engages in the national defense, financial and monetary policy.
From
such perspectives, it consequently leads to the principle of “near is better”
that the private sector does what it can, and the government takes the
leftovers, and that the local governments do what they can and the central
government takes the rest. However, looking at the true state of U.K., while it
could be said that the private sector is doing what it can, the central
government is dominant within the central-local demarcation.
The
U.K. is a uniquely centralized country in the international standard. It is a
surprising fact given that the other Anglo-Saxon countries are having much more
decentralized regimes. True, there are little local assembly or local taxes in
the U.K. Because there is no local tax, there is no need for local assembly to
decide local taxes. Most local governments are managed by allowance from the
central government.
Recently,
the Blaire administration started the decentralization moves by first
establishing local assemblies in Scotland, Whales and Northern Ireland,
which reinvigorated Scottish independence. Main independence supporters are
young citizens and poor residents. Frustrations of the weak are turning to the
independence campaign, seemingly.
The present situation is, it seems to
me, that the central government had forcibly pressured voices for
decentralization reform for long, and its outcome was the poor management of
the local economies, hence the people’s frustration unmasked as the current independence
movement. However, administrative infrastructure is not prepared as the state
has long been centralized. Virtually no local tax exists in Scotland and the
local finance depends almost exclusively on allowances from the central
government. It is also guessed that the Scottish bonds owe to the central
government. Therefore, once Scotland becomes an sovereign state, existing loans
from the central government will likely be exchanged with the existing bonds that
the current central government has. It means that new loans will be imposed to
the new state which has little financial resources from the beginning. The new
Scotland will face the risk of financial crisis as soon as it gains
independency.
The new Scottish government will no
longer receive supports from the central government. Leaders of the
independence campaign will seek the North Sea oil as alternative financial
sources, but the North Sea oil is declining itself, so financial management of
the new state will not be easy. Also it has nuclear facilities in its
territory.
Independence
also means that a new government must issue its own currency. British pound is
a legally-based currency in England and Whales issued by England Bank, and legally
speaking there are rooms for Scotland Bank and others to issue new currency. However,
there is no know-how of monetary policy in Scotland. Henceforth, the “yes” side
insists an easygoing idea of currency treaty centered on England Bank.
To
avoid possible troublesome conflicts such as above, many capitals may evacuate
from Scotland, or even from the entire U.K. Scotland’s independence will cause the
conservatives in the U.K. to take advantage in the country, which might lead
the British society to lean nationalistic, and even the government to retreat
from E.U. Only vicious circles can be predicted on its way.
