In this and future articles, the Scottish Currency Group outlines how an independent Scottish Government with its own currency-issuing powers and central bank will have policy options not available to the present devolved government , which is required to use sterling controlled by the Bank of England.
A WELLBEING economy is one which supports a thriving society in economic, social and environmental terms, one that delivers prosperity for all Scotland’s people and places.
Persistent unemployment and precarious employment presently results in poverty, which leads to chronic ill-health, makes people unable to work and puts a huge burden on the NHS.
Our own government with our own currency can reverse this “doom loop” by spending to create secure and stable employment and bring people and families out of poverty, which will of itself improve their health and educational outcomes, and thus increase the productive capacity of the domestic economy, which allows further investment in societal wellbeing without risking inflation.
Scotland suffers from high inequality compared to our European peers. Scotland’s poorest are also the least healthy, with the lowest life expectancy and the longest periods unable to work due to long term health issues. The degree of this disparity is massive, well documented and a disgrace in a wealthy country.
It also has serious economic implications, because the poorest participate least in the economy, are unable to work for a significant part of their lives and need a disproportionate amount of support from the NHS, social care and welfare services. And their children have worse educational outcomes.
The answer is long-term investments by government in preventive health care, education and training, decent jobs, improved infrastructure, and energy-efficient social housing; and an economic model that prioritises wellbeing and reduces inequality. With our own currency we can make these investments. Without it, we are subject to the whims of foreign investors and lenders.
Foreign investment creates jobs but often only for a while and extracts profits from our economy. Foreign debt needs to be serviced and repaid in foreign currency, which needs to be earned using resources which are not then available for other purposes.
Our own currency isn’t a free lunch – we aren’t limited by money, but we are limited by the available resources and productive capacity of the economy. So it’s vital to invest strategically in a way that reduces inequality, improves the general health of the poorest part of the population towards (ideally to) the level of the richest members, and makes the labour force more productive.
A particular challenge for us is that poverty and inequality are far more geographically concentrated in urban Scotland than in similar European nations. This has key implications in relation to designing and implementing effective policy interventions. If we do this properly, the poorest will be lifted out of poverty, participate more effectively in the economy and place less load on health and social care services.
This fuels a virtuous circle in which the health service will be less overloaded and with more resources available, can be fully resourced to prioritise preventive healthcare and treating patients quickly to get them back to work. This again increases both wellbeing, and the productive capacity of the economy.
The economy will then have the capacity to absorb additional investment, for example in building good quality energy-efficient social housing using Scottish-grown timber. Thus we can end homelessness and fuel poverty, and the demand for locally-produced low-carbon building materials will boost the rural economy in all parts of the country.
The increased productive capacity of the economy justifies more investment – in businesses that employ people, and in infrastructure and capital equipment that will improve productivity.
With our own currency, government agencies and mutual funds, such as public-sector pension funds, can take larger equity stakes in foreign investments to ensure a long term commitment to Scotland and keep some of the profits at home, to fund further investment.
Our own currency also enables us to take full state or mutual ownership in areas of critical infrastructure where the market will not deliver strategic goals, giving the opportunity to protect and develop national resources for the good of the population, eg energy, water and other natural monopolies, moderating pricing and directly reinvesting profit.
A programme of this nature is essential to build an independent nation and we can only do this quickly and sustainably with our own currency. It requires considerable government deficit spending, of course, but on the asset side of the ledger we’ll have transformed what is now a subordinate branch economy into a resilient, self-reliant, and adequately self-sufficient national economy fit for the 21st century; and radically improved the wellbeing of the population.
