Tomorrow morning, some 4.2 million Scots will take to the polls to decide whether to remain part of the United Kingdom or break away. If they stay, they would preserve the last vestiges of the United Kingdom. If they leave, they’ll send shockwaves through the British and European economies and force America to rethink security policy in Europe.
Scotland has been a part of the British empire since 1707, when it, along with Wales and Northern Ireland, agreed to form the United Kingdom with England. It has its own separate legal and education systems, as well as its own Parliamentary government. However, it still relies on London for defense and taxation.
Anyone who’s seen “Braveheart” knows that the relationship between Scotland and England was never an easy one. Scots have always felt bound by the Brits, even if the relationship has been more cordial in recent years.
The improvements in tone prompted England’s parliament to allow the vote to happen. The problem is that it never expected it to be close. UK officials were shocked last week when a new poll showed the Scottish people split evenly on whether to leave the union.
That’s because from an economic standpoint Scottish independence would be a disaster for both Scotland and the UK. If Scotland leaves, it might have to establish its own currency after centuries of using the pound. Proponents of Scottish independence say this isn’t the case, and that they would form a monetary union with the UK and continue using the pound (because monetary unions always work out well in Europe).
This plan has done little to quell worry among Scottish businesses, including RBS, which have no desire to stop using the pound. RBS and other companies have already hinted that they would move their headquarters from Scotland to England if Scots vote for independence.
England would also lose on Scottish oil resources. Right now, the UK has access to Scottish oil; Scotland holds some 61 percent of all EU oil reserves. If Scotland votes yes, it would have to open a long, messy 18-month negotiation on how (or if) its oil right would be split up.
While the United States hasn’t made a formal statement on the Scottish vote -- diplomatic protocol dictates that allies do not comment on other ally’s internal politics -- a yes vote would force it to change nuclear strategy in Europe. Right now, Scotland is home to all of the UK’s nuclear weapons. Those for Scottish independence have already said that they want the weapons out if Edinburgh breaks away.
That means London would have to agree to keep the weapons to keep a strong nuclear deterrent. The problem is that England doesn’t have any room for them right now, putting a long-term NATO strategy of deploying nuclear weapons in the UK at risk.
Irene Finel-Honigman, an expert on European banking at Columbia University, said that from an economic standpoint, there could also be ramifications throughout the EU. There have already been rumblings in Spain, where Catalans have long wanted independence from Madrid.
Beyond that, leaving is simply a bad deal for Scotland.
“Economically, this makes no sense: currency conversion, financial regulatory regimes, relationship to the Bank of England, position in the EU Banking Union, fiscal regimes etc. would all be in play, creating market shocks and heavy speculation against Scotland short term,” Finel-Honigman said in an email to The Fiscal Times.
“No one took this referendum seriously enough, therefore these issues are being addressed in a panic in the last few weeks,” she added. “This is a classic case of divergence between political sentiment and economic realities. Scottish independence appeals to historic identity, autonomy, and feeds into concerns that the UK post-crisis is no longer a guarantor of long term stability.”
Edward Goldberg, a professor at Baruch College and the New York University Center for Global Affairs, put this sentiment more succinctly.
“It was a populist idea and like most populist ideas the ramifications were not thought out beyond the original applause lines,” he said.
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