Carnegie Council's U.S. Global Engagement program gratefully acknowledges the support for its work from the following: Alfred and Jane Ross Foundation, Donald M. Kendall, and Rockefeller Family & Associates.
DAVID SPEEDIE: Good afternoon, ladies and gentlemen, and welcome to the Carnegie Council. I'm David Speedie, the director of the program on U.S. Global Engagement here at the Council.
It's very fitting that on this occasion we welcome the first minister of Scotland, Alex Salmond, as our special guest.
I would like, by the way, immediately to acknowledge Robin Naysmith, the Scottish government counselor for North America. Robin, thank you so much to you and your staff for helping arrange this very special occasion.
I would also just like to acknowledge, if I may, the presence of Governor David Paterson, former governor of New York. Governor Paterson, it's a great pleasure and privilege to welcome you to the Council today.
As I said, it's fitting on various levels that we welcome the first minister. Let me just briefly mention two. First of all, of course, there's the Andrew Carnegie connection itself. The links between the Council and Scotland are deep and robust, and especially with the Carnegie UK Trust in Dunfermline, represented here today by Martyn Evans, as chief executive officer. In October this year, these links will be reinforced by a gathering of the Carnegie clan in Dunfermline and Edinburgh, culminating in the Carnegie Medal of Philanthropy awards, where Mr. Salmond's government will be our host at the Scottish Parliament in Holyrood, Edinburgh.
Second, of course, there's the proud heritage of Scotland and Scots in America—something which I like to say I identify with—from the very origins, really, of our country, the United States' independence in 1776. The first minister knows his American constitutional history, and he has often spoken of the immersion of Jefferson, Washington, Franklin, and other founding fathers in the principles and guiding light of the Scottish Enlightenment.
The extent of the Scottish-American heritage is, I'm glad to say, difficult to overstate. In a speech he gave about four years ago, the first minister said the following: "On a previous lecture tour, I was told by a member of the audience that there were 4 million Scots-Americans. By the last lecture, the number suggested by the audience had risen to 20 million. That lecture tour lasted only a week. I often wonder what the final figure would have been if I'd kept going." First minister, we'll do a quick survey at the end of this visit.
Alexander Elliot Anderson Salmond became first minister in May 2007. He also served as M.P. for the Banff and Buchan constituency in the House of Commons at Westminster from 1997 to 2010. On the way, he had the singular good common sense to attend the University of St Andrews, from which he graduated with a joint MA honors in economics and history.
By the way, Carnegie was rector of St Andrews. That's a uniquely Scottish university institution, where the rector is the elected representative of students on the university council. So Carnegie has a link with St Andrews.
Alex Salmond worked for the Government Economic Service, later with the Royal Bank of Scotland [RBS] as an energy economist, where he wrote and broadcast for both domestic and international media. I believe that the RBS-BBC oil index that he devised is still used today. His commitment to energy issues, and particularly green, clean energy, has been a hallmark of his government at Holyrood. In his 2010 New Year's message, he called for an increase in commitment of the Scottish Parliament to harness Scotland's green energy potential and to take full advantage of what he called the "renewable revolution," Scotland's greatest natural asset, water. He set ambitious targets for his government for renewable electricity generation within the next 10 years or so.
Regardless of where one stands on the independence question, Alex Salmond can most definitely be credited with what can be described as intellectualizing the debate. If that sounds too egghead-ish, what I mean is that, not to be too unfair to Mr. Salmond's predecessors, in days past, the independence issue sometimes seemed to have a resoundingly emotional ring to it, an appeal to heart rather than head. That has changed. What the first minister has done is to frame the debate squarely in Scotland's place in the world.
That debate is not just political. Let me say parenthetically that the debate has not just political and economic dimensions, but also ethical ones—for example, the contentious issue of Scotland and nuclear weapons.
Mr. Salmond has said, "An independent Scotland has at its core an active and positive membership in the European Union and, by extension, in the world beyond." Whether Scotland will have this role to play, and particularly in the economic and business investment sense, will be decided by her voters on September 18, 2014.
With that momentous date looming, please join me in a very warm welcome to the first minister of Scotland, The Honorable Alex Salmond.
ALEX SALMOND: Governor, David, ladies and gentlemen, and friends:
I was struck by David's introduction for a number of reasons. I well remember the ever-expanding number of Scots-Americans on that lecture tour. But I also remember, about 10 or 12 years ago, the census in America coincided with an opinion poll on ethnicity. In the census it was discovered that people of Scots or Scots-Irish origin in the continental United States were about 15 million. But the opinion poll which was carried out at the same time discovered that 30 million people claimed Scots or Scots-Irish ancestry.
I have to say, I've never heard a greater compliment paid to any country—that there were 15 million people knocking about these United States who wanted to be Scottish. All of my message is, you're in. You're in. That is the qualification.
