Sum You Lose

The recent electoral success of the SNP throws the spotlight back on the question of Scottish independence. It seems few people remember that the economic forecasts of the nationalists were discredited within months of last year's referendum. Perhaps therefore a summary of the crucial points might be appropriate.

In December 2013 The SNP published Scotland's Future, a document long on words and short on numbers. Yet amongst the numbers it did contain, one received surprisingly little attention. It was projected that in the first year of independence the Scottish fiscal deficit would be £4.4 billion, or approximately £1,000 for every adult member of the population.

Remember that figure, it is important. At a time when people were blithely talking about being one of the richest countries in the world, creating a more caring society and setting up an oil fund for the benefit of future generations, the numbers actually showed that Scotland was already living beyond its means and proposed to go even further into debt.

In order to arrive at this deficit figure, they made assumptions about likely sources of government revenue. Large receipts were expected from taxes on Scotland's oil and finance industries, which together form a disproportionately large component of our national income. Assumptions were also made that Scotland would continue to use the pound sterling as its currency and that Scotland would run a Balance of Payments surplus. All four of these assumptions were flawed.

Official statistics were pessimistic about future oil prices, given the threatened slowdown of the Chinese economy and the rapidly expanding supply of cheap shale gas from the USA. Alleging deliberate manipulation of the figures to disparage the potential riches of an independent Scotland, the nationalists substituted their own oil price estimate (of over $110 per barrel). In fact the official statistics turned out to have been over-optimistic. In 2015 oil prices are in the range $50 to $60, around half the nationalist projection. So far from supporting an independent Scotland, the oil industry was soon in need of UK government help.

The UK Chancellor of the Exchequer challenged the assumption that Scotland would continue to use the pound sterling. He expressed himself poorly. What he meant to rule out was a currency union by which the rest of the UK would continue to underwrite Scottish finances. Fresh from the 2008 banking crisis in which UK taxpayers had been required to find £46 billion to bail out Royal Bank of Scotland, that was hardly surprising.

His lack of clarity was misrepresented as a threat. "No-one can stop us using the pound," Alex Salmond declared. This was of course true. Surprisingly he did not go on to explain that no-one could stop us using the dollar or the yen or the Zambian Kwacha either.

An independent country may use any foreign currency it likes, provided it can get hold of enough by means of a trade surplus. Panama, for example, uses the US dollar. All that you have to do is give up any desire to control your own monetary policy. If Scotland were to use the pound without a currency union it would have no choice but to accept UK monetary policy as its own.

It also means the Scottish government could only run a fiscal deficit to the extent that it could cover the revenue shortfall with reserves of sterling.

An odd sort of independence, you might think, that resulted in less economic powers than Scotland already has?

When the currency problem became clear, the large Scottish financial institutions announced plans to move their services to UK customers south of the border. This was not simply a brass plate technicality to comply with EU regulations as nationalists claimed.

Banking profits derive from the difference between the interest rates at which banks can borrow and those at which they can lend. Essentially a bank's lending operations create new money and most of the money supply in a modern economy consists of bank deposits, not cash. In order to perform these money-creating operations, banks must be within the jurisdiction of, and accept regulation by, the central bank responsible for that currency. A bank attempting to create new foreign currency would be acting illegally; it can only operate in a foreign currency to the extent that it possesses reserves of that currency.

The net result of this alleged technicality would therefore be twofold.

      1. Scotland's financial institutions would be responsible to the Bank of England and pay their taxes to the UK Treasury.

      2. Without financial exports it is unlikely that Scotland could run a Balance of Payments surplus. This would eliminate the Scottish government's ability to acquire reserves of sterling and thereby to run a fiscal deficit.

Now please remember the important figure that I quoted at the beginning of this article. By the SNP's own projections, the fiscal deficit in the first year of independence was to be £4.4 billion.

This was before accounting for the fall in the oil price and the loss of the financial services industry. It was before losing control of monetary and overall fiscal powers as a result of sterling becoming a foreign currency. This £4.4 billion deficit was actually a serious underestimate, perhaps not within several orders of magnitude of the reality.

Not only would a future Scottish government be unable to afford the promised fairer society, it would have to borrow improbable sums just to keep public spending at present levels.

