The Scottish Secession Vote Is More Important Than You Think
Thursday, 18 September 2014, is the date of the Scottish secession vote. Most finance commentators are focused on the likely huge economic considerations. Yet, this vote is far more important than you may think. The secession vote, even if it fails, signals the beginning of the end of the preeminence of the nation-state. Here is why:
- The idea of the nation-state is a relatively recent phenomenon in human history;
- Increasingly, identity is coming from horizontal, not vertical, affiliations; and
- A state of quality of life parity is coming.
Nation-States Are a Relatively Recent Phenomenon
Prior to the revolutions of the United States and of France in the late 18th century, the idea of the nation-state was just that, an idea. Prior to that, other nations with strong central identities were empires that, in turn, were cobbled together through military or economic conquest. In fact, Scotland is a part of the United Kingdom primarily for this reason. This situation was typical not just in Europe, as the Eastern world also was noteworthy for its emphasis on national organization through conquesting monarchs. Think: China, Japan, Mongolia, Indonesia, Thailand, India, the Ottoman Empire, and on and on.
Most of the existing borders in the Middle East and Central Asia were intentionally created in order to cast ancient ethnic rival clans against one another to make rule by distant hegemons easier. In the Middle East this was done via the secretive division of territory of the Sykes-Picot Agreement between the United Kingdom and France. Joseph Stalin wanted his thumb on the unruly “stans” of Central Asia and undertook a bit of border legerdemain so as to pit ancient clans against one another, as well as parsing up natural resources to ensure the weakness of each of the nations. Take a look at a map of the Fergana Valley to see the odd convergence of Kazakhstan, Kyrgyzstan, and Tajikistan. In both the Middle East and Central Asia, almost a century later the tensions remain. Sans the artificial boundaries created by defunct empires, would the people of Iraq care to be Iraqis? Probably not.
Many are surprised to learn that only in the late 19th century were Germany and Italy united internally to become “nation-states.” So the Scottish secession vote signals a unique recognition by its people: Hey, we do not have to be a part of history any longer, we can actually craft our own destinies separate from legacy. That Scotland is part of a First World nation, the United Kingdom, and is a country of significance, is tremendously important, because they have crossed a psychological rubicon from which others may take inspiration. Within Europe alone there are strong secession movements in Spain’s Catalonia; among ethnic minorities in Hungary; in northern Italy; and of course, Northern Ireland. In Asia secession is discussed in Thailand’s northern regions, as well as in China’s Uighur and Tibetan regions. For what are they waiting? An example.
So even if the Scots vote “no” the idea of secession is now a part of the collective consciousness.
Horizontal Identity vs. Vertical Identity
In the last 250 years, people within First World nations have taken their political, and especially economic, identities from the countries in which they live or were born, rather than from their home regions or by their sociological cliques. If I am traveling abroad and someone asks where I am from, I do not say, “I am from Colorado.” Instead, I say, “I am from the United States.” Primary socioeconomic identity in much of the world largely comes from the nation of which I am a citizen. Put another way, my primary identity is a vertical identity taken by me from the nation that reigns over my citizenship.
Yet, the Internet and social media are changing all of that. Prior to the early 1990s, the chance of finding someone who shared your unique view of the world was slim; consequently you likely felt privately marginalized, while publicly your persona was limited by common personality archetypes. But now every bizarre combination of identity finds willing partners (think: leather-jacket-wearing finance professionals who love Jack Russell terriers, and pine for Friedrich Hayek.) Now identity comes from one-to-one affiliation with people nearly identical to me, horizontally. As an example, 50 years ago people’s primary work affiliation was to the company that hired them just out of school. They then spent close to the entirety of their working lives with that firm. Now jobs are found by networks — that is, through the people we are connected to horizontally. Hierarchical structures, like nation-states, are losing their importance with every fan site you visit.
What is more, knowledge workers execute work that can be done anywhere, sans borders. I am just as able to do my work in Myanmar as I am in my home country so long as I have my computer or smartphone and an Internet connection. What is more, many governments around the world from the United States to the European Union to the Middle East all are saddled with ineffectual governments hopelessly gridlocked at the legislative level. If my government does not work for me, but my Twitter followers do, what ties me to a place? Inertia or identity?
Scotland’s secession vote is the natural outgrowth of 20 plus years of a world suffused with information about other people and their ideas about identity. I would argue it is also a harbinger of things to come: the decline in importance of the nation-state.
Quality of Life Parity is Coming
Many nations have homogenous cultural offerings brought about by 40 years of economic globalization. Outside the airport in Prague there is a McDonald’s. In Shanghai there is a Burberry. In New York there are HTC cell phones in many pockets. Many of the goods and services people care about are becoming increasingly affordable. Big data and the wringing of information out from that ocean of digits promises to reduce costs and expenses for most goods and services. Economic efficiency is a tidal wave that only government seems to stand in the way of.
Goods and services that make lives work are nearly universally offered, and even remotest parts of Africa, South America, and Asia are now experiencing capitalism’s ability to affordably deliver “what you want and need.” What this means is that as the 21st century is exited there will likely be global access to a minimum level of goods and services and a global quality of life singularity. Income inequality will still exist, but the primary difference between the über wealthy and most others will be access to scale (bigger houses, more houses, bigger autos, more autos).
In this environment, it is businesses that provide the essentials of life (including employment) and no longer nation-states. Ask yourself right now: Which is more important in your home country, businesses or government? In many countries the answer certainly is government. But now ask yourself a follow-up question: Is this the same as it was 20 years ago? How has the balance of power between businesses and government changed in 20 years?