I'm delighted to be here. Thank you so much for your introduction, David.
I'm in the United States for a number of reasons: to boost business links, to promote trade and tourism, to celebrate and strengthen that bond of friendship between the United States and Scotland. But the very specific reason for attending this week and now is because the United States Senate, in 1998, proclaimed that the 6th of April was Tartan Day. Of course, not content with a single day to celebrate Scotland, we have made that Scotland Week, of which Tartan Day, Saturday, is the centerpiece.
The 6th of April, of course, marks the anniversary of the sealing of the Declaration of Arbroath. In the original draft of the speech, incidentally, that read "the signing of the Declaration of Arbroath in 1320," but David and I went to Scotland's most ancient university, St Andrews, where they were pretty pernickety about these things. And people didn't sign documents in 1320. They sealed documents in 1320.
So the 6th of April marks the anniversary of the sealing of the Declaration of Arbroath, which, of course, was a ringing declaration of independence, but, in particular, also appealed to a sovereignty beyond monarch and nobility to the entire, as the document put it, "community of the realm." Of course, the U.S. Senate, in its resolution of 1998, said and understood that that first European expression of something near popular sovereignty was an inspiration for the United States' own Declaration of Independence some 450 years later.
The Declaration of Arbroath was sealed during the reign of Robert the Bruce, Scotland's hero king, who secured a historic victory in the Battle of Bannockburn in 1314. The Bruce was buried in the Abbey of Dunfermline, which, of course, is the hometown of Andrew Carnegie. As a young lad, Carnegie read about Bruce's exploits and those of William Wallace through a book by Sir Walter Scott called Tales of a Grandfather.
Carnegie later recalled adopting, actually, some words of Robert Burns: That those tales "had created in me a vein of Scottish patriotism which will cease to exist only with life itself." The Burns quote actually is "will boil along there till the flood-gates of life shut in eternal rest." But Carnegie, being a modest man as well as a brilliant one, referenced the quote to Burns when he wrote about it.
I think it's reasonable, very reasonable, to assume that Carnegie would have been a huge supporter of tomorrow's Tartan Day. He would also, I'm sure, have been a big supporter of Scotland's Year of Homecoming in 2014, the 700th anniversary of the Battle of Bannockburn, when we're inviting visitors from around the planet to enjoy hundreds of fantastic, special events being arranged for Scotland's big year.
For example, we're expecting 250,000 people just for the week of the Ryder Cup at Gleneagles. That may well be worth a visit after the epic drama of Medinah. I would ask you to remember that Jack Nicklaus designed the Centenary Course on which the Ryder Cup will be contested next year, but it was God, of course, who designed Gleneagles.
I would suggest that there's no better way—in fact, I would suggest it's your duty—at the Carnegie Council to pay tribute to your founder's legacy in your own centennial year of 2014 by coming to Scotland to celebrate these auspicious anniversaries.
Andrew Carnegie remains admired for his business success, but especially for his philanthropy—and that remains, obviously, totally influential to this day—his commitment to culture, to education, and, above all, to peace. His foundation of the Church Peace Union, now this Carnegie Council for Ethics in International Affairs, is one of the very important examples of that. Frederick Lynch, who worked with Carnegie for many years, notes that Carnegie had never taken more delight in any of his gifts than in this child of his later years.
Therefore, it is a real privilege, as first minister of Scotland, to speak here about Scotland's economy, about her place in the world, and in doing so, to honor one of Scotland's greatest sons.
As we were mentioning just a few seconds ago, in 17 months' time, on the 18th of September next year, the people of Scotland will choose whether Scotland should become an independent country. In talking about that decision this afternoon, I want to focus a lot on economic issues, but more than that, I want to articulate that the underlying motivation for this is a simple, devastating, and obviously true argument that the best people to take decisions about Scotland are the people who choose to live and work in Scotland. I want to also suggest why that process of Scottish self-determination is an exemplar in the conduct of international relations.
First of all, I'd like to make one point clear. Scotland is already a successful nation. That is recognized by many companies around the world, especially in the United States. The accountancy firm Ernst & Young publishes every year a comprehensive survey which ranks the different parts of the United Kingdom and their success in attracting inward mobile investment. The current survey shows that Scotland is easily the most successful part of the UK for attracting these jobs, ahead of all other areas, including the city of London. Ernst & Young also found that Scotland is by some distance the most productive location across the UK for attracting research and development jobs in particular.
Much of the reason for that success is Scotland's reputation and tradition in innovation. The Scots, as we know, invented the television, the telephone, the bicycle, the condensing steam engine, MRI scanners, ATMs, and Dolly the Sheep. Professor Arthur Herman, now at the American Enterprise Institute, has argued that Scotland invented the modern world. Modesty would have forbidden a first minster of Scotland to make that claim, but I'm really, really pleased that an American has made it.
