Scottish independence: ‘Need for talks’ on monetary control

By TOM PETERKIN
Published on 26/08/2012 01:05

NOBEL Prize-winning economist Joseph Stiglitz has suggested that control of monetary policy in an independent Scotland should form part of discussions about the UK’s constitutional future.

Stiglitz, one of the world’s top economists and an adviser to Alex Salmond, said talks should take place, despite the First Minister conceding the Bank of England would remain in charge of an independent Scotland’s interest rates.

When asked about the Bank’s role post-independence, Stiglitz said: “[That is] among the issues we are going to be talking about in various forms of devolution. What are the instruments and institutional arrangements by which Scotland can promote its economy, promote jobs, promote stability?

“It is clear that, unfortunately, the UK has not managed to ensure stable macroeconomic performance. So whatever the degree of devolution, [whether it] is more devolution or independence, this issue of economic management is going to be there.”

Stiglitz, professor of economics at New York’s Columbia University, also said the Scottish economy had to be rebalanced to stimulate jobs.

Speaking at the Edinburgh International Book Festival, he said: “There is a longer-term issue for Scotland. How do you promote growth? Markets don’t exist on their own. Government creates markets – shapes markets – and governments in the US and London distorted the economy where they created an overblown financial market and distorted the economy away from what I might call real economic activity. “Now the challenge is how to correct that imbalance and restore not only growth but most importantly employment – jobs – which is a particularly important problem here in Scotland.”

Stiglitz also criticised the Conservative-Liberal Democrat coalition for pursuing austerity measures.

He said: “I and other economists predicted that it wasn’t going to work. It would lead to a slowdown. Unfortunately what we 
predicted has happened.”