Scotland’s independence vote marks a break from nearly 200 years of answers to life’s problems coming primarily from a central, unitary, powerful, political authority. Yes, governments will still exist, and yes, there will be economic consequences for Scotland and the United Kingdom (most commentators are predicting dire effects) upon a “yes” vote. Even though I am a trained economist, I have no idea what the economic consequences are in full from a vote for independence. But I do know that the Scottish people, if they secede, will do what all people always do: adapt to evolutionary forces and inevitable change. Secession is now on the minds of millions regardless of the outcome in Scotland; and nation-states look increasingly like great auks. And the Scottish independence vote is more important than you think.
Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.
I think you fail to understand the concept of the ‘nation-state’ in general, and in particular within the context of the United Kingdom.
The United Kingdom is not a nation-state but rather a state of nations, 5 to be precise, the English, Scots, Welsh, Northern Irish, and the Cornish.
If anything, Scotland voting for independence is the embrace of the nation-state in its purest form, a state for the nation of Scots, which is of course the aim of people espousing a 19th Century concept of nationalism.
Hello Mickey,
Thank you so much for taking the time to share your views.
Actually I do understand that quite well, as well as the idea that there is a commonwealth of nations tied to the United Kingdom, such as Canada, Australia, New Zealand, et.al. Perhaps what you failed to understand from my piece, and I accept full responsibility for not better communicating it, is that Scotland’s near 50:50 running on this issue is a harbinger for the diminished power of the nation state in the 21st century; and for a more localized identity (to which you allude).
With smiles,
Jason
Hello Jason
First I would like to take this opportunity to thank you for your many thought provoking blogs, on subjects that are not covered by conventional media.
This one resonated with me at least two reasons – I am a product of two countries, India and Canada, which are just two examples of countries that are relatively recent in origin (I realize that India goes back a lot longer than Canada but the concept of India, and Pakistan, is a British creation).
I would have thought the potential ripple effect of a Scottish vote, successful or not, would impact the market, but perhaps the significance of it has not fully registered, and your blog post may be a timely reminder.
This has the potential to give new impetus to separatist/tribal movements, from Kashmir to Quebec, and everything in between, particularly the countries of Europe, Africa, and the Middle East.
The shift from the collective to the individual (a simple example is the shift to Defined Contribution Pension Plans from Defined Benefit Pension Plans) will provide the foundation for more individualism, and less reliance on the state.
Extrapolating this further, one would question the benefit of an allegiance to a central body that is recent, imposed upon, and one that provides questionable value – why not shift to local self governance since funding a centralized bureaucracy (think the spineless Senate in Canada) is not doing me, the individual, any good.
Thank you again for this thought provoking piece – whether or not this will be reflected in the upward climb of the stock market remains to be seen – this final quarter of the year will be interesting.
Kind regards
Savio
Hello Savio,
Thank you so much for taking the time out to express your thoughts – I know that they will contribute to the discussion. I think this issue, that you so elegantly described from a first-person point of view, will be one of the defining characteristics of the 21st century. Here my time horizon is 25-50 years out. Even here in the United States as I communicate my thesis people tend to focus on Scotland or Catalonia. But the fact is that there was a secessionist movement here in the United States from the early 1800s through to 1865 (the end of the civil war here). Through warfare was the United States re-cobbled together. Political divisiveness is driven, not just by politics, but by identity and cultural differences.
Another trend that is in some of my future scenarios: line item voting for citizens. Here representatives are elected to draft legislation, but via the Internet individuals cast their votes for specific legislation rather than representatives. Clearly the technology to make this happen exists. What is missing is not the idea, but the endorsement. It is hard for me to imagine a world where such a thing does not happen somewhere – maybe in the Caribbean where the islands’ issues are simpler than in larger countries. But some nation somewhere is bound to experiment here. Then? Then it will evolve quite interestingly.
Last big trend that is tangent to the discussion: labor free-agency. Right now, capital, nations, and businesses can operate globally with impunity, but labor is rooted to nation states. During the Great Recession, I am certain that many unemployed would have willingly traded their lives in their home nations for a nation where they could be employed; even if this meant much lower pay. What people care about is quality of life. I would trade my salary for the living in another country if my quality of life is relatively the same. So would many others. This inequality of labor vs. capital is (and this is my personal opinion) a great injustice to my mind.
Thanks so much for sharing your views!
Jason
Jason, you mention the possibility of the Caribbean, where island issues are simpler than elsewhere. I direct your attention to the situation of the Federation of St. Kitts and Nevis, and its similarlity to the United Kingdom. In mid-20th Century, the islands of Antigua and St. Kitts desired to be no longer colonies of England but to be independent. Britain agreed, so long as they took Nevis with them. But Nevis did not want to de-colonize; they thought that Britain could manage affairs better than a local federation. As soon as the group was given independence, Antigua wanted out and broke away. Nevis tried, but St. Kitts refused to let them. Every few years a new popular leader creates a new people’s party to work for secession from St. Kitts, and each time the new movement gets co-opted. But the tiny island continues to believe that the central government puts St. Kitts first. Assuredly they will look to the Scottish example with renewed hope.
Hi Garry,
Thank you, thank you for including this great story. Yes, divorces, even “no-fault” ones always seem to be messy.
With smiles,
Jason
Yours is an outstanding essay, Jason. As you say,
“Economic efficiency is a tidal wave that only government seems to stand in the way of.”
“… it will evolve quite interestingly.”
“… what all people always do: adapt to evolutionary forces and inevitable change.”
Thank you.
Gordon
Hello Gordon,
Thank you for the feedback!
With smiles,
Jason