All of that is a result of the inventiveness, the ingenuity of the people living and working in Scotland. There's a really important point here, and this is one that Carnegie really understood. Scotland's industry preeminence in the 18th, 19th, and early 20th centuries—the sheer volume of inventions that came from our country—had its origins in the fact that we were the first society on earth to introduce universal education. By educating more people than other nations, we nurtured the individuals to have the skill and talent to innovate and to invent.
The lesson we should take from that holds true to this day. One of the first actions that the government I lead took in 2007 was to reestablish in Scotland the principle of free higher education. The Scottish government is absolutely committed to ensuring that schools, colleges, universities are accessible to all and are among the best in the world. That's an aspiration which Carnegie identified with. In Carnegie's biography of James Watt, he referred to "the doctrine of compulsory education for all the people, the secret of Scotland's progress."
In 1901, of course, he endowed Scottish universities with a bequest of $10 million. That's worth approximately a quarter-of-a-billion in today's money. In contrast, the entire public support in 1901 for the four, then, Scottish universities, the ancient universities, was around £50,000. That legacy has helped some 100,000 Scottish students since then and continues to do, of course, much good to this day.
As things stand just now, the Times Higher Education supplement highlights that Scotland has four universities in the world's top 200, more per head of population than any country in the world except Switzerland. According to research conducted in 2009, we are ranked first in the world in terms of research productivity per unit of GDP and second in the world in terms of research impact. Our life sciences research achieved global fame, of course, from the Roslin Institute when they cloned Dolly the Sheep. Of course, that's an exceptionally strong industry in Scotland, and we have a strong tradition of working collaboratively with that industry.
Yesterday I was able to announce another major life science investment in Scotland from Daktari, which not only will initially create more than 100 jobs in Inverness, but potentially, through its innovative testing of HIV, will help millions of people across this planet.
Scotland also has major opportunities in the energy sector. Research that was published last month demonstrated that Scotland is responsible for some two-thirds of the European Union's oil production. In fact, more than half of the wholesale value of Scotland's oil and gas reserve—potentially more than $2 trillion worth—remains to be recovered from the waters around Scotland. As a result, last year saw a record-level of investment in the North Sea oil and gas sector. Supply chain companies based in Scotland now sell to more than 100 countries around the world, and Aberdeen is the largest energy sector center on the planet after Houston.
Beyond that, Scotland has the ambition and the potential to become the renewable energy powerhouse of the continent of Europe. We have 10 percent of Europe's wave power potential, a quarter of offshore and tidal power potential. Pentland Firth has been described memorably as the Saudi Arabia of tidal power. Glasgow is Europe's largest research base for offshore wind energy. Scotland leads the world in the development of wave and tidal technology.
President Obama in his inauguration speech this January made it clear that he wants the United States to lead the transition to sustainable energy resources. You couldn't have a better partner for achieving that than Scotland. Indeed, the Scottish government's partner in the Saltire Prize for innovation for the commercial development of marsh, wave, and tidal power is National Geographic, the world's largest educational charity, of course co-founded by another prominent Scot, Alexander Graham Bell.
Scotland has key strengths in sectors such as digital media, informatics, financial services, and tourism. CNN has wisely designated Scotland this year as the world's number one must-see tourist destination. We know that the homecoming events of next year will attract hundreds of thousands, indeed millions more tourists.
In addition, our food and drink exports are going from strength to strength. In fact, one of Scotland's greatest inventions of all has seen the value of its exports increase by almost a quarter in the last two years. Our global whiskey sales were worth over $6 billion in 2012. Carnegie described whiskey as "the best, as well as the most fashionable medicine of the day." I'm not sure that advertising standards these days would allow me to promote whiskey as a medicine now. But you get the basic idea, I think.
Carnegie, I'm sure, would have been delighted to see that the United States remains the top Scotch whiskey market in the world. Sales increased by 16 percent last year. I would like to thank each and every one of you for contributing. That's really important. The United States remains in the lead in that regard. What I'm saying to the Carnegie Council is that you must do your duty by drinking your full quota. We all want the United States to stay number one in the world.
I'm providing this outline of Scotland's economic strengths partly, of course, to promote Scotland as a fantastic place for investment, but it also underlines the massive potential of an independent Scotland. If Scotland were an independent nation now, in 2013, we would have the eighth highest gross domestic product per capita in the developed world. We would still be behind the United States, in fourth place, but significantly ahead of the United Kingdom, which is the 16th place.
The long-term financial strength of Scotland is demonstrated time and time again by official figures. In every one of the last 30 years, Scotland has generated more tax revenue than the average of the UK as a whole. Over the past five years, we have had a stronger fiscal position than the UK by the equivalent of almost $19 billion. Our fiscal deficit is smaller than the UK's—indeed, is smaller than many countries across the European Union.
