14 Sep 2014

Stiglitz: no need to fear economics of independence

Nobel Laureate in economics and former World Bank chief Stiglitz speaks to media after his lecture "The Price of Inequality" at the Center for The New Economy Annual Conference at a hotel in San Juan

Nobel Prize-winning economist Joseph Stiglitz has said there is “little basis” for “fear-mongering” over the economy of an independent Scotland.

Mr Stiglitz, who advises the Scottish government on economic affairs, said that while there would be risks in the event of a Yes vote, the risks of Scotland remaining in the union and UK leaving the EU would be “significantly greater”.

In an article published in the Sunday Herald and the Scotsman, he urged Scots to focus on “vision and values” in the last few days before Thursday’s independence referendum.

His words come in stark contrast to warnings issued by other economists including fellow Nobel winner Paul Krugman, who has said Scots should be “very afraid” of the risks that come with independence.

He said: “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.

“By an order of magnitude, far more important than size is the pursuit of the right policies.”

Mr Stiglitz, who is a member of the Scottish Government’s council of economic advisers and Fiscal Commission Working Group, said the debate over the currency of an independent Scotland was a “non-issue”, arguing that many currency arrangements would work, including Sterlingisation – or using the pound without a formal agreement.

He said: “The Scottish vision and values are different from those that have become dominant south of the border.

“Independence may have its costs-although these have yet to be demonstrated convincingly; but it will also have its benefits.

“Scotland can make investments in tidal energy, or in its young people; it can strive to increase female labour force participation and provide for early childhood education-both essential for creating a fairer society.

“It can make these investments, knowing that the country will recapture more of the benefits from them through taxation.

“The difficult question that Scotland has to face is thus not about arcane issues about monetary arrangements or economies of scope, about the minutiae of the short run gains and losses, but whether Scotland’s future – its shared vision and values, a shared vision and values that has increasingly departed from those dominant south of the border – will be better achieved through independence.”