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Brexit Might Pave the Way for an Independent Scotland

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The BBC reports today that Scotland's first minister Nicola Sturgeon has announced she'll seek a new referendum on Scottish independence to be held in late 2018 or early 2019:

That would coincide with the expected conclusion of the UK's Brexit negotiations. The Scottish first minister said the move was needed to protect Scottish interests in the wake of the UK voting to leave the EU. ... She will ask the Scottish Parliament next Tuesday to request a Section 30 order from Westminster. ...The order would be needed to allow a fresh legally-binding referendum on independence to be held.

These "Scottish interests" to which Sturgeon refers stem from the long-asserted position by Scottish politicians that a majority of Scottish voters opposed Brexit, and wish to remain part of the European Union. In response to the successful referendum to withdraw from the EU, Scotland has instead said it must somehow be allowed to be a part of both the EU and the UK:

But speaking at her official Bute House residence in Edinburgh, Ms Sturgeon said the people of Scotland must be offered a choice between a "hard Brexit" and becoming an independent country.

The Scottish government has published proposals which it says would allow Scotland to remain a member of the European single market even if the rest of the UK leaves, which Mrs May has said it will.

Sturgeon wants the option of withdrawing fro mthe UK if the final UK bote on Brexit does not sufficiently address Scottish demands. 

Predictably, the two leaderships in the two largest political parties have opposed a new referendum. 

UK PM Theresa May claimed that "a second independence referendum would set Scotland on course for 'uncertainty and division' and insisted that the majority of people in Scotland did not want another vote on the issue."

Meanwhile, Labour leader Jeremy Corbyn, according to the AP, said "The 2014 Scottish independence referendum was billed as a once-in-a-generation event. ...The result was decisive and there is no appetite for another referendum."

Why Not Have Another Vote? 

Regardless of how one feels about Scottish independence, it's unclear why two politicians from England — Corbyn and May — should have any say over whether or not the Scots should vote on independence. 

If the Scots don't want another vote on independence, they need do nothing more than decline to participate, or to simply vote "No" in the next referendum. 

Given the response we see from May and Corbyn, however, it appears that little has changed ideologically since the 2014 Scottish referendum when national politicians drew on old-fashioned nationalism in their opposition to independence. These opponents of independence included David Cameron, Nick Clegg, and Nigel Farage, all of whom called for "unity" in British politics in 2014. They succeeded: 55 percent of Scottish voters chose "No." 

Opposition to a second referendum is likely to draw on similar sentiments, but this time will be the added claim that "we already did that" since, according to this position, voters are only allowed to vote on matters such as secession every 20, 30, or 40 years. Anything more often than that, we are told, would produce "uncertainty and division." By this logic, of course, the practice of parliamentary elections at least once every five years should be curtailed or abolished since voters, presumably, are confused when voting is allowed as anything more than a "once-in-a-generation event." 

The Usual Economic Fear-Mongering 

At the core of the anti-secession argument is an ongoing claim that an independent Scotland would be locked out of global trade without access to European markets without membership in the EU. 

As pointed out during the UK referendum on Brexit, however, membership in the EU, if anything, restricts participation in global trade more than it enhances it. Even the EU admits that "growth in global demand is coming from outside Europe, noting that 90% of global economic growth in the next 10–15 years is expected to be generated outside Europe, a third of it in China alone."

Moreover, the importance of the EU as an export market for the EU has been declining in recent decades. 15 years ago, the EU accounted for over 50 percent of all UK exports. By 2015, the number had fallen to 44 percent, reflecting the shift toward markets outside of the EU. 

So, unless the goods and services produced in Scotland are somehow specially suited to only the EU and not to the rest of the world, it is very likely that — as with the UK — the EU is shrinking in importance as a trading partner for Scotland as well.