Helping us to chart the way ahead, Scotland already has our own independent Council of Economic Advisers. It's partly based, of course, on the U.S. model. It includes two Nobel laureates, Professor James Mirrlees and Professor Joseph Stiglitz. Professor Stiglitz, as you'll know, previously served as the chairman of the President Clinton's Council of Economic Advisers. I had to explain to Joe that in Scotland he could only be a member of the council. He chaired it, of course, for President Clinton. Of course, he was also chief economist at the World Bank, before taking up his current post at Columbia University here in New York.
The Scottish government commissioned a number of advisers, including Professor Stiglitz, to form an independent Fiscal Commission Working Group, which produced its first report in February. That report is an exceptional piece of work, as you might expect, given the caliber of its authors. Its key findings will be invaluable as we prepare the way for an independent Scotland. The starting point of that report was clear. By international standards, Scotland is a wealthy and productive country. There is no doubt that Scotland has the potential to be a successful independent nation.
However, the report also found that in certain key respects, despite all of the achievements and advantages and natural resources and human resources that I have mentioned, Scotland underperforms as part of the UK economy. Our growth rate over the last 30 years has been around half-a-percentage point lower than the UK as a whole and about the same lower for comparable European nations.
Based on Gini coefficients—that's the widely used measure of inequality in household incomes—inequality is lower in Scotland than it is across the UK, but it's still very high indeed by international standards. The UK as a whole ranks in the bottom 10, incidentally, of the Organisation for Economic Co-operation and Development.
The Stiglitz working group proposed a stable economic framework that an independent Scotland could use to build both a fairer and more prosperous country.
In all of this, there's a wider point about fiscal responsibility. At present the Scottish government is responsible for approximately 60 percent of public spending in Scotland, but controls just 7 percent of the taxation base of the country. This will soon rise, next year, to around 15 percent. But 15 percent is a long way from control of the taxation base.
To reverse a phrase first coined in this country, the Scottish Parliament couldn't endure representation without taxation. It's a fundamental problem. It's not sustainable, healthy, or efficient for Scotland, or indeed for the rest of the United Kingdom. An independent Scotland would be responsible for 100 percent of taxation. That would give us the powers that we require to create prosperity and make Scotland a fairer society.
With power for taxation, like corporation tax, the Scottish government would be able to set a competitive rate to attract new investment to Scotland, to encourage key industries, to counterbalance the gravitational pull of London and the southeast of England. The Scottish government modeled the effect of a 3 percent reduction in corporation tax and concluded that such a step would create 27,000 long-term jobs, and it would encourage the rebalancing of the economy by boosting exports.
Air passenger duty would be another topical example. This is a tax on air travel paid by each passenger. At the moment, one part of the United Kingdom, London, has airports which are totally congested and over-capacity. Other parts of the country need to encourage more direct air links. It makes no sense whatsoever—no sense—to have a common rate of duty. With control over that tax, Scotland could provide extra help to our tourist industry, boost our connectivity, encourage business investment. Crucially, our Parliament in Scotland would understand the importance and the needs of economic sectors of most importance to our country.
An example of that would be a couple of years ago, when the UK government imposed a supplementary charge on North Sea oil without any prior consultation whatsoever. That move, since reversed, with positive results—it temporarily reduced, indeed, resulted in almost freezing, investment in the North Sea. It is inconceivable that such a change would have been introduced in an independent Scotland.
Those who argue against Scottish independence sometimes frame the argument in terms of perceived risk. In fact, they always frame the argument in terms of perceived risk. The real economic risks for Scotland, I would submit, lie in our constitutional position—the risk of oil revenues continuing to be used exclusively for common expenditure rather than providing long-term economic security; the risk of inequality rising further, as it has done at the UK level over each of the last 35 years; the risk of taxation and welfare policies being designed in London as opposed to designed for Scottish circumstances.
Independence, I would submit, replaces these risks with a certainty. That certainty is that whatever challenges we wish to face, whatever opportunities we wish to seize, Scotland's future would be in Scottish hands. Independence allows us to make our own policies to match our own priorities and our own values.
Ladies and gentlemen, an American president once famously said that the business of America is business. As a canny Scot, I can recognize that sentiment. In this trip, we have been demonstrating with inward investment, trade delegations, the marketing of Scotland Week, and next year's homecoming, that the business of Scotland in America is business.
However, I also know that the Coolidge quotation is not the fundamental of American society. The foundation principle of this republic is popular sovereignty. The real business of America is not business, but democracy. Therefore, it's worth reflecting on something really, really important—how the process of Scottish self-determination is offering an exemplar to the rest of the planet.
For the best part of a century, Scotland has been on a constitutional journey. Despite the passion of the argument, not a single person—not a single person—has lost their life arguing for or against Scottish independence. Nobody has had so much as a nosebleed in this debate. The process has been peaceful, polite, constitutional.
