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.