THE response to Professor Ronald MacDonald's devastating assessment of Alex Salmond's proposal to share the pound in a currency union between an independent Scotland and the rest of the UK was entirely predictable.
"The opposition narrative seems to be that having oil is a dreadful curse for Scotland. That's a preposterous notion," said a spokesman for the First Minister after the Glasgow University economist explained why he believed a pound-sharing deal was doomed to fail. The spokesman's stock answer completely missed the point. Far from launching an orgy of scaremongering, Professor MacDonald had done the opposite: at a briefing organised by Better Together, he made a case for independence.
His argument went like this. As in other oil exporting countries, an independent Scotland would see rising prices and wages, making non-oil sectors less competitive. The diverging economies and priorities north and south of the Border would quickly place an impossible strain on joint agreements over taxation, spending and borrowing. The currency union would collapse within months, he said, at ruinous cost to both countries (a reason why the UK would be unwilling to sign up in the first place, he added). He concluded the "only tenable Plan B" was the creation of a separate currency. That could only be done, however, if Scots were prepared to accept years of austerity as the newly independent country built up its foreign exchange reserves (its share from the Bank of England would only amount to £6 billion or so) in order to manage exchange rates.
"An independent Scotland needs its own currency," he said. "If an independent Scotland had its own currency I'm sure in the longer term it could survive and prosper. But it's how you get to that position; that's the nub of this."
If Professor MacDonald was saying the unsayable for someone speaking beneath a Better Together banner, Jim Gallagher, an adviser to the campaign, stepped in to explain. "No-one in Better Together is saying Scotland could not manage on its own," he said. "It is a question of whether it would manage better or worse. And to get to a stage where it could manage, you would have to make huge economic changes."
The briefing, held around the corner from Holyrood on Thursday, has prompted a flurry of "what-ifs?" Professor MacDonald's analysis may have torn Mr Salmond's proposals to shreds but there was nothing there, economically or philosophically, that challenged the idea of independence. So what if the SNP had laid the groundwork for a separate currency two years ago? It would have been possible according to Professor MacDonald, who said open discussions and a clear plan to create a currency would not have created fatal instability in the financial markets. Like other economists, notably Professor John Kay, a former adviser to the First Minister, he was clear that a separate currency would be perfectly feasible.
After nearly a fortnight of relentless pressure on the First Minister to outline his preferred alternative to the currency union, which has been publicly ruled out by the main UK parties, the idea of having a ready-made Plan B has gained a lot of sympathy. But like all "what ifs?" the answer is "who knows?" Could the Yes campaign have survived two years of claims the pound was on the way out? Could it have succeeded by arguing independence might be a tough collective endeavour, requiring difficult adjustments to begin with, but would be worth it in the long run? Questions like those were surely what Professor MacDonald was alluding to when he offered the view Mr Salmond's Plan A was motivated by politics rather than economics.
They go to the heart of the SNP's strategy. Those who have been following the debate in microscopic detail for the past couple of years noticed this week that John Swinney and Nicola Sturgeon have taken to saying independence is "not a magic wand". For some, those words - which you would not expect to hear from the mouth of Mr Salmond - are a sign of a fracture at the top of the SNP. Who knows about that? But what it might be is a recognition that the First Minister's bold story of an independent Scotland in which everything is instantly better than before does not, at a basic, gut level, ring true for a large number of people.
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