Peter Jones: Failed political model must be fixed

SCOTS must be sure that what they’re being offered isn’t a broken system, primed to repeat old mistakes, writes Peter Jones

Angela Merkel, Germany’s chancellor, is planning a European convention to draw up a scheme for EU supervision of national government budgets, The Scotsman reported yesterday. This is the closer political and fiscal integration needed to match the currency integration in the eurozone, the lack of which is a major cause of the current European debt and economic crisis.

It is a perfectly logical development. But what does it say about the basic democratic model that everyone has taken for granted for years? Does it say that the democratic nation state has failed, that it presided over the creation of the worst economic crisis ever known, and that to prevent it happening again, power has to be taken away from it and given to a supranational institution such as the EU?

And what does that say to us in Scotland as we look at creating, or re-creating, our own nation state? Would we be just buying into a failed model? Or is there some secret scheme that the SNP have yet to tell us about which solves the problems and which will ensure Scotland unbound will be a huge success?

I do not believe that we have even begun to think through all the political ramifications of the recent financial, and now economic, crises that have hit us. Proposed solutions – separation of banks’ investment and retailing functions, closer financial regulation, EU fiscal integration – are all useful ideas, but all seem to me to tackle symptoms rather than fundamental causes.

Let’s start with our basic political model. Every four or five years, political parties put their proposals for running the country on view. We inspect them, criticise or commend them and then vote accordingly. If the party which has been in power has done a terrible job, we throw them out of office and elect a different party. And while they are in power their actions are invigilated by opposition politicians, the media, non-governmental institutions and the public. Any faults are quickly picked up and corrective action can be demanded.

It seems like a pretty fool-proof system. There are plenty of checks and balances. Where it does not work is with a government that ignores demands for changes in direction, or for it not to do things such as, say, the Blair government’s invasion of Iraq. While such actions cannot be undone, it at least pays a price by being voted out at the next election.

This is, essentially, what we will be asked to institute for Scotland in the 2014 referendum. Some take the view that any government which has only Scottish interests to look after will be infinitely better than what we have at the moment, just because it is Scottish and not British or dominated by English interests.

I don’t, not because I am, as some assert, a unionist. I’m not any kind of –ist other than a journalist who regards it as his job to ask awkward and inconvenient questions, especially of governments of any hue purporting to offer magic bullet solutions, such as independence.

And the inconvenient question I want to ask today is this: what structures and institutions do the SNP propose to put in place in an independent Scotland which mean that the major governmental failure which we have seen across the western world since 2007 will not occur in Scotland in the future?

This, I accept, is also a question which can be asked of the UK government. It indeed, is instituting purported solutions to the current economic crisis, such as quantitative easing which, as Brian Montieth pointed out yesterday, may not only not be working but may also have malign future consequences which we are only now dimly beginning to perceive.

But that doesn’t logically mean, as Ewan Crawford rather ludicrously argued last week, when discussing a couple of statements by Alistair Darling, that we should vote for independence, especially if that state of independence merely replicates the same failed institutional structures.

The failure is this: despite all the democratic checks and balances, most of the western world spent a decade and more importing deflation in the shape of cheaper east Asian manufactured goods and offset that by allowing a vast expansion of cheap credit which pushed up asset prices, notably housing prices.

When the housing bubble started to deflate, a financial system which depended on ever-rising asset prices exploded. We are now left with a mountain of debt, the nominal value of which is, in some cases, greater than the value of the assets on which it was raised, and with shrunken national, corporate, and personal incomes which may not be enough to pay off that debt.

The eurozone has particular problems with the debts concentrated in southern Europe, but the UK also has big debt problems. If you add up national, corporate, banking and personal debt, it comes to five times GDP. Even allowing for a degree of Scottish thriftiness, an independent Scotland would start life with a big debt millstone around its neck.

So what’s the solution? How would an independent Scotland prevent similar, or even unforeseeable and quite different, problems from arising in the future? Independence in itself is no answer – ask the Irish.

The solution which UK and European governments have moved towards is technocratic. In Britain, the Office of Budget Responsibility has been instituted and much greater financial supervisory powers are to go to the Bank of England. These are, essentially, tacit admissions that politicians cannot be trusted. Mrs Merkel has the same thoughts, except that the technocrats will be in the European Commission and the European Central Bank.

How will these new technocracies fit with our democratic traditions? And where would they sit in any new Scottish democracy?

I don’t have any clear answers to these questions, especially the latter one which is for the SNP to answer. I look forward to seeing what the Nobel-prize winning brains of Alex Salmond’s Fiscal Commission working group, which met for the first time yesterday, come up with.

But I am sceptical that technocracy is the right answer, mainly because I don’t recall supranational institutions such as the European Commission, the International Monetary Fund or the World Bank issuing warnings that we were headed for the cliff the financial world fell over in 2008.

But it is a question which needs an answer. Whether Scotland is independent or not, the broken political model needs mended before the next crisis hits us.