John Ferry John Ferry

The SNP’s star economist eviscerates the case for independence

'You can’t really say that Brexit is the worst thing ever and then commit the biggest Brexit of all time'

Humza Yousaf (Credit: Getty Images)

He’s only gone and done it again. Mark Blyth, born in Dundee but now professor of international economics at the prestigious Brown University in the United States – the man who was wooed by the Scottish government to join its economic advisory council in 2021 in the obvious hope he would lend credibility (and maybe a touch of stardust) to its case for secession – has eviscerated the economic arguments for splitting from the UK.

What was meant to be a PR triumph for the SNP completely backfired

As a quick recap, not long before Blyth took up his role formally advising the Scottish government, video emerged of him criticising the economic case for a Scottish exit from the UK on the basis it would be ‘the biggest Brexit in history’.

‘It’s [the UK] been together for over 300 years, so if pulling apart 30 years of economic integration with Europe is going to hurt, 300 is going to hurt a lot,’ he said.

What was meant to be a PR triumph for the SNP completely backfired. Blyth no longer advises the Scottish government. But perhaps because he has previously signalled his backing for secession despite being so honest and open about the downsides, the professor remains something of a darling of the nationalist movement.

Fast forward to this weekend and a video interview with Blyth from his US home was the star attraction at the ‘Scotonomics Festival of Economics’, a conference organised by separatists aiming to boost the economic case for secession. It was incredible. With his record for saying it like it is, you might have expected Blyth to drop the odd truth bomb here and there. Instead, he turned up with a 10-megaton truth nuke.

Let’s start with his repeating his warning that a Scottish exit from the UK will be like Brexit on steroids. ‘You can’t really say that Brexit is the worst thing ever and then commit the biggest Brexit of all time. Which is literally what this is,’ said Blyth.

He went on to say Scots have to think sensibly about what being independent really means:

‘At the end of the day, as a small, open economy, which you then would be, you need to balance your imports and your exports over the long term or everyone thinks your currency is shite, and at that point they dump it, prefer payments in British pounds, and then you get a run on your foreign exchange, and you get a mini Argentina on your hands. So just because you’re independent, you can print bits of money, doesn’t mean anything if you don’t have things to back it up.’

The SNP’s currency plan is for an independent Scotland to start off unofficially using sterling before moving to adopt a new Scottish currency as quickly as is feasible. Some nationalist supporters, including the organisers of the event, view the creation of a Scottish currency as the key to successfully cutting away. This is because they subscribe to modern monetary theory (MMT), which posits that countries in control of their own currency essentially do not have to worry about budget constraints so long as they keep inflation under control.

‘You can’t really say that Brexit is the worst thing ever and then commit the biggest Brexit of all time’

The MMTers also favour a newly independent Scotland refusing to accept a share of UK government debt. This is also something the SNP has hinted at using as a threat to provide the Scotland side with leverage in separation negotiations.

It is safe to say Blyth is not a fan of MMT or this approach to national debt. ‘MMT is closed economy Keynesianism. That’s all it is, and you don’t live in closed economies,’ he said, adding that if MMT applies anywhere it can only apply in the US, with its uniquely dominant economy that effectively gives it a form of insulation. ‘You’ll just get poor as shit,’ was his final analysis. 

He also added that a newly independent Scotland, effectively starting life by defaulting on its debt while launching a new currency, will have zero credibility in financial markets.

Then there was the argument often put by First Minister Humza Yousaf that cutting away from the UK will recreate Scotland as the rich Nordic-like nation it naturally should be. ‘Scotland, particularly in nationalist circles, loves to say that Scotland is a small open economy like the Nordic economies. That’s a bit like saying I’m a supermodel because I also have legs,’ said Blyth. Ouch, as they say.

A few other Blyth zingers were:

  • On currency again: ‘The entirety of currency is confidence. Confidence is not given by nationalist fiat.’
  • On the argument that becoming independent will improve energy security: ‘Your energy infrastructure is owned by asset managers… so how you going to improve that when you don’t even own it and you’ve no capacity to buy it. I mean I don’t do fantasy economics. I’m too old for this.’
  • On debt again: ‘If you think you’re starting off with a default, you’re dead already.’

Blyth, the author of anti-austerity book Angrynomics, was no doubt asked to be interviewed for the conference to provide the proceedings with a bit of star quality. He gave us much more than that. His honesty on the economic costs of independence is to be applauded. If only his audience of committed nationalists could be so open to reality.

John Ferry is a contributing editor for the think tank These Islands and a former financial journalist