The entire GERS debate has been pretty explosive on social media, one which doesn’t really see an end in sight. My contribution came when I wrote a short article/essay titled “Economics Around Scottish Independence“, to which I received much feedback on Facebook and Twitter, whilst also commenting on the deficit share for each nation. On both of these contributions I wanted to respond to raised issues, so if you haven’t seen what I have wrote I encourage you to follow the two links above.

1) GERS is done by the Scottish Government and has no interference from Westminster

This came from the baffling and stupid meme from Mary Connor, stating the following:

 

mary connor

 

It’s incredible that some of the very people who hail GERS as being almost perfectible haven’t actually read it themselves. It’s not far into the report that it clearly states the following:

 

data source

 

And the SNP have never claimed GERS is a “truthful representation of Scotland after indy”, since the White Paper actually said “The analysis in GERS is based on the current constitutional framework.”

And it doesn’t help either when the BBC have to openly uphold a complaint for misrepresenting GERS on the news, suggesting it is solely the Scottish government that is responsible for it. (because of difference between iPEO and non-iPEO, we know the vast majority of that deficit is down to Westminster spending)

On a more broader note, the term “GERS Denier” is pretty hysterical. One can almost picture a fanatic religious preacher in the streets waving his holy book around screaming “YOU DENY CHRIST? YOU DENY THE WILL OF GOD!” as if because his book tells him God is real, it is so. When I pointed out one flaw in GERS to political journalist David Torrance, was his response to actually refute such a claim with evidence? Did he take an articulate view and kindly explain to me why such data was accurate for the Scottish economy?

No, instead he wailed “GERS denier” and proceeded to block me.

If we are to engage in debate over GERS, no matter what side of the debate you are on, blocking out the opposition only forces yourself into an echo chamber. It’s not the first time I’ve been blocked though.

 

 

blocked 1

 

 

 

I’ll take these blocks as a good sign I’m on the right track.

(By all means block people who are simply annoying or causing grief, that’s fair enough)

2) How will borrowing will help reduce the Scottish deficit?

This was raised when I spoke about how the Scottish Government could not lower its deficit significantly enough due to having limited borrowing powers whilst most macroeconomic leavers were based in Westminster. Many unionists pointed out that by borrowing, this will only add to the deficit.

 

borrowing

 

Whilst this argument sounds logical, economic theory is not as simple as that. If borrowing allows greater output for a nation, then it succeeds in trying to lower the deficit. Where a government spends is also important, most likely in Labour to increase production overall. But if you do not believe me, as a macroeconomics student, then take it from the International Monetary Fund, who hold the view that governments should be borrowing more.

One user pointed out that if Scotland were to borrow then it could end up like Weimar Germany in the early and late 1920s. It was a rather funny example to use, not because I had already done a dissertation on Weimar Germany under Gustav Stresemann, but because the situation was incredibly different. The entire world had just gone through a World War with France, Britain and the US making Germany pay reparations under the Treaty of Versailles, Article 231. It didn’t help either that the German government were constantly dealing with attempted coups and revolution from both the right and left of the political spectrum, whilst their political setup made it that no party could achieve a majority in a system with too many parties. Anyone suggesting Scotland would be like Weimar Germany should really look into the history of Germany at the time.

3) The methodologies with GERS is some of the best we have available

I’ve read two interesting articles on this, one from Kevin Hague who uses two academics to argue that GERS is sound, and one from Graeme Roy from the Fraser of Allander Institute. Professor Richard Murphy has already responded to both Kevin Hague (here) and and Graeme Roy (here), which leaves me with very little to say overall, but I’ll go over the issue anyway.

In response to Graeme Roy, he makes this argument near the end of his article:

“These arguments are entirely legitimate, and ‘fairness’ is something we each may have an opinion on, but to criticise the entire GERS exercise for the simple fact that they are based upon ‘estimation’ is clearly wrong.”

One of the academics Kevin Hague cites, Professor Ronald McDonald, makes a similar comment:

“As in practically any statistical exercise the GERS statistics depend on estimates and there is nothing unusual about that. In that regard it is noteworthy that the statistics produced and reported in GERS come with standard confidence intervals indicating the uncertainty with which the central estimates are held. An examination of these confidence bounds demonstrates that the generally accepted position on Scotland’s fiscal and trade positions are unchanged. This is why mainstream economists, statisticians and commentators will continue to use these statistics in their work.”

In respect for both men, they have ultimately missed the point being made here. What we are questioning here is not primarily the estimation, but what the estimations are based on. The data itself, as has been argued for a while now, is abstract. Doing great things with bad data will not magically change the data to be accurate, which complies with the GIGO theory (Garbage In, Garbage Out). Here is what UK Statistics Authority had to say on such a matter:

 

OFFICE OF NATIONAL STATISTICS

 

Another worrying comment made by Graeme Roy is the following:

“It’s important to remember that GERS does this taking Scotland as a mini-UK, and the constraints and protections that the current constitutional arrangements bring.”

Why is Scotland being perceived as a “mini-UK? This in turn goes back to one of the original arguments made towards GERS, which is that it does not represent Scotland as an independent country, since independence changes the current setup which GERS works upon. If GERS represents Scotland as a mini-UK, it cannot be applied to thinking what an independent Scotland would look like, since the government of an independent Scotland would be taking different macroeconomic decisions.

The other academic is Professor Angus Armstrong, who for one is questionably bias. For starters, he use to be Head of Macroeconomic Analysis at HM Treasury, so realistically he is defending much of his own work. If I were to present an essay to my university and quote myself to prove the argument I’m using is sound, I would lose a lot of marks and would most likely be failed. Not only that, he’s also wrote for Labour Hame and is a House of Lords special advisor when it comes to Scottish independence. So when we take his viewpoint, you’ll need more than a pinch of salt.

If we want to have a proper debate on Scotland’s deficit, we need to have proper identified figures and less so on what is assumed. For example, the US can go into incredible detail about what is spent on defence in terms of a regional basis, yet the Ministry of Defence in the UK fails to do so. Why? GERS assumes that roughly £3bn is spent in Scotland, yet the real armed forces budget is around half of that figure (whilst the Tories severely cut more of Scotland’s defences).

At my time at Stirling University, I’ve gone through a lot of learning about economics, but there has always been one thing that has struck out by everyone who I’ve spoken to: question everything.

We cannot simply accept that data is good enough because the government or statistical bodies say so, that’s why this debate is important to have. Whilst GERS is improving, ultimately Scotland should have data gathered specifically for ourselves as a country, not as a “mini-UK”. I can appreciate that Graeme did bring more clarity about the role of Scottish civil servants. He had the best intention when it came to this debate, however, he sadly misses the point.

4) But if the data is unreliable, how can you present a case for an independent Scotland?

There was much confusion from critics on my article, arguing that because I hold the view the data for GERS is unreliable then it makes little sense to bring forward an assessment for an independent Scotland.

 

bailey

 

It was rather odd, because I would have thought there was a fair distinction from what I was doing. As much as I do criticise GERS for it’s unreliable data, there’s a difference in the data provided for current economic status and data used to look at what different macroeconomic decisions Scotland can take to benefit the economy. It seems that many have skim read my article and jumped straight to the comments.

The feedback overall has been mostly positive, and I welcome new sources and arguments which can help me adapt my understanding of the debate (from both sides). I’ll be doing more work with members of Stirling University in terms of Scotland’s deficit and data in general, and will give more feedback in the future.