Why improbable? Because in order to borrow you must first establish that you are creditworthy. Why might the international financial community suspect that Scotland was not creditworthy? Because the SNP threatened that if they did not get their own way on the currency they would walk away from responsibility for Scotland's share of the UK National Debt.

Let us leave aside whether one could throw over this debt without sacrificing Scotland's claim to a share of the national assets and infrastructure which that debt has financed, much of which is not located in Scotland and nearly all of which would need to be replaced by an independent country starting from scratch.

Let us also leave aside the fact that a country involved in a major financial dispute with an existing EU member would struggle to find an easy path to re-joining the EU.

Just consider this single point. What international lenders would offer reasonably priced funds to a new government whose first independent monetary act had been to deny any responsibility for debts accumulated jointly under the previous political union?

I am an economist. But of course I am also human. I might be wrong. To persuade me that I am, would enthusiasts for independence please not shout at me. Just show me your numbers.

And before you do, please check that they add up.

Falkirk Festival Writers Seminar 2015

This was my sixth attendance at the annual seminar run by Falkirk Writers Circle for authors from all over southern and central Scotland.  Each year usually sees competitions for short story, article and poem with a special additional category.  This time it was flash fiction.

One thing that writers must overcome is fear of speaking in public. If you do achieve success in being published, you are likely to be required to promote your own work. The chances are you will have to do book signings or readings in various locations and give talks to all sorts of audiences.

Of course being a good writer doesn't make you a good speaker, so it is very helpful to those who are inexperienced in the latter skill to have practice in reading to an audience of other writers who are going to understand.

To an audience it can be remarkably difficult to follow a story read out by an author who has not yet mastered the art of reading aloud, so it is also helpful that the judges are given time to explain their rankings and what they are looking for in the various competitions.

For some reason I specialise in submitting entries that would have suited last year's judges. All too often I find myself on a track with which this year's judges do not sympathise. I have however a fairly good idea of what I do well, so I have decided to do that every year regardless of who happens to be judging.

Last year that produced a surprising first place in the short story competition with a very experimental story.  This year my best result was a perhaps even more astonishing second place in the flash fiction competition judged by Silvie Taylor. I must confess I had thought the classical puns in this little story were far too outrageous for such a competition, so I was very pleased with the result.

Being your own editor

I read nineteenth century novels for fun. Well, either that or I'm a cheapskate and you can read nineteenth century novels for free. The problem is that when I've read one I have a dreadful habit of writing like its author when I return to my day job of story writing.

I was given a bit of a jolt recently by a slush reader's feedback - the sort of thing you get from some magazines when your story's not good enough for a personal rejection and not bad enough for the unsubtle hint that they'd just as soon you didn't send them any more. This reader criticised my slow pace. Then as an afterthought he wondered whether I was trying to write as though I were a nineteenth century novelist. That, he thought, might be clever but was never going to sell.

Now this particular story had started life at something approaching 11,000 words. Then with difficulty I edited it to 9,800 so as to meet another contest's 10,000 word limit. I had, as usual, very high expectations. I got straight rejections. I tried again until I got the above comment.

As it happened, I had received an encouraging personal rejection for another story of a similar genre at about this time, but from a market whose word limit was about half the length of the original version of this story. I had a bit of a think. What were the chances of cutting out so much? Well I had often read that it was good practice to try and reduce your story by a third, so I reckoned it must be even better practice to try and almost halve it. I set to work.

I stress that I really liked the original version of this story myself. Of course I'm the guy that likes nineteenth century novels too. As I got going I discovered lengthy lyrical writing about the setting of the story; so lengthy in fact that the story was sometimes put on hold for a page at a time whilst my Point-of-View character took a look around in all directions. And then moved a few yards and got a different view and did the same again.

Now writers are always warned against white room writing. This means not engaging your reader in the setting at all and ignoring all or most of the human senses in your enthusiasm for the story and nothing but the story. Whilst the writer can see the setting in his own mind, the reader cannot unless the writer paints the scenery and populates the landscape for him.

But perhaps at the other extreme we should also be warned against what I might call Art Gallery writing - if we might consider a gallery to be the opposite of an empty room. A lot of the pictures in an average gallery don't attract the average visitor's attention. Fortunately. If they did, I'm told, it would take ten years to walk around The Hermitage in St Petersburg (left).

