Saturday, 11 April 2015

Don’t turn the UK into the Eurozone.


If North Koreans, by some good fortune, were able to rid themselves of tyranny what would be the result? Well just as in 1989, when the Berlin Wall came down, there would begin a process of reunification with South Korea. Why? It would happen simply because the Koreans speak more or less the same language and have a shared history that goes back hundreds of years. They would see themselves as family rather than foreigners. It would not matter at all that technically they had been at war for decades. Whatever harsh words may have been spoken by one side about the other would instantly be forgiven and forgotten.

We already know what would happen during such a reunification because we can look at the example of Germany. The process by which Germany became one united country again was carried out by a number of steps. The border was opened and there was free movement of people. A single currency was reintroduced. Each Eastern mark was found to equal each Western Mark even if the former traded massively below the latter. There were massive transfers of money from West to East that have gone on for decades. Why were people in Western Germany willing to transfer billions or Marks to the East? For a simple reason. They viewed those people as compatriots.  It didn’t matter that Bavarians, Hessians, Prussians and numerous others had been living in separate nation states until 1871 and had fought a war against each other as recently as 1866No one in Germany celebrates a war against the “old enemy”, even if Germans still sometimes make jokes about each other.

The single currency of the reunited Germany was a currency union that covered not just two formerly independent states (East and West Germany), but going back a little further literally dozens if not hundreds. If I were a German I could describe my country in any number of ways. Almost everywhere at some point or another was an independent country, some remarkably recently.  Imagine if Germans were to try to re-establish the borders of 1707. We would all struggle to name all the new countries that would result.

People then can see themselves as forming a family even if they once lived in independent states. This fundamentally is the reason why they are willing to transfer money to each other. In the same way as most of us care more for our children than someone we’ve never met, so we care more for a compatriot than someone from abroad. This is human nature and there is no changing it. It is the reason why it was possible to introduce a single currency in Germany in 1990 without too much difficulty. It is also the reason why it will ultimately prove impossible to introduce a single currency across the European Union, unless and until people in member states across the Eurozone view each other as compatriots.

The fundamental reason for the crisis in the Eurozone is that Germans are unwilling to transfer massive amounts of money from Germany to Greece. They were willing to give without limit to the former East Germany, but they feel no such obligation to Greece. Why? Because Greeks are not compatriots.  It’s as simple as that. But a currency union without a transfer union is bound to fail ultimately. What would have happened if the West Germans had refused to transfer money from West to East following reunification? The problem was that East Germany could not have competed on international markets with a currency as strong as the D-mark. It would have required devaluation in order to become competitive. But it could not devalue owing to the fact that it was in a single currency. Exactly the same situation obtains in Greece, which desperately needs to devalue its currency, so as to make exports more competitive and holidays cheaper. Greece is faced with a choice. Either devaluation or transfer union. The logic of the Eurozone is that it must begin acting as a single country or it must break up. There isn’t a third alternative.

If there had not been a transfer union in Germany after reunification, there would have been radically different standards of living in East and West with no prospect of the differences narrowing. There would have been more jobs in the West and given an open border, the same language and free movement of people there would have been depopulation in the East. People would literally have voted with their feet.  A transfer union is the only way that a currency union can work long term. In the end Germans must treat Greeks the same as Germans or else they must accept that they must break up the Eurozone.

The UK just like Germany is formed from places that once were independent, some like Scotland a long time ago, others like DálRiata a very long time ago. At one point, no doubt we all lived in independent tribes and villages and painted ourselves blue. Since coming together the various parts of the UK have had different economic circumstances. It’s only necessary to read Thomas Hardy to realise that quite recently parts of the south of England were very poor. They must have looked on with envy at the wealthier northern parts of Britain at the height of the industrial revolution. These things tend to go in cycles. Scotland had an oil boom in the 70s and gave more than we received, now the boom is over and we receive more than we give. This is usually called sharing. What is necessary to keep standards of living in the UK reasonably equal is a transfer union. It is this transfer union that guarantees that everyone gets a similar level of benefit, a similar level of healthcare and education, no matter where we live. The people living on a small island off the Scottish coast with a tiny population have a teacher and doctor which they simply could not afford without money being transferred from the other parts of the UK. Without the transfer union that exists in the UK the rich parts would get richer, the poor parts would get poorer.

