If Scotland Can Do It, So Can We

There is an upcoming vote in Scotland that will determine whether or not that nation remains as part of the United Kingdom.

Sidebar - For those of you who, like me, were a little unclear on the concept, the UK is officially titled as the United Kingdom of Great Britain and Northern Ireland. It consists of four countries; England, Scotland, Wales, and Northern Ireland.

It gets even more confusing. Ireland is a single island divided into two countries - the Republic of Ireland, which is an independent sovereign state, and Northern Ireland, which is part of the UK.

Now back to our story.

On September 18th Scots will vote on the question  "Should Scotland be an independent country?" The most recent polls have the election rated just about even.

The election is being driven by the Scottish National Party, which claims that the 300-year-old UK is no longer viable. The party also believes that Scotland could become a rich oil state a la Saudi Arabia, thanks to the North Sea oil reserves.

Historical and cultural ties aside, there are serious economic ramifications for an independent Scotland.

Currency confusion - Scotland would no longer have the British pound as its currency. The European Union has made it plain that Scotland would not be allowed to join it, so the Euro is out as well. A new Scottish currency "would be so volatile and problematic that it would dissuade investors, reduce trade with the rest of the world and threaten to turn Scotland into an economic backwater."

Delusions of oil grandeur - North Sea oil and gas revenues have been declining, from around $15 billion in 2012 to roughly $11 billion in 2013. Predictions for 2015 are approximately $5 billion. That may sound like a lot of money, but it's not enough to finance a country. Furthermore, "many of the North Sea rigs are at the end of their life and production levels are falling."

Financial mismanagement - Scotland’s banks have become a byword for chaos and catastrophic losses, after the hubris of the 1990s turned into the near-collapse of the mid-2000s with massive rescue packages needed for Royal Bank of Scotland and Lloyds (both of them based in Edinburgh).

Loss of credibility - The UK has sunk an awful long way since the height of empire in the 19th century, but it remains the world’s sixth-largest economy and the second-largest in Europe behind Germany.  This confers all kinds of useful benefits, including low interest rates, a permanent seat at the UN Security Council, leadership in NATO, a major role at G20 conferences and in the WTO, among many others.

An independent Scotland would have none of those perks. And as previously mentioned, Scotland would not be allowed into the EU, making it problematic for its citizens to travel, work, and live in the rest of the UK.

Lack of natural resources - Once the North Sea oil dries up, all Scotland has left is whiskey. Granted, that's a wonderful resource, but it doesn't generate much revenue ($4.8 billion annually). Major employers and manufacturers would have little reason to move there, for the reasons outlined above. In fact, existing firms have already threatened to leave the country if it votes for independence.

"The insurer Standard Life has already warned that it could relocate its headquarters in the event of a Yes vote for independence, endangering 5,000 Scottish jobs.  Many more companies are doubtless thinking along the same lines."

All these arguments for remaining in the UK are ignored by Scottish nationalists, who see the vote as an opportunity to pay back the English for centuries of domination and exploitation, either real or perceived.

So what does all this have to do with the price of eggs? Well, since I live in Texas, and since there is always talk down here of seceding from the union, I was curious about parallels between Scotland and Texas. Then I stumbled across this article.

If Scotland can secede, so can Texas

If any state is fed up with the rest of America, it’s Texas. Republican Gov. Rick Perry floated the idea of seceding from the United States in 2009... A petition for Texas to “withdraw" from the United States, lodged on the White House’s “We the People” Web page, gathered 125,000 signatures before voting closed in 2013. A group called the Texas Nationalist Movement has nearly 190,000 likes on Facebook.

Even as a state, Texas has strong anti-federal leanings. It’s a hotbed of Tea Party activity and has declined, so far, to participate in the Affordable Care Act. Perry has called Social Security, the cherished American retirement program, a Ponzi scheme. Freshman Sen. Ted Cruz, also a Republican, wants to abolish the IRS. In lieu of a strong federal overlord, secessionists want to form — or rather, recreate — the Republic of Texas, which was an independent nation for a decade before Texas joined the union in 1845.

The case for Texas existing as an independent nation is considerably stronger than it is for Scotland. Here are some of the reasons Texas might thrive as an independent nation:

It’s big. With a population of nearly 27 million and GDP of $1.6 trillion, an independent Texas would be the 13th biggest economy in the world, between Australia and Spain. That’s plenty of heft to play in the big leagues. Scotland, by comparison, is puny, with 5.1 million people and GDP equivalent to about $210 billion--which would rank around 50th.

Texas could lure companies from America. The corporate tax rate in Texas is 0, which would instantly make Texas the most tax-friendly country in the developed world if it became a country. Instead of fleeing to Canada or Ireland, U.S. firms seeking a better deal than the federal government’s 35% corporate rate could just head to Dallas or Houston. Scotland, by contrast, would have no particular tax advantages as a nation, since its tax rate — 21% for big firms — is the same as in the U.K. overall.

Texas has a healthy, diverse economy. It has energy galore, along with Big Ag, a tech hub centered on Austin and a few corporate giants such as Exxon Mobil (XOM), AT&T (T) and American Airlines (AAL). Scotland also enjoys oil wealth due to long-established wells in the North Sea, but oil extraction is declining and Scotland has little of the oil infrastructure or home-grown energy firms Texas does.

Adios, Federal Reserve. Splitting from the United States would allow Texas to wriggle free of the Fed’s loose-money policies, which have rankled Perry and other prominent Texans. If Texas adopted a new currency, meanwhile, it could make it as weak (good for exports) or as strong (good for egos) as Texans wanted. Scotland will have to wean itself off the Bank of England if it becomes independent, which is more problematic since the financial sector is a bigger part of the economy in Scotland than in Texas, and Scottish financial firms could suffer without the BOE’s implicit backing.

Independence would produce a few disadvantages for Texas, too. Here are the cons:

No more federal funds. Texas gets a good deal from Washington, receiving about 43% more from the federal government than its citizens pay in federal taxes. If it were to become independent and lose highway funding, U.S. military establishments and other types of federal spending, it might have to impose corporate taxes after all. Scotland is in a similar position, since it accounts for more public spending per person than in other parts of the U.K. and would suffer a net loss if it became sovereign.

The Texas Dept. of Defense. Texas would have to establish its own national security force to deal with problems such as illegal immigration, coastal defense, terrorist threats and of course any territorial incursions from New Mexico, Oklahoma or Louisiana. The good news is Texas has a well-armed citizenry it can tap to form local militias. (Scotland doesn’t.)

Political opposition. Texas has voted Republican in every presidential election since 1980. Losing the state’s 38 electoral votes would severely impair Republican chances of retaking the White House in future elections, which could make the kind of small-government Republicans who run Texas intent on keeping the state in the union. In the U.K., leading politicians want Scotland to stay, too. Threatening to secede is one way to find out who really cares about you.

One more reason to support an independent Texas - no more barack obama. I'm not a big Rick Perry fan, but he's exponentially better than obama.

From where I stand, the pros for Texas secession outnumber the cons...