The Edinburgh Agreement, which I signed with the prime minister of the United Kingdom last October, is the culmination of that process. Both Scotland and London agreed on the terms of a popular referendum, agreed to accept the result, and crucially, in clause 30 of that agreement, agreed to work in the best interests of the peoples of Scotland and the rest of the United Kingdom following the result, whatever it may be.
Both the Declaration of Arbroath back in 1320, with its search for a Scottish legitimacy, and the American Declaration of Independence, with its glorious affirmation of popular sovereignty, were sealed in the force of arms and struggle. Now the process of Scottish self-determination is signed by a handshake and determined in a democratic referendum of the people. Even in modern times, this is a rare and precious process and one which stands as an exemplar to the rest of the planet.
Ladies and gentlemen, since Andrew Carnegie's day and his search for peace, the world has changed, changed fundamentally. Global markets are open to countries large and small. Threats to international security don't come, by and large, from territorial acquisition. They come from international terrorism or international criminality. In this environment, the disadvantages of smaller nations have disappeared. They are now benefiting from their natural economic strength, which is flexibility, speed of decision making, the ability to define clear national interests and objectives.
Of the United Nations Human Development Index, 11 of the top 20 nations have fewer than 10 million inhabitants. Norway, with just under 5 million people, is number one. The UK is number 26. The United States, incidentally, is third, so large nations can also prosper. However, the USA, importantly, has a far less centralized system of government than the United Kingdom does.
You can see the advance of smaller countries in many other ways. When the United Nations was founded itself, it had 51 member countries. Now there are almost 200. As recently as 1990, Europe had 35 countries. Now it has 50. Of the 27 countries that currently make up the European Union, six of them did not exist as independent states before 1990. In that context and looked at in that way, Scotland's current constitutional status seems more and more like an anachronism. Independence, which carries the right to participate as an equal on the international stage, appears more and more like Scotland's natural state of being.
Independence inevitably in the modern world goes hand-in-hand with interdependence. Nationalism, as Scotland Week demonstrates, goes hand in hand with internationalism. Scotland will share a currency with the remaining members of the United Kingdom. We'll be a member of both the United Nations and the European Union. We'll participate as an active member of the international community. Of course, we will remain close friends with nations such as the United States of America, with which we share such longstanding ties of trade, of family, of friendship—ties which are epitomized by the life and the legacy of Andrew Carnegie.
For all of these reasons, I believe that, come September next year, Scotland will choose to be an independent nation. To quote Scotland's national bard, Robert Burns, in a song praised by Andrew Carnegie as the hymn of triumphant democracy: "For a' that, an' a' that, it's coming yet for a' that."
In the words of Thomas Jefferson, your own tribune of triumphant democracy, "We are a people capable of self-government, and worthy of it."
Thank you very much.
QUESTION: I'm Ulrike Klopfer.
This probably is a stupid question, because I don't know much about these things. When you vote for your independence, what happens with the United Kingdom? Are they bound to accept it? Can they reject it, or what?
ALEX SALMOND: This was the agreement signed on the 15th of October last year between myself and David Cameron, the prime minister of the United Kingdom—the Edinburgh Agreement that I mentioned. In this document it commits both governments to accept the result of the referendum by majority vote, whatever it may be.
So, yes, the vote will be accepted. The legislation, both in the United Kingdom Parliament and in the Scottish Parliament, has put the vote beyond legal challenge. The vote is consolidated, accepted, properly monitored, totally democratic, fantastic, and beyond reproach.
It was very important to get this agreement—and equally important, incidentally, not just to have an endorsement of accepting the result, but a commitment that both governments will work in the interest of their peoples, regardless of the result. The reason is that in the hurly-burly as you run up to a referendum, there's a temptation, of course—and it applies to both sides, but particularly to the "no" side—to suggest that people wouldn't cooperate after the democratic vote.
I was told by a very prominent public servant in the United Kingdom a year ago—a very, very prominent public servant, who will have to be nameless, because he's still in post and he might not be in post if I said who it was—I was told that, "Your difficulty, Alex, is that what the UK government says now and what they say the day after a 'yes' vote in the referendum are two entirely different things."
So it was important in the Edinburgh Agreement to get the endorsement of the process, the acceptance of the result, and the commitment in clause 30 that both governments will work in the interest of the peoples and accept the outcome.
It's not a silly question at all. It's a very, very important one.
QUESTION: Warren Hoge of the International Peace Institute.
ALEX SALMOND: They are in alliance with the Conservatives and the Liberal Democrats, to be against independence. The Scottish National Party [SNP] are in alliance with the Green Party in favor of independence.
We have an absolute majority in the Parliament—in a proportional Parliament, incidentally, because we achieved a very notable result in 2011. But the issue of independence, we argue, has to be decided on a referendum, because there are many, many reasons why people vote in elections—many good reasons. But a referendum is a choice, and the choice is focused and clear. The question is: Should Scotland be an independent country? The question could not be clearer.