The proposal that Scotland gains Full Fiscal Autonomy (FFA) is being proposed by the SNP and Iain Martin suggests the Conservatives might agree with them in order to get English Votes for English Laws (EVEL). It is bizarre that this proposal is even being considered seriously.  For fundamentalist nationalists who want independence at any cost, there is a certain logic for FFA inevitably leads to independence. There would be no need even to have a second referendum as FFA would break up the UK in and of itself. No country in the world has a part which has FFA for the simple reason that it is incoherent economically.

The SNP have spent the last few years complaining bitterly about wicked Tories introducing austerity. They want the next UK government to end austerity and spend £180 billion more than either Labour or the Conservatives intend. Yet FFA would give rise to eye watering levels of austerity in Scotland. People who don’t understand this fact simply have not seen the figures, or more likely don’t understand them. FFA would massively increase taxes in Scotland and massively cut public spending. The poorest would be hit hardest. Do nationalists really believe it is worth paying this price just to obtain independence? This isn’t “Devo-Max” it’s "Austerity-Max". This is simply fanaticism. I begin to wonder if my country has literally become so drunk on nationalism that it has taken leave of its senses.

Logically if Scotland had FFA, it would hardly make sense for us to send MPs to Westminster at all. What would they have to do there that would have anything to do with Scotland? Foreign affairs, defence? These are not exactly issues that we have spent much time debating in the General Election. This isn’t devolution its independence in all but name. We voted against that remember.

Would the Tories really sell Scottish No voters down the river just to get EVEL? Who can tell? There’s a short term cunning about some present day political leaders which I find hard to understand. Statesmen look at the long term interest of our country and work for that. It was Cameron’s fatal underestimation of Scottish nationalism that got us into this mess in the first place. He can still go down in history as a rogue if his future actions are seen as breaking up the UK.

It should however be made clear that FFA is not in the interests of anyone in the UK. The reasons for this have already been made clear. FFA turns the Poundzone into the Eurozone. The Poundzone only works because we have for centuries had a transfer union between the various parts of the UK.  FFA takes away the transfer union and turns Scots into Greeks in relation to the UK’s Germany.  If the UK is unwilling to transfer money to Scotland and vice versa it would be treating Scots in the same way that Germans treat Greeks. Scots would no longer be compatriots, i.e. people we share with without question. Scots would already be foreigners. But the same logic that applies to the Eurozone would immediately start to apply to the Poundzone. Either we would have to start behaving like a single nation state or we would have to split up. To start behaving like a single nation state we would have to begin our transfer union again (which we just stopped with FFA!). Alternatively we would have to break up our currency union.  There isn’t a third alternative. Does anyone really fancy bringing the economics of Grexit to the UK? What would we call it Scoxit or Engxit?

Do people in the rest of the UK really want to go down this route? Moreover, if FFA is given to Scotland, why not to Wales and Northern Ireland? Once we start going down the route of breaking up our country, why shouldn’t London and the South East demand FFA? They would be far richer if they didn’t have to share their wealth with the rest of England? By some calculations Londoners wouldn’t have to pay tax at all if they kept all the money earned in London to themselves. Why moreover, should not Aberdeenshire have FFA? We’re far richer than people in the Central Belt. Why should we have to share our money?

Nationalism is poisonous because it divides people who until that point thought of themselves as the same. Look at how it has already divided our country, not only within Scotland, but also in the UK. Where previously we all thought of ourselves as compatriots who had a duty of care to each other, nationalism would divide us and then divide us further.  I have seen what nationalism can do to a country like Ukraine. It leads people to act irrationally. They cease to act in terms of basic self-interest.  But equally a people that would vote to make itself poorer, that would joyously embrace "Austerity-Max" is capable of anything. When nationalism trumps every other political policy, I begin to get very scared, for it is just this kind of nationalism and fanaticism that led Ukrainians to destroy their country. Nationalism is the most powerful political card that can be played, therefore it should never be played. It appeals to something instinctual in human nature and base. Blair is right:

“National pride is a great thing. Nationalism, as a political cause in the hands of parties like [the SNP], is almost always ugly and, despite being wrapped in the garb on high-sounding phrases, can never disguise its essentially mean spirit.”

