Has Alex Sammond’s Eagerness For Scottish Independence Doomed It?

Yesterday Scotland came one step closer to independence when Alex Salmond, the First Minister and Prime Minister David Cameron came to an agreement about holding a referendum in 2014 on the issue. The process and the referendum being offered to the Scottish people in two years time will be a surprisingly simple affair. There will be only one question asking whether or not one wants Scotland to secede from the Union and become independent. The First Minister wanted two questions offering two separate choices for Scotland’s future: independence or “devo-max”. The latter would have seen increased devolution of powers from Westminster to Holyrood in such affairs as taxation. David Cameron, a stern opponent of Scottish independence had refused two questions but to the consternation of his own party agreed to the referendum on the condition that there would be only one question that explicitly laid out the issue of independence or not.

There is no doubt that Alex Salmond and his Scottish Nationalist Party will be happy today and that getting Westminster to even approve a vote on independence will be seen as a crowning achievement. It is without doubt a seminal event but has the First Minister in his haste for a vote on independence doomed it? Scotland has had devolved government for close to fourteen years and in many respects it has been a very positive thing for Scots. The parliament in Holyrood has passed popular legislation such as abolishing prescription and college fees, the latter creating a huge discrepancy between the rest of the United Kingdom where students now could pay up to nine thousand pounds a year for their courses. To many politicians in London they snort that it has been only possible from financial transfers where Scotland gets more money than it creates by taxation and is therefore a blatant free-rider. The Scottish Nationalist Party scoff at such remarks saying that with North Sea oil revenues Scotland does the exact opposite with Westminster siphoning off money that are the fruits of its nation. Scotland in the opinion of nationalists will prosper if granted independence.

David Cameron would never have agreed to a referendum on independence if he did not believe it could be decisively beaten. Polls show only lukewarm support with the majority still in favor of staying in the United Kingdom. It appears people are more interested in the basic issues of the economy, education and welfare. Nationalists respond that once the debate gets kicking and the people begin to take an interest in the vote, things will change. Nevertheless the economic question of can Scotland be both financially independent and viable will be the decider. The prime minister was straight out of the gun after agreeing to the vote by visiting Rosyth and the shipyards where the next generation of British aircraft carriers are being built to emphasize that with independence such contracts could be in jeopardy and thus the loss of thousands of jobs.

The Scottish Nationalist Party was formed with the explicit intention of advocating for independence for Scotland. After winning a stunning outright majority last year in Scottish elections based on PR voting it seemed to Alex he had his mandate to ask for the referendum. But by placing all his cards on the table he has created a high-risk game. While already having control over certain aspects of Scotland through devolution, “devo-max” seemed a deeply unsatisfying option compared to independence. Considering the debate in Spain about Catalan independence, Scotland after winning from central government the right to a binding referendum has become the vanguard for regional independence in Europe. Although the Catalan President Artur Mas has advocated for Catalan independence, recently it has been more out of frustration with the government in Madrid refusing to devolve more powers such as independent tax raising to Barcelona, in essence “devo-max”. This is an issue seen even more egregious considering the other independence-inclined region of the Basque Country has that right. Artur Mas’s centre-right nationalist party Democratic Convergence of Catalonia would much prefer a process beginning with increased devolution for Barcelona to allow a stronger sense of independence to grow organically because to many right now a full jump to independence is somewhat unpalatable.

Scottish Parliament Debating Chamber, Holyrood

David Cameron firmly believes that many Scots are fearful of taking that jump to full independence, a new frontier that in light of the current world economic environment could be dangerous. Alex Salmond, who advocated for two questions took that exact jump. In 1979 Scotland voted in a referendum for devolution that failed on two accounts, a failure to win a majority of supporters voting and also the mandated quorum of registered voters. It took another generation to have another vote on the issue. While that issue was for basic devolution, it would be a lot harder to get Westminster to agree on another vote for independence in the future. A rejection of the referendum will be in the eyes of the government in London as a copper-fastened verdict and a mandate to refuse any other votes for a very long time if not forever. In essence the independence vote would in fact become the pawn of Westminster to prevent independence.

Alex Salmond and the SNP firmly believe they can win this debate but with rejecting a vote on “devo-max” in favor of a vote on full independence they could in fact doom the cause they were founded on for over a generation. David Cameron played hard-ball, pandering to that eager, genuine desire by the SNP for independence. Intoxicated by winning a strong mandate in elections last year more likely due to other issues than independence and a discredited Labour party, Alex Salmond has probably fallen for a Tory-designed trap to emasculate them. A failure to win a referendum could mean the other parties in Scotland against independence sense blood and advocate for a new Scottish election. It will at the very least hurt the SNP.

Rosyth shipyards

While I am personally a supporter of Scottish independence I feel that devo-max would have allowed a stronger sense of independence grow in Scotland and thus win over the sizeable minority firmly against secession. With greater control over all the important aspects of government bar currency and foreign affairs, Alex Salmond could then point to that success and call for outright independence. However he has never been one to take that path and has been consistently itching for a clear referendum on the issue. Alex Salmond is a surprising politician who has come back from behind countless of times to succeed at the end and he could very well win his cherished lifetime goal. But the stakes are high and in his haste he could have in fact sabotaged the entire cause for at least a generation. 

Argentina and the 100 Peso Note: A Story in Economic Mismanagement and Manipulation

The new 100 Peso note

Eight years ago when I first visited Argentina in what would result in an affair that lasts to this day, I was very naïve in what to expect from a nation that still felt numb after its economic collapse. I will admit that one of the reasons to visit Buenos Aires was curiosity about what exactly happened. To be fair the media at home were not particularly concerned with the economic calamities of a South American country such was the jaded and somewhat ignorant opinion that these things, like coups or attempted coups were as prevalent as the seasons in that part of the world. All I knew was that in the year and a half prior to my arrival Argentina suffered the biggest sovereign default in history, its currency crashed and with it the savings of a once wealthy and proud nation were wiped out. To this day, the sight of cartoneros, the newly poor and destitute from the far edges of this vast city arriving by twilight like economic zombies to collect the cardboard in the empty evening streets of the financial district, all the time too proud to ask you for money haunt me.

