Next
week Scotland will hold a referendum on whether to leave the United Kingdom.
And polling suggests that support for independence has surged over the past few
months, largely because pro-independence campaigners have managed to reduce the
“fear factor” — that is, concern about the economic risks of going it alone. At
this point the outcome looks like a tossup.
Well,
I have a message for the Scots: Be afraid, be very afraid. The risks of going
it alone are huge. You may think that Scotland can become another Canada, but
it’s all too likely that it would end up becoming Spain without the sunshine.
Comparing
Scotland with Canada seems, at first, pretty reasonable. After all, Canada,
like Scotland, is a relatively small economy that does most of its trade with a
much larger neighbor. Also like Scotland, it is politically to the left of that
giant neighbor. And what the Canadian example shows is that this can work.
Canada is prosperous, economically stable (although I worry about high
household debt and what looks like a major housing bubble) and has successfully
pursued policies well to the left of those south of the border: single-payer
health insurance, more generous aid to the poor, higher overall taxation.
Does
Canada pay any price for independence? Probably. Labor productivity is only
about three-quarters as high as it is in the United States, and some of the gap
may reflect the small size of the Canadian market (yes, we have a free-trade
agreement, but a lot of evidence shows that borders discourage trade all the
same). Still, you can argue that Canada is doing O.K.
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