Joseph Stiglitz: Independence has costs and benefits

AS SCOTLAND contemplates independence, some, such as Paul Krugman, have questioned the “economics”. Would Scotland, going it alone, risk a decline in standards of living or a fall in GDP? There are, to be sure, risks in any course of action: should Scotland stay in the UK, and the UK leave the EU, the downside risks are, by almost any account, significantly greater.

Joseph Stiglitz: If the UK continues on its current course,  the results will be like those of the US. Picture: Getty
Joseph Stiglitz: If the UK continues on its current course, the results will be like those of the US. Picture: Getty

Should Scotland stay in the UK, and the UK continues in its current policies which have resulted in increasing inequality, even if GDP were slightly larger, the standards of living of most Scots could fall. Cutbacks in UK public support to education and health could force Scotland to face nothing but a set of unpalatable choices – even with Scotland having considerable discretion over what it spends its money on.

But there is, in fact, little basis for any of the forms of fear-mongering that have been advanced. Krugman, for instance, suggests that there are significant economies of scale: a small economy is likely, he seems to suggest, not to do well. But an independent Scotland will still be part of Europe, and the great success of the EU is the creation of a large economic zone. Besides, even small political entities, like Sweden, Singapore and Hong Kong have prospered, while much larger entities have not. By an order of magnitude, far more important than size is the pursuit of the right policies.