If Scotland Votes for Independence, It'll Become Just Like Greece

NEW YORK (TheStreet) -- Scots will be worse off if they vote for independence. It's not good economics -- and not much else is at stake.

Unlike the now-dormant (but never dead) separatist movement in Quebec and the rising tide for independence in Catalonia, the Scottish movement lacks a strong impulse in sustaining an ancient culture. Advocates of independence may protest, but they are not about to resurrect Scots Gaelic as a widely spoken national tongue.

Scottish independence advocates sound more like Texans complaining about Washington, lamenting that London is aloof and deaf to Scottish sensibilities. Although Texans would like less government, the Scots want a heck of a lot more.

Nationalists are quick to blame local economic problems on the tough-love reforms imposed by Margaret Thatcher and subsequent British governments, which reduced support of Scotland's once-powerful but now much diminished traditional manufacturing.

Independence has been seized by the professional left -- academics, artists of all kinds and other "social thinkers" -- who believe an independent Scotland could raise taxes and spend more to affect more progressive social values. The Scots do support Labor candidates for Westminster in much greater numbers than do the English.

But Scotland is hardly shortchanged by London. It accounts for 8.3% of the UK population but receives 9.2% of public spending. Nevertheless, advocates of independence say if Scotland got control of the 80 to 90% of North Sea oil that lies within its waters, it would be better off.

No doubt the new Scottish government could go on a spending spree, but North Sea production is declining and the revenue bonanza would tail off quickly. Then commitments to bloated social spending and industries propped up by large subsidies would be awfully tough to scale back.

Scotland would emerge like Greece -- a nation with a beer budget but with champagne tastes, in massive debt and insolvent.

With oil, Scotland has an economy smaller than Connecticut. Without oil, it's smaller than metropolitan Madrid.

Nationalists argue that other small countries do quite well -- for example, Switzerland and Ireland. But the Scots' neighbors across the western sea are hardly more prosperous, and the Swiss have assets the Scots won't enjoy -- a world class financial sector and competitive manufacturing in pharmaceuticals, chemicals and machinery.

After oil, it's whiskey and salmon for Scotland. Then things tail off precipitously. Independence supporters note Scotland's presence in some high-tech activities, but those hardly have the mass to carry the economy in its coming post-petroleum age.

Overall, private-sector productivity lags the UK average by 11% and is particularly weak in manufacturing and R&D.

Scotland's service sector is stronger, thanks to the Royal Bank of Scotland (RBS) , Lloyds (LYG) and pension giant Standard Life (SLFPY) . But those companies will likely head to England if the Scots vote to leave, and with good reasons. An independent Scotland would impose much higher taxes on their employees and operations and have an uncertain currency.

Advocates for independence say they would like to continue using the British pound, but the Bank of England has indicated it wants no part of having its monetary policies hamstrung by a high-taxing, free-spending declining oil state.

Scotland would likely join the EU and could adopt the euro, but that would put Scotland into the same economic-policy straightjacket the single currency has imposed on Spain and other Mediterranean states. That's something the Scots are trying to escape by severing ties with the UK.

Without oil and its big financial sector employers, Scotland would face taxes too burdensome for high tech and good-paying industries. Those would ultimately leave too.

Then the Scots would be left with nothing more than their flag to quilt their poverty.

At the time of publication, the author held no positions in any of the stocks mentioned.

Follow @pmorici1

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Peter Morici is an economist and business professor at the University of Maryland, and a national columnist.

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