There have been referendums around the world where you maybe needed a Ph.D. in politics to understand the question. I think everyone accepts that the question that's going to be asked in Scotland is clearly stated, clearly understood, and the answer will be either yes or no.
QUESTION: Peter Tear, 59E59 Theaters.
As a Scot, I lean towards independence. But I wonder, could you clarify for me and for everyone, I think, what the position of the Scottish national government would be in terms of the currency if there was a yes vote?
ALEX SALMOND: That was part of the Fiscal Commission report that I mentioned, the one with Joe Stiglitz and Jim Mirrlees on it. They recommended that we stick with sterling. The argument is that the advantages outweigh the disadvantages. Any currency position has pros and cons, like any decision in economics.
The reason our currency union will work, in a way that perhaps the euro illustrates where a currency union has difficulties, is quite simple. The rates of productivity, industrial productivity, export productivity, in Scotland and England are very similar. In fact, Scotland over the last two years has been marginally higher. In the euro area, of course, you have divergent rates of productivity between the Ruhr Valley and the southern tip of Greece, which can approach 40 or 50 percent. So there's a huge instability within that currency union.
But a currency union between Scotland and England—it's an optimal currency area, to use the economic jargon. So the advantages of the currency union, in our view, outweigh the disadvantages. That's the policy.
The argument we make in terms of economic progress is for the control of taxation—which, incidentally, I seem to remember a lot of people in this country thought was quite important just over a couple of hundred years ago. That's where we would seek to make the difference to economic prospects, as economic policy makes a difference, through the judicious use of fiscal policy.
QUESTION: Shellie Garrett, Sacramento Seminar in San Francisco.
First Minister, what would the relationship of an independent Scotland be with NATO?
ALEX SALMOND: The SNP took a policy decision last October to be in favor of NATO. Of course, we would only be one party competing to be the Scottish government. That's a matter that's decided in elections, of course. But our policy position is to be in favor.
The reasons for that are quite interesting. I don't think, incidentally, a single vote—well, maybe some votes, but not very many—will be swayed by the SNP position on NATO. Whether you're a member of NATO or, like Ireland, a member of the Partnership for Peace, for most people voting in this referendum, it would be not uppermost in their minds in terms of priorities.
Why we took the decision was basically because of what our friends and partners thought, including the United States, but also partners like Denmark and Norway. For these countries, Scottish membership in NATO is very important, because the alliance covers a substantial geographic area, and a part of that substantial geographic area is Scottish territorial waters, which are strategically significant in terms of the North Atlantic.
So we took the decision, not to try and get votes in the referendum; we took the decision—and it was a difficult decision for the SNP, and I'll come to that in a second—because we knew it was a signal to friends and partners that we recognized their legitimate interests in the process of Scottish independence.
Why was that a difficult decision? Because our objective would be to be a non-nuclear member of NATO. Nobody, I think, seriously would argue that a country of 5,250,000 people should possess nuclear weapons. But, of course, Scotland currently hosts Europe's largest concentration of weapons of mass destruction. That has been a burning issue in Scottish politics for 50 years. It is difficult sometimes for people to separate the process of being a member of the North Atlantic Treaty Organization, like the 25 non-nuclear members of the organization, from the possession of nuclear weapons. So we have had to make the argument that being a member of NATO does not imply the possession of nuclear weapons. It's quite legitimate to be a non-nuclear member of NATO.
For that reason, it was a vigorous debate. It came to what I believe is the right result. We came to it because we wanted to send a signal to our friends and partners that we wanted to assume responsibility as a responsible friend and partner.
DAVID SPEEDIE: If I may follow up on that briefly, in passing, you mentioned that Scotland will be a member of the European Union. For the American audience, would you just summarize a little bit of what has been going on in the press about the discussion with the European Commission as to whether Scotland automatically receives such an invitation, what the process will be, how this affects the UK as a member of the EU if the election goes in the yes direction?
ALEX SALMOND: The formal position of the European Commission is that they won't comment on our situation in general. They have to have an exact prospectus to comment. But there has been a fair amount of speculation as to what the position is.
However, I do think we're reaching a conclusion to this debate. Roughly, that is that the United Kingdom government published a constitutional paper a couple of months back, which was offered by Professor James Crawford, an Australian, a very distinguished professor of international law at Cambridge University. Professor Crawford argued, quite controversially, that the UK would be a continuing state and Scotland would be a successor state or a new state in terms of international law. In other words, you wouldn't automatically inherit treaty obligations.
However, he went on to say in an interview that he thought the time scale which the SNP had been putting forward for negotiations was, as he put it, a reasonable one. Scotland will vote for independence, we hope, next September. Then there will be an 18-month period before the 2016 elections, which will be the process for negotiations, both for the United Kingdom government and with the European Union, and indeed with other international organizations. He described that 18-month period as a reasonable one.