But Blair is ultimately responsible for the rise of nationalism in Scotland. It’s growth can be traced to his time in Government. The other Prime Minister most responsible for the rise of nationalism is David Cameron. It was his folly and miscalculation that gave the SNP their chance. Now is the time when both Labour and the Conservatives must make amends. Don’t play the nationalists game. Don’t make short term political calculations that risk our country’s future. Don’t make deals with separatists. Rather find a long term strategy that will bring our country together again. Above all else don’t turn the UK into the Eurozone.






If you like my writing, you can find my books Scarlet on the Horizon, An Indyref Romance and Lily of St Leonards on Amazon. Please follow the links on the side. Thanks. I appreciate your support.



26 comments:

  1. Effie - I wish that the leaders of the unionist parties could be as incisive as you have manged to be in this piece.

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    1. Thanks. It's not difficult but all pro UK politicians are in an awful muddle. Let's hope someone listens before it's too late.

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  2. The reason the S/E of England would continue to share the wealth with the rest of England is that England is a nation, unlike the UK which is simply a union of nations.

    Personally I think whatever oil is found in the S/E should be used to fund England's currently under-funded public services, and could even be used to give the English a reduction in tuition fees and a cut in the price of prescriptions.

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    1. It is simply a misunderstanding of ordinary words to suppose that the UK is not a nation or a country For a detailed explanation see

      http://effiedeans.blogspot.co.uk/2014/07/nationalist-arguments-depend-on-strange.html

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    2. I didn't say "country", I said nation specifically.

      The United Kingdom is a country, and a state, but it most certainly not a nation. It is in fact an increasingly asymmetric union of various nations with different degrees of autonomy, and it is that asymmetry that will bring about the break-up of the UK in the near future.

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    3. The blog post I cited shows using OED definitions that the UK most definitely is a nation. Only by using the word in a very peculiar sense could you think otherwise.

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    4. I consider Scots, English & Welsh as my compatriots, and have done all my life.

      I also hope this continues and I still expect it will.

      An obvious problem has arisen of late though, and not just here in the UK, but across many mature democracies globally. It’s a problem where some among us have decided we, along with our politics, are superior and it's equally obvious that this delusion is divisive and harmful. Anyway, before I get carried away, that's a whole heap of navel gazing about the philosophical vagaries of democracy and the destructiveness of Nationalism, for discussion another day.

      In the meantime, I hope it transpires harmonious and well for the people of our small Island and that the current global trend for complexly interconnected peoples to fracture acrimoniously along selfish, ideological lines is just another passing phase we in the UK will largely come to ignore.

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    5. The fundamental issue is if the people of Britain are our compatriots then Scottish independence makes no sense at all. But it also involves a self-contradiction. This is the same contradiction that exists in the Eurozone.

      We are probably not going to be able to reach many Scottish nationalists at the moment. But sensible people in other parts of the UK must realise that FFA is not in their own interest. It would create currency instability. Independence with a separate currency is a far more preferable and logical outcome than FFA. That too however would involve a similar economic catastrophe to Grexit. The logic of currency union is unrelenting. It is the most important lesson of the last few years. It actually makes the Scottish nationalist ideal impossible to fulfill. Even if they had voted for independence last September real independence would not have occurred. It would have been too damaging for everyone economically. A fudge would have been found.

      Thanks for commenting and thanks for reading.

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  3. Such common sense. So right. Such an important read. Thank you.

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    1. Thanks. The key now is to get our message across. It's by word of mouth, by telling friends and family that we can really make a difference.

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  4. The problem is Effie that the 2 main unionist parties seem unable to take up the cudgel of righteousness and attack these scum at every turn. Cameron was a wimp to even allow the referendum now that both have said no to a further one i would it to be virtually enshrined in stone we are not getting one. However as always you make a clear argument it's a pity most of these seperatists don't care about the results of their pursuit of power for its own sake.

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    1. I am not impressed by modern day politicians of any party. The great leaders of the past whether from left (Atlee) or right (Churchill) would not have risked the future of our country, but that's because both had served to protect it. We need statesmen, but all we have are politicians who have done nothing else in their lives apart from be politicians.

      In the past few weeks I have tried to make the case for Britain and how to defend our country from the Nats. It's the combination of articles that is crucial. The UK is one country that is indivisible just like the USA. All pro UK politicians must make this point clearly. For this reason there will never be another indyref. If necessary write this into a constitution. Don't cooperate with separatists. No other country in the world would, so why should we. Finally recognise that the next step the Nats want to take, FFA is a Trojan horse that inevitably leads to independence and wrecks the UK economy by turning it into the Eurozone.

