There are many who would hold an investment bank such as Goldman Sachs up next to God. Its analysts are impeccable and accurate, and not only can see every financial catastrophe coming, but also understand the opportunity cost of what could have been but wasn’t. Thus the financial world was shocked by the recent polls that showed the spread between the YES and NO vote to be a mere 6 points. Goldman Sachs analyst Kevin Daly was quoted in an article in Reuters “Severe Consequences for UK if Scotland Leaves – Goldman” on September 3rd, 2014. This article and opinion has great influence and many will read it without questioning its premises and assumptions. Thus the Academic Entrepreneur was compelled to respond.
We do know that indeed the rUK faces severe consequences on many fronts if Scotland leaves, from resources to stature, to a seat on the Security Council, and even the EU itself if the referendum on EU membership says “No more EU”. There is much to lose for the rUK, and this is evidenced by Cameron’s pulling of the terrorist card yesterday, as reported in the Daily Mail “Scotland will be more at risk for terrorist attacks if it leaves the UK, says Cameron”. This is a desperate attempt to swing the vote through the use of fear, and the propping up of the protectionist nanny state illusion. The Westminster Government is getting nervous about Scottish Independence and knows that there is a great deal to lose.
However, Scotland itself may well prosper beyond the wildest imagination of the banksters if it implements good innovation policy, as suggested many times by the Academic Entrepreneur. Let’s focus on Scotland for the moment and leave the discussion of rUK for later.
“In the event of a surprise ‘Yes’ vote, the near-term
consequences for the Scottish economy, and for the UK more broadly, could be severely negative” – Goldman Sachs Economist Kevin Daly
The analyst at Goldman Sachs got it wrong. First, because of shortsightedness. He failed to comprehend the potential of a new cryptocurrency state, and the creative destruction and innovation that would follow in the areas of banking and finance. But who could blame him as he is a part of the status quo, and the establishment banking infrastructure? He and his ilk benefit greatly from the current system and its inefficiencies. Like it or not, the rise of cryptocurrency is unstoppable, and it will disrupt the banking industry as we know it, and change the entire financial institution landscape. Scotland has a unique opportunity to become the first crypto state, and this in and of itself would lead to great wealth creation for the people of Scotland through not only the network effect, but a leadership role in the world as the centre for innovation for banking in the new era.
Through immigration and innovation policy, Scotland could build a large pool of risk capital, especially venture capital, and the entrepreneurs to go along with it, most of who will come from non-EU zones in the world to build their companies in Scotland. Furthermore, through research and university policy and innovative funding mechanisms, Scotland could build a powerful knowledge economy through massive increases in the resources available to their universities and the exploitation of knowledge into new commercial ventures, including world-leading, innovative technology companies with great job-producing capabilities. Immigration policy can be leveraged to increase the supply of brains in the country as well. The synergies between all of the above could rock the status quo, creatively destruct, and create whole new industries on the global front, Schumpeter style.
Northern Europe and Canada – Nevermind These Countries
Second, the analyst neglected the Arc of Prosperity States, and failed to make the comparison when talking about the Eurozone. What about Norway, with its independence and currency? Sweden, Finland, Denmark and others? The EU analysis ignored a very important part of Europe — Northern. He assumed Scotland would be in a “weaker” position, where it might actually be in a stronger position relative to other EU States. Moreover, what about Canada and its relation to the USA? This was another analogy that the analyst failed to make. Canada is in a particularly strong position, with abundance of resources, a healthy banking system, and great potential as an innovation country itself, the true up-and-comer in the Western World. However, its Prime Minister, Stephen Harper, is discouraging Scotland from becoming an independent nation state like his. He has backed a United Kingdom where Scotland is still ruled from Westminster. So the logic would thus follow that Canada is best ruled by Washington, DC, in a Northern American union? Or perhaps Canada itself should rejoin the union itself and enjoy the benefits of a strong and centralized United Kingdom? The Academic Entrepreneur would like to hear from the Goldman Sachs analyst on Canada ditching the Canadian Dollar for the Pound or US Dollar, and the benefits of full political integration with either nation for Canada’s economy.