Anyway, in very short order I had removed 1,000 words from the first eight pages of this story. The thing was I was really enjoying this process. I found myself developing an instinct for the difference between description that was vital to the story and description that was there for its own sake.

So I ended up with a story halved in length and zipping along, if not like a racing car at least like a  buggy drawn by a spirited horse. And I couldn't believe how much better I liked it. I read it again and again without even threatening to get tired of it the way I can easily do with some (though not of course all) of my longer stories.

Since then I think I may be more sparing with unnecessary description, but I still think it's a worthwhile exercise to be your own editor for a while.

Scotland's Voice

In order that 'Scotland's voice shall be heard' we Scots have decided to change our traditionally successful tactic.

Hitherto we have sent to London representatives of UK-wide political parties who could and did take a disproportionate share of the great offices of state.  Two recent Prime Ministers, three chancellors, foreign, home and defence secretaries,  the outgoing Chief Secretary to the Treasury and numerous other ministers have been Scots.

For some reason the English, Welsh and Northern Irish used to be content to allow Scots to run the country. But that wasn't enough for us, so we have now sent to London 56 members of a purely Scottish party who, with no significant allies at Westminster, cannot hope to hold any UK office of state at all. Scotland's voice will no longer be heard in the cabinet room or in senior departments as it has been up to now.

Perhaps someone will explain to me how having our representatives shouting from outside the cabinet room is more likely to ensure that Scotland's voice is heard than having several of the most crucial seats inside was.

Confined to opposition, it will be tempting for Scotland's representatives to become shrill and peevish. We have no-one but ourselves to blame for this loss of influence. Since austerity is the current UK government's policy and the SNP demands an end to it, we can hardly be surprised if we are told we have leave to spend more money in Scotland provided it is all raised in Scottish taxes.

Miaow do you do?

Now come along, you can’t expect me to believe that you didn’t know cats could talk. I mean, everyone knows that cats are much more intelligent than people, don’t they, and people can talk.

Well, yes, now you come to mention it the conversation of some people is a trifle limited. My Aunt Tabitha; she was the one who stayed in Cowcaddens, you know; she once told me that the local people there only ever learned one adjective, but that they were so pleased to have learned it that they used it over and over again, every fourth or fifth word, so that it became meaningless; you know, the way that a cat might say “you know” or a rather dull human might say “er…” Apparently this adjective began with f, but it wasn’t a clever word such as “F-eline” or “F-rolicsome”; not even a moderately clever word such as “F-ornicating”, though apparently it was a synonym for that. My Aunt Tabitha, you know, was always too F-astidious to mention what the word actually was; she called it “the F-word.” Personally I know rather a lot of adjectives beginning with f, but then of course, I am a cat.

I suppose what you really mean to say, in your limited human way, is that you are surprised that a cat would condescend to talk to you. It is true that the majority of cats can’t bring themselves to do such a thing. They go through their entire lives without uttering a word in human hearing. They have very delicate empathy with human sensitivities, you know, and they are only too well aware that people feel themselves sufficiently inferior to cats already, without being subjected to the further indignity of having their ignorance exposed in conversation. My Aunt Tabitha used to say that, even for an intelligent human, talking to a cat would be rather like a Rangers supporter talking to Einstein. No! Einstein was not that foreign coach who was hired by Celtic; he was that foreign coach who was hired by Princeton. No, Princeton don’t play in the English League, they play in the Ivy League.

I had better get to the point. Well then, I suppose that you could say that the whole problem started when my people, (you know, those are the humans that I keep as pets; they do useful things like opening cans and lighting fires for me in the winter?) well, they brought home a dog. Now I can cope with dogs; they aren’t very smart, even less smart than humans, but as a general rule they understand simple instructions that come reinforced with a swift right hook to the nose, claws extended – know what I mean? Well that’s all very well for elementary house rules such as who gets to eat first, or who gets to lie closer to the stove, but legally binding job demarcation lines are really too complicated for a dog. I have to say that I did my best to explain the principles of mouse-hunting, but I could see by the glazed expression on his face that the mutt really wasn’t taking it in.

“The whole point,” I said slowly, “is not to kill the mouse. If you kill the mouse, then it stops running, you see, and it’s far less fun hunting it if you have to throw it up in the air first and then run after it.”