      Gradually politicians appear to be coming round to this way of thinking. Dave and Ed have ruled out future indyrefs. Ed appears to have ruled out working with the Nats. The problem is can we trust either of them not to put short term party gain before the long term good of our country. I don't know.

      All we can do is publicize this measage as widely as possible. If enough people read and understand, we will be making some progress.

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    2. There you go again with your inapt historical comparisons: last week it was post Franco Spain and the nascent U.S. Republic; this week it's German reunification; what will it be next week? Parallels between Scotland and China, on account of both of them having an ancient wall? Scouring your own, no doubt well thumbed, political atlas for examples of congruence with modern UK politics, to me, looks increasingly desperate, and ultimately futile. Especially when we have such a rich tradition of our own.

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    4. Effie,
      The UK is not one country......thats where you are going wrong and to treat is as such is ignoring the elephant in the room.

      Much as we know you'd love to see it otherwise. If after 300 years these demarcations has not been extinguished then its not dying out anytime soon.

      Get with the realpolitik. If they really wanted a happy united kingdom they would have offered a reasonable Devo solution of which FFA would meet most people's mark. Its not as scary as independence and we don't need to kill the poor just because England or Wales decide to.

      The problem is that no one gives up power without a fight and the result in a democracy is you get found out by the voters. Hence the fallout from the Vow......If you are establishment people are looking for a reason not to vote for you.....Blow them off and they remember , do it right next to a vote and they take revenge.

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    5. Scotland is a country, but not in the normal sense of the word. I can't think of another "country" in the world that is not independent. That in itself implies some oddness in the usage.

      Real Politik is the strategy I have outlined recently of blocking the SNP. It is quite easy and will work if politicians follow it. You have no legal route to independence.

      FFA would damage both Scotland and the UK. Once this is understood by everyone especially in other parts of the UK it obviously won't happen. Who wants to turn the UK into the Eurozone?

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    6. Best of luck with that approach, you are not a real country and we won't let you.....lol...

      Its the Unionists who are trying to stopp a freight train using nothing but wishes.

      At least put something on the table. Hope and crossed fingers will not be enough.

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    7. Effie Deans, you write some excellent posts and this is one of your best yet but I'm afraid you are simply wasting your time trying to debate with these people. The SNP and their followers are total fanatics and to be frank I am surprised they haven't set-up an armed struggle unit yet such is their loony and totally fanatical nature. They are Scotland's version of Sinn Fein and must be opposed totally and no party or sensible politician shoudl give them an inch.


      Barry

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  5. German states essentially have FFA......Not sure what the issue is for Scotland to do the same in the UK. They call it federalism.....

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    1. If German states had FFA their would not have been the massive fiscal transfers from West to East. Federalism does not equal FFA. No where in the world has this as it's economically incoherent

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    2. They have more autonomy than Scotland has today......If you are only offering the status quo or the watered down Devo offerings from the long unravelled Vow then the polls are telling you its going to unravel.

      If anyone on the Unionist side thinks that sitting in their hands will save the union then its great for me as an independence seeker.

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  7. Uk.gov could try to act more assertively in the interests of the nation, the one it campaigned to preserve so energetically in 2014. The ad-hoc distribution of constitutional change has introduced much inequity. Let it bed down for a few good few years before even contemplating further change. Please resist further change simply because it is demanded. Where's the rush?

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    1. I agree. This road shouldn't have been gone down without the Labour Party and others having a final destination in mind. It is the very fact the process appears to have no definite end in sight that has allowed the perpetual whiners and troublemakers of the SNP leverage to extract ever more concessions and to destablize the United Kingdom

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  8. I noted, with some amusement, it has to be said, that you are now a self styled "prominent blogger", based on an obscure internet list from no verifiable source. This list is a strange miscellany of fashion, health, movie review and other esoterica. These blogs to most dispassionate observers would be viewed as vanity publishing.

    You seem to be preaching to a converted and zealous audience and making no discernible converts. No doubt there are some who oppose your views do read it, but they will be approaching it in the same way that someone goes to marvel at the wonders of a circus.

    Here is the real list: http://uk.labs.teads.tv/top-blogs/search/general

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