So what we would do is signify our intention to remain in membership of the European Union on a "yes" vote in the referendum and negotiate the position between then and March 2016, when the independence elections would take place.
If we get to the stage—which we have now arrived at—where the author of the United Kingdom paper on this matter describes the 18-month period as a reasonable one, then I'm confident we're approaching a reason for the debate being conducted in a proper fashion.
The other interesting part of this, of course, is that Prime Minister Cameron has signified his intention to renegotiate, if he's reelected, the UK's membership of the European Union. So we might well have a process, following a "yes" vote, where Scotland is negotiating to remain a member, but the United Kingdom government is negotiating perhaps to withdraw. I think it's a reasonable supposition that negotiations to remain a member might be rather more successful, productive, than negotiations to withdraw. So I suspect we're in a slightly better position.
Why is this? I don't say for a second, incidentally, that everybody in Scotland is content with the policies of the European Union. Everybody in America is not content with the policies of the federal government or the state government or the city government. That is just the natural state of things. People express their democratic right to be discontented, and so they should. But we don't have in Scotland the visceral anti-European strain that appears in some of English politics—in the House of Commons, for example. We don't have a party, as there is now, called UK Independence Party, which is on an anti-European platform, attacking the flank of the Conservative Party in England. That's not a tradition of Scottish politics.
I think our position would be comfortable within the European Union, not because we agree with every single thing the European Union does now or in the future, but because we recognize that we are part of a European continent and we should be part of that European process.
QUESTION: Joel Bell, the Chumir Foundation for Ethics and Leadership.
I have a double-barreled question. You make a very interesting and compelling case on the economic front for independence. That could be done by many countries or many parts of countries. The underlying assumption, I think, of a community is an exogenous variable of a social value system that decides to pool at a certain social level rather than a higher or lower social level. My question would be, first, what would the case be that you would make for independence based on that social value scale?
Secondly, if the vote is no, are there alternatives? What political position would your party take? Are there alternatives, such as federation or some other arrangement that you would find would be an optimizing of the relationship?
ALEX SALMOND: I recognize the argument. I was speaking about the economics because this is part of a series of speeches. The fundamental reason for Scottish independence is not that Scotland will be better off as an independent country. I believe it will be. But that's not the fundamental reason for independence. The fundamental reason for independence is that Scotland is a nation, and nations, by and large, on the whole, are better governing themselves than allowing decisions to be taken by other nations for them. That, I would submit, is generally recognized and understood.
You may decide, of course, to pool sovereignty over certain things, but you still retain the sovereignty that you decide to pool. Scotland, as an independent member of the European Union, would decide in certain areas to cede its sovereignty to a European authority over commerce or the single market or competition law, but it would still retain the sovereignty. It would still be making that conscious decision. That's something that nations do to protect the national interest.
Scotland is not in that position at the present moment. The policies that are pursued by the United Kingdom government, which could be described as not only unpopular but hostile to Scottish interests, are not policies that they pursue by permission of the Scottish government. They are policies they pursue because, in their scheme of things, it is the Scottish government, the devolved Parliament, which is a subsidiary parliament, and, of course, sovereignty is actually retained at Westminster.
So as things stand at the present—I don't think it's going to do it, incidentally—theoretically at least, Westminster could pass an act abolishing the Scottish Parliament, as well as passing legislation over reserve issues, which may be inimical to Scottish interests.
To take an example, we have something which is famously called the bedroom tax which is being introduced amid great controversy at the present moment. This is basically a reduction in the payments in social housing to people who have a spare bedroom. The reason for this happening is because there have been soaring rent levels in certain areas of the south of England, particularly in London and the southeast. There haven't been soaring rent levels in Scotland. But that legislation is still being introduced in Scotland.
You might say, "Well, what's wrong with that?" What's wrong with that is that people don't have an option to move to a smaller house. We haven't built a social housing stock in Scotland of single room accommodations. We built social housing stock to give people the maximum freedom they can afford—people with disabilities who may need a room to store their equipment, people who are separated who need a room when the kids visit.
The idea that we should ask single mothers to take in lodgers, potentially with young children, so that they can finance the rent on their house—that's an example of current legislation being introduced by Westminster. If it came to a vote in the Scottish Parliament, it probably—and the Conservative Party are always capable of surprising me, of course—but, nonetheless, I would doubt that it would garner a single vote in the entire Parliament.
My submission would be that the fundamental, underlying reason for Scottish independence is that Scotland is a nation and nations are better to govern themselves, I suppose, than allowing other people to do it for them. They make better decisions. They make more responsible decisions. They grow as a community and a country, not in isolation, but with other countries contributing properly to the process of internationalism.
