Taking this off twitter. With the talk of a second referendum I wrote something on the problems inherent to it for another publication, here I have edited that down but the references are still at the bottom.
Although I see a lot of people discussing these topics most have a political viewpoint they are pushing as well. I don't have any particular opinion on the issue, my family emigrated from Scotland four jumps back. But Scots deserve somebody that will look at the very real problems with setting up a new country in this day and age. So far, both pro and con, the pundits and academics have been long on talk and short on numbers. This video is a good place to start:
<iframe width="560" height="315" src="https://www.youtube.com/embed/K3B3BoTsXoU" frameborder="0" allowfullscreen></iframe>
It is attractive to reduce this argument to the simplistic idea of freedom from an overbearing, incompetent and at times quite mean spirited UK government. The Brexit vote placed the issue front and center once again since many Remain voters were swayed by the argument that remaining in the UK and the EU was desirable. Only 45% of Scots eventually voted to leave the UK in 2014, while 62% voted to remain with the EU, the largest margin in the UK.
First, there is the plan to join the EU and enter the Euro based economy or keep the British pound. This is not going to happen right away, as the EU has made it clear that Scotland would be in line for membership, something the UK is sure to try and delay. Spain might as well, but lets assume that the EU makes an effort to fast track the process and get Scotland into the EU faster. Part of the requirements for admission are to demonstrate a stable economy and economic market that can survive in the EU. The value of the currency they choose and their control over that currency will be key issues and despite assurances from various politicians any of these factors may delay a seamless transition. The video above notes that Scot wages are lower than Ireland and Scotland is much larger. Wages are a function of monetary policy, something Scotland will lose control of completely upon leaving the UK unless they form their own currency. In comparing Scot wages to Irish wages he neglects to note that the Irish are on the Euro, and have some say over EU monetary policy. Britain would have no reason to consider Scotland when deciding things that impact the value of the pound, such as how much to borrow and what form that borrowing should take. While McWilliams is correct that deficits don't matter that much the caveat to that is they don't matter to nations that control their own monetary policy. Not having such control means that Scotland could theoretically "run out" of money, something no other country has to worry about. When Scotland has to borrow (all countries borrow, it is how you fund things like a perennial deficit) they will pay more for the debt because they lack said control.
Next he asserts the bizarre argument that using other currencies is somehow normal. It isn't. That is why he uses the example of mid-90s Bulgaria. When have you ever heard of a positive Bulgarian comparison? Other countries that use foreign currencies or peg their currency artificially include:
Ecuador, East Timor, El Salvador, Zimbabwe, Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Republic of the Congo, Equatorial Guinea, Gabon, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal, and Togo.
This is not a list of successful economies.
Counting on North Sea oil, even as a kickstarter, is foolish. He notes 30-40 years of remaining oil. That is perhaps the amount should pumping oil be free. In fact North Sea oil is some of the most expensive to get to. The price of oil is at the lowest point it has been in some time and North Sea oil costs about $47 a barrel to produce, while oil is trading at $55 a barrel. This is driven both by a reduced demand and a global supply glut that OPEC has so far failed to eliminate by cutting oil production. In the U.S. shale, oil producers have developed new technologies and learned how to produce oil more cheaply than ever before. This threatens the price regime of OPEC, and if that organization were to collapse we could expect oil to fall in price even more. Right now, the plans are in motion to disassemble much of the oil extraction infrastructure in the North Sea.
This is quite a problem for free Scotland, since oil is the largest and most profitable sector of the economy. Indeed, oil seems to pay for the imbalance in infrastructure costs and revenue, something Scotland will need to borrow to maintain upon independence. When you include other related industries like renewable energy and infrastructure support oil has an even larger footprint.
The other two major exports are banking services and whiskey. Banking may be more of a mirage than a reality though, as the Royal Bank of Scotland is now the sole big bank still headquartered in Scotland. Their CEO made it clear ahead of the previous vote that in case of Scot independence RBS would relocate its corporate location to London. This is more understandable than you might think, all the UK assets that RBS holds, all their UK reserves, and most of their liquidity is held in British Stirling. Keeping this status quo while they become a “foreign bank” is very unlikely.
Whiskey and a handful of other items are the other major export, with most of the goods going to the rest of the UK. This would continue barring any unforeseen epidemic of sobriety among the rest of the world, although it seems likely that the UK would impose some sort of tariff on these items.
There will be consequences, painful ones, for a new, free Scotland but the form they take is difficult to discern. Britain will probably not share these troubles, as some seem to think. Their economy is ten times the size of Scotland's. They don't rely on the Scot market for anything of note and their economy is built on a post -industrial model exporting services and high end manufacturing to global markets (aerospace, finance, insurance, etc). Restrictions on trade with Scotland are unlikely to have a significant impact and they are well situated to endure the rapid decline of North Sea oil revenue.
Although some have made references to the failed experiment of Zimbabwe that position seems to be without merit, Scotland is not going to be ruled by a murderous dictator. A more likely, though no less scary, comparison might be to the Czech Republic. Formed upon the dissolution of Czechoslovakia, the Czech Republic converted to the koruna and endured over a decade of International Monetary Fund imposed austerity before they found firm footing among global investors. Although the Czech Republic now is stable and prosperous, and the IMF has moved away from its staunch insistence on austerity (especially among white/European nations) would Scots be willing to accept the twenty-year period of deprivation and struggle that the Czechs went through?
I don’t know the answer to that. As I said, I am not Scottish, but for my cousins that are I hope that Scot voters get a chance to hear a better assessment of the risks involved than we can expect from either side in the current debate.
 Notably, I have had to rely largely on British references for this memo, as they are the major source for some of the more technical analysis. Although reputable, these sources may introduce a measure of bias so I have tried to restrict their use to quantifiable facts.
 For a more visual recap of some of these check out this piece http://www.telegraph.co.uk/fin...ssential-charts.html and http://www.gov.scot/Topics/Sta...xports/ESSPublicatio