The Benefits of Unilateral Free Trade

As with any country, the path to a higher standard of living in Scotland is not going all-in with the EU. The most promising path is simply unilateral free trade. Were the Scots to embrace this, the cost of living would go down as Scottish consumers would be free to avail themselves of any goods and services foreigners were willing to sell them. At the same time, this new access to a bevy of previously-more-costly goods and services would open up Scotland to new avenues of greater innovation and entrepreneurship. The Scots would also be more free to trade worldwide outside both the EU and the UK. 

While trade talk often centers on tariffs, the biggest modern impediment to trade is often regulatory in nature. In the case of the EU, all countries are restricted to trading partners that meet the demands of the EU regulatory state. This can include everything from corporate welfare to environmental regulations to labor rules. In other words, when EU trade regulations favor French special interests — as is often the case — an independent Scotland would only be allowed to import goods into Scotland that aren't seen as a threat to French lobbyists. Obviously, that can prove to be a crippling limitation in many cases. 

RELATED: "The Case for Unilateral Free Trade" by Louis Rouanet 

Nor is it a mere coincidence that two of the wealthiest countries in Europe — Switzerland and Norway — are not members of the EU. Critics claim that Scotland should not be compared to Norway because — although Scotland does possess oil wealth — it does not have oil wealth at levels comparable to Norway. That's fair enough, although it is clear that Norway's wealth is not simply a product of its oil wealth. After all, Venezuela has considerably more oil than Norway.

But what about Switzerland? Much of Switzerland's success comes from decisions it has made that depend nothing at all on natural resources. Switzerland is a safe haven for wealth, and has taken steps to ensure it remains attractive to global investors. There is no reason that Scotland could not do the same — save for the fact that Scottish politicians refuse to adopt Switzerland's relatively laissez-faire economic institutions. 

Just as the fear-mongers' claims of a post-Brexit-vote economic collapse proved to be pure fantasy, the same would be true of Scottish independence — assuming the Scots are willing to embrace free trade and a stable, investment-friendly economy. 

Scotland and England: Stronger Apart?

Although English politicians tend to let pan-British nationalism wag the English dog, there is no reason to believe that Scottish independence would have a negative impact on the UK rump state. If anything, Scottish secession would shift UK politics in a more laissez-faire direction in the absence of Scottish voters who have tended to favor Labour-type politics, and thus more state interventionism in the economy. 

Fortunately, however, the opposite would be unlikely in Scotland. While many Scots would not doubt want to pursue more interventionist policies in the wake of independence, the realities of international markets would force the Scots toward more laissez-faire — assuming, of course, the Scots wish to maintain their standard of living. As it is under the status quo, the Scots can afford their interventionism because they benefit from subsidization from the UK state in the form of transfer payments and other forms of government spending funded by English taxpayers. They also benefit by being tied to the large British economy which means Scottish exporters can ride the coattails of the English economy. In the case of an independent Scotland, the Scots would be forced to take a more favorable look at adopting institutions and policies more like those of Switzerland. 

The Brexit Rationale Carried Forward 

In terms of political institutions, the case for Scottish secession may have been already made by pro-Brexit opponents of Scottish independence. Nigel Farage and George Galloway for example — both opponents of Scottish secession — made the case for Brexit by claiming the British laws should be made by British people, and that political institutions should be controlled locally. One need not be the world's most rigorous logician to see that the same logic can be applied to the Scots. Scottish independence, one might say, is simply applying the logic of Brexit to Scotland. Of course, to maintain the appearance of consistency, the Scots might need to eschew submitting themselves to the EU parliament without guarantees of future options to secede. But, in either case, the Scots could claim it's none of England's business.


Contact Ryan McMaken

Ryan McMaken (@ryanmcmaken) is executive editor at the Mises Institute. Send him your article submissions for the Mises Wire and Power and Market, but read article guidelines first. Ryan has a bachelor's degree in economics and a master's degree in public policy, finance, and international relations from the University of Colorado. He was a housing economist for the State of Colorado. He is the author of Breaking Away: The Case of Secession, Radical Decentralization, and Smaller Polities and Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre.

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