“But I run after a ball when my person throws it, and that’s fun,” said the stupid dog.

“You don’t understand,” I replied patiently, “If you throw the mouse it can only travel in straight lines. When it’s running it can jink about and turn corners and stuff, and that makes the hunt much more interesting.”

Well the clown said that he would try to remember, didn’t he? But what happened? The next night there’s a mouse in the kitchen, and I cunningly head it off from running back to its hole, don’t I? And so the mouse hides behind a wide-open door, you know, one that’s opened right back on itself so that there’s just this narrowing V-shape for the mouse to run into? So I’m just about to adopt the classic position, where the mouse is stuck up the narrow end and I’m blocking the wide end, staring at it and frightening it to death with my penetrating gaze, when this stupid dog jumps in and grabs the mouse! I ask you; just grabs the mouse without so much as a by-your-leave!

You can tell that this dog doesn’t know there’s a recession can’t you? I mean there are livelihoods at stake here. In my capacity as local shop steward of the Feline Artisan Rodent Manipulators and Carnivorous Allied Trades Society (FARMCATS for short,) I lodged a formal protest right away, I don’t mind telling you. “All my members want at the end of the day” I said firmly “Is a fair day’s stalk for a fair day’s slay.” But it didn’t do any good, you know, because the mouse was already dead, wasn’t it?

Well, as you can imagine, I was feeling properly humiliated by this, because my absurd people told the dog how clever he was for catching a mouse. For goodness’ sake, as though there was any skill in catching a mouse! All the skill lies in prolonging the hunt; even a human should know that. Oh, you didn’t know that either, eh? Well I can’t say that I’m surprised.

In any case, to cut a long story short, I decided to go and sulk in the stables, didn’t I? “Let them see if the miserable mastiff can fluke more than one mouse,” I said. “You’ll see, they’ll be over-run with rodents and pleading for my return in no time.” But, in fact, no sooner had I stepped outside the back door when there’s this dreadful twittering noise and this crazy swallow dives on me from twenty feet in the air. He zooms past about three inches from my head and climbs up into the air again chattering some rubbish about the stables having been occupied by hirundine popular forces and being out of bounds to cats for the duration of the nesting season.

Now if you think it’s tough explaining something to a dog, you should have a go at trying to get through to a bird-brain. This guy had a completely one track mind; every time I would leave the house, the same thing would happen; twittering, dive bombing and a political lecture about the avian master race. I couldn’t go and sun myself on the lawn; I couldn’t move from one shrubbery to another in a leisurely field-mouse hunt without this numbskull diving on me out of the clouds. I think he’d been watching a lot of those old war movies, you know, where the German Stukas roll over and dive bomb the refugees with a great wailing of those huge sirens that they had fitted in their air intakes. You’ve seen them, haven’t you? Eeeee–yowwwwwwww–boom! And then zoom back up into the sky. Oh good, that’s something you do know about! Maybe you’re not quite as green as you’re cabbage looking?

So now I not only had this stupid dog parading about the house and crowing about how he’d beaten the cat in a mouse hunt, I also had this stupid bird parading about outside the house and bragging how his Stuka act was protecting all the little swallows. I ask you, as though I would have eaten any of his stupid hatchlings – well, not more than my fair share anyway. I mean, you must be able to see that the situation was intolerable? What I needed was a master stroke that the dog could never pull off and that would teach that bird a lesson. As my great-great–ever-so-many-greats grandfather famously said to Cleopatra, “You want to be careful with that snake, lady, you could fall right on your asp!” So I went off and did some research on the Intercat, didn’t I? Simple really.

Anyway, as I told a completely crestfallen dog afterwards, a wise cat once observed that there are old swallows and there are bold swallows, but there are very few old, bold swallows. I bet you didn't know that the Ju87 Stuka had to be fitted with automatic dive brakes that pulled up the nose at the end of a bombing run? This was because the G forces at that point were so great that the pilots could black out. For a critical couple of seconds the aircraft was actually flying itself and therefore its behaviour was very predictable for ack-ack gunners. Not a lot of people know that.

Considering what happened when I put my research into practice, we are bound to conclude that not a lot of swallows know that either.