Son of Kirkcaldy, and scholar not only of Glasgow but also of Oxford, Adam Smith propounded that the wealth of a nation depended upon its division of labour, which in turn depended upon the breadth of the markets in which it traded. This might sound like an argument for retaining the union, but so long as an independent Scotland could remain in the EU as it probably could it is the single market that matters most. Smaller economies can and do thrive, and there is little serious doubt that in the end the new country could survive on its own.
This is worth remembering as foreign exchanges and stock markets zigzag around, and the financial world awakes to the possibility of a yes vote. The first thing that needs to be said is that Scotlands monumental decision is not primarily financial, and it would be a travesty if financiers were to call all the shots in the closing days of a campaign that has energised and engaged a nation. The second is that it is easier to assert than to prove that market movements reflect sentiment about any one thing. Some of this weeks movements for example, of the pound against the euro have been unexceptional in scale, and inconsistent in direction. The final lesson of the past couple of days in the markets, however most particularly the sell-off of shares in big Scottish firms on Monday is one that many Scottish voters will be weighing carefully over the week ahead. Namely, that there is often a price to be paid for uncertainty. For there would be a good deal more of that around, during a transition to independence that could prove very rocky, even if all the details are ultimately satisfactorily resolved.
Continue reading...