News Column

How to-do about nothing captures nation's attention

August 26, 2014

ONLY a Nobel Prize-winning economist would have the chutzpah to declare that the referendum currency debate was "a lot of to-do about nothing", but then not all practitioners of the dismal science can sell out the main theatre of the Edinburgh Book Festival.

Professor Joseph Stiglitz, author of The Price of Inequality, told his audience yesterday that even the International Monetary Fund, with whom he is usually at daggers drawn, had come round to his view that inequality is actually bad for the economy.

He captivated a packed audience except for one forlorn voice, who complained: "Have I gatecrashed a Yes Scotland meeting?"

Mr Stiglitz became interested in Scotland primarily through the Saltire Prize, the pound(s)10 million purse to reward a breakthrough in wave or tidal energy, because of his argument that governments drive technological innovation more than the private sector does.

Given his outspoken arguments that inequality drives economic failure, it was no surprise that Alex Salmond asked him to join his circle of advisers, and the economist then became fascinated by the whole issue of policy divergence between two similar economies - the UK under the Tory-led coalition pursuing the same policies as his native US, and Scotland, devolved and possibly in time independent, choosing to chart policies with the aim of creating a society with less inequality.

Of that, he said: "I feel it here. I don't feel it south of the Border." He repeated his view that London's refusal to share a currency was a bluff and defended Alex Salmond's use of debt as a bargaining chip. "That is a legitimate position on a fair division of assets and liabilities. It is inappropriate to say you can take the liabilities but you can't take the assets. I would be a little embarrassed to take that argument forward."

He argued that debate should focus on the bigger picture, the kind of more equal society that can produce a better economy in ten or 15 years, rather than the short-term controversies around any independence negotiations.

He argued currency union could work, saying: "Germany and Greece were not on optimum currency union. If you look at the statistics for the similarities of Scotland and England they are sufficiently similar that a currency area could work, that's what the Fiscal Commission recommended."

But he also pointed out: "Panama and Ecuador have adopted the dollar -- it's worked for Panama for over 100 years. So the argument that England could decide is a little bit short-sighted."

He pointed out that Canada and some of the Northern European states used their own currency, saying: "There are many currency arrangements that can work, I think this is a lot of to-do about nothing."

Mr Stiglitz added: "The main issues here are not currency, they're probably not even North Sea oil. The main issue -- again as an outsider, and not wanting to intervene in any other country's politics -- is the question of the vision of society, what do you want to do."

He insisted: "This idea of the American dream where everybody can make it, unfortunately it's a myth and what I want to say is the UK and other countries that have imitated the American model have wound up with results like America.

"So the UK is second to the United States in inequality and there are real concerns about equality of opportunity, and the direction of England, of raising tuition fees, is key to this. The direction they are going is towards inequality of opportunity and inequality of income."

He argued more fiscal stimulation was needed to boost the economy after recession, and he condemned the austerity politics of European governments including Westminster.

Mr Stiglitz said: "The austerity policies in Europe and in England have been an utter disaster. I have done a calculation of the cost of these policies, and we're talking about for Europe as a whole, trillions of dollars and the costs going forward are even larger because the young generation, who should be having productive jobs, are spending time in unemployment, getting disaffected, not building up their skills.

"That's the vision of Cameron, the vision of more unemployment. There are risks always in any economic course, there's risks of doing something and risks of not doing something.

"So the risk of staying together is you could have a Conservative government that cuts back on government spending and that would force inevitable cutbacks here in areas of health and education."

A Better Together spokesman said: "A No vote is a vote for a strong Scottish Parliament, with more powers guaranteed, backed up by the strength, security and stability of the larger UK economy. We should say No Thanks to separation on September 18."

Scottish Finance Secretary John Swinney said: "Professor Stiglitz is right to see through Westminster's bluff and to highlight the fear-mongering of the anti-independence campaign."



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Source: Herald, The (Scotland)

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