I had never heard of the term corralito, a word that even today makes the average Argentino spit in disgust that described the economic measures taken by the desperate government to prevent the nation falling into economic and political anarchy. Breaking the one dollar one peso peg that hubristically held that perennial demon inflation away and underpinned the boom of the 90’s resulted in a peso freefall, wiping 75% off the value of the peso and all peso-denominated wealth. Since then I have taken a keen interest in the economy of Argentina. Buenos Aires went from being one of the most expensive cities in the world to one with a cost of living on par with many African nations. This confirmed the belief many of my Argentino friends that all the time no matter how wrong they were such was their resignation they in fact lived in a Third World country.

On my second day in Buenos Aires I took a taxi to a restaurant. For the lengthy trip it came to about 10 pesos or just over 2 euro. I gave the taxi man a 100 peso note. He looked at me with an expression between exasperation and horror as if I was a pedophile. Cursing in Spanish he angrily scowered around for change before without a smile speeding off. In the past 100 pesos amounted to 100 dollars and thus a note of novelty but with the crash it had become a piece of scorn. Smaller notes became much more needed due to the devalued peso but became prized. Handing over a 100 peso note back then would result in angry sighs in shops and restaurants. Yet today it is a completely different situation and Argentina is a nation in desperate need of new 100 peso notes that resulted in a new one issued with the revered Evita as it’s face and a rapid increase in print numbers. What caused this change of events is a particularly Argentino story that has as its star that old foe: inflation.

Argentina today is a strange yet fascinating country again for politics and economics lovers. Instrumental in all of this is the person some see as the contemporary Evita, the current president Cristina Fernandez de Kirchner, or CFK to many Argentinos. CFK and her husband, the former president and deceased Nestor rose up from the calamity of 2002 to steer the nation back on track. Taking a particularly brazen and confrontational approach that gave them supporters and haters in equal amount, Nestor was rightly successful in getting a massive write down in international debts for the country.

Former president Nestor at the innauguration of her wife Cristina as president

However what happened after was more dubious. Fuelled by revenues from hugely increased international demand for agricultural exports, Nestor and later Cristina (who won election in 2007 when Nestor stepped down to prevent the handicap of two-term limits) created a state of clientelism and largesse, lavishing the country in subsidies for things such as fuel and public sector wages. To some it was a game of indirect vote-buying or at the very least an incentive to sectors supportive of the Kirchners to vote for them in the future. What resulted in this is basic economics. Inflation, although always there returned to double digits and in a nation long prone to the erosion of purchasing power by it, the acrimony increased.

To dampen criticism about increased inflation and prices and move attention to other policies considered more important, Nestor and later Cristina slowly began to manipulate the board of the independent national statistics organization INDEC, thus taking control of the institution and cooking the books. Soon the organization was posting inflation numbers much lower and certainly lower than what the average person on the street was seeing in the prices of goods in shops. A plethora of alternatives, formal and informal flourished in an attempt to keep people informed of price increases. A personal favorite was called the Ugi’s index, started by an American ex-pat that charted the price increase of the price of a pizza from a pizza chain of dubious quality in Buenos Aires.

In a fashion prevalent in some South American countries, which the Kirchners have their own virulent brand of, they begun to find measures to prevent the publication of alternative inflation indexes. Cristina enacted laws that prosecuted individuals and organizations that published inflation statistics that were not INDEC’s with six-figure fines. No matter how much of merit these alternative statistics were, in a sense it was a crack down on the freedom of information and thus a furor has ensued ever since with the Economist refusing to post INDEC’s statistics in its paper and a “yellow-card” from the IMF, much to the delight of Kirchneristas, the name given to supporters of Cristina. Only a number of members of the federal Congress post monthly statistics under the protection of Congressional immunity such is the situation right now.

The slide in the price of the Argentine peso since last year

The ratcheting up of the printing presses is at times a sign of economic mismanagement and the beginning of failure of the economic policies of a nation that is involved in it. To many that seems to be the case in Argentina with increased money flight and growing demand for more stable dollars. To prevent this the government has imposed restrictions on buying dollars and taking them out of the country, resulting in sniffer dogs at ports and airports on the hunt for large quantities of foreign currency on a person and the return of that truly Argentino situation of parallel exchange rates. Although Argentinos now have to inform the state revenue commission if they plan to go abroad and buy dollars for the trip and have to endure a mandatory 15% credit card surcharge on all purchases outside the country the president refuses to say that such actions are in fact restrictions. It is in Cristina’s opinion a process to de-dollarize the economy and start getting people thinking and using pesos in a country where all major transactions from cars to houses are denominated in dollars.

However one must ask why now? With almost ten years of Kirchner presidents why is the process being implemented over the past few months and seemingly haphazardly? To Kirchneristas it is the natural progression of an economic process begun under Nestor to rebuild confidence in the peso but to others it is a sign of desperation as people lose confidence in the Argentine economy. It doesn’t help that the peso has been on a continuous yet slow slide in price against the dollar, bringing back bad memories of 2002 and the end of the currency peg. It seems that the cogs are coming off the machine that Nestor and Cristina have built and that the newly-printed 100 peso note will lose even more value. To some it could result in the next economic crisis in Argentina. Looks like there will be more Evitas in my pocket than I expected before.