In terms of your other question, I love hypothetical questions. I really adore them. Generally speaking, I've found it better to hypothesize on success rather than failure. This, I have to submit, is something that has served me quite well in politics.
I spent a lot of time as an opposition member of the House of Commons in London. I must have been almost 20 years in politics before I realized an essential truth. I kick myself sometimes for not realizing it earlier. That is to say, if you're engaged in a political debate and argument, then the only way a negative case will win is if there are two negative cases, in which case the most negative case will win. If you have two arguments which are framed in negative terms, then the most negative case, the most bitter case, the most scaremongering case, the most fear-mongering case will win.
If, on the other hand, you have a positive case set against the negative case, then that positive case will win. Why? Because at the end of the day, people want to do the right thing. The vast majority of people, confronted with any set of circumstances, want to do the right thing. People want to believe that things are capable of improvement, getting better. Andrew Carnegie spent a lifetime believing in the ideas of self and international improvement. People react to a positive case.
As part of my positive demeanor and positive case, I find it better to make assumptions based on positive answers and not negative ones.
QUESTION: Rick Grove, Rutter Associates, a financial market consulting firm based here in New York—and, incidentally, the parent of a St Andrews student and, as of last week, an investor in Scotland, as we purchased a flat in St Andrews for our daughter. So I have a vested interest in this conversation.
The question I have is on the financial sector in Scotland. Right now, at the outset, if there is currency union with the UK, monetary policy will be determined in London. The big four High Street banks will be the dominant market share in Scottish financial services.
Two questions. How do you see the financial sector evolving? What are the risks if the headquarters of those four—even, ostensibly, RBS is in Scotland, but they are controlled from London—how do you see that evolving?
Secondly, what's the chance that one of the terms for Scottish accession, Scottish membership in the EU, would be membership in the euro? How would that change your thinking?
ALEX SALMOND: The last point is not a risk at all. There are a number of countries which have opt-outs from the euro, but are still members. Sweden would be an example. The reason for that is, to join the euro, by condition, you have to be in the EMS for two years. Since EMS, European monetary system, membership is voluntary, by definition you cannot be forced into the euro.
I should say, in fairness to the European Central Bank, they show no enthusiasm for recruiting extra members at the present moment. I think it would be fair to say that they feel they have enough.
But that is generally accepted as not being a real issue.
The other point is very interesting. The Scottish financial sector—and let me welcome you as the latest international investor—we've already announced two major international investments, or inward investments, from America to Scotland. I shall issue a press release announcing the third.
The Scottish financial sector traditionally had three main pillars: investment fund management, pension fund management, and, third, clearing banking. Obviously, our clearing banks, like many clearing banks in many places, have had some substantial difficulties—indeed, so much so that we have to look at some solutions. We don't actually have four major High Street banks in Scotland. We have two major High Street banks. Lloyds and RBS between them have something like 75 percent of the business banking in Scotland. That is a very tight situation. It's not the ideal situation at all.
In terms of personal banking, we have had very substantial success recently in opening up the market to personal banking. Tesco Bank and Virgin Bank have both decided to headquarter in Scotland. So the personal banking market has new entrants and substantial competition.
The business banking—we have to work really hard to get new entrants into the market. We have been working hard with HSBC, which, of course, in many ways, is the most Scottish bank in the world—founded by a Scot, run by Scots, on the principles of Scottish banking—hence, one reason why it has survived the winds better than other institutions. But there are also other banks who we are working hard with to increase that competitive position.
Since 2008, we have had a rise in financial sector jobs in Scotland. As the clearing bank jobs have declined, there has been a substantial rise in some of the other sectors where Scotland has particular skills—asset management, fund management, pension fund management, particularly, incidentally, asset management, which is now a very substantial part of the Scottish financial sector, with Scottish companies like Aberdeen Asset Management, but also the major United States companies like BlackRock are expanding their operations in Scotland.
I sound a bit techie on this. I should admit to being a former economist at the Royal Bank of Scotland—when it made money, incidentally. But it's really, really important.
What do you look for from a financial sector? What we look for is to do really well in the things we excel at. I would submit these are asset management, fund management, long-term management of individual and group funds. This is a great Scottish tradition. It's something we do well. We're excelling at the present moment. With that we would have a real area of specialty.
For the other aspects of the financial sector, you look for a transmission mechanism that's effective. The public, not just in the UK, but in America and many other countries, spend a great deal of public utility in repairing aspects of the financial sector. The very least they've got the right to expect is that that transmission mechanism, that essential transmission mechanism that depends on competition, works effectively. An effective working of business banking and access to finance, fairness for the personal sector through competition, and an endorsement, an enthusiastic endorsement, for the things that we do really well. The potential for expansion in that aspect of finance in Scotland is very great indeed.
As first minister, I thank you personally for your own personal endorsement of the future of the Scottish economy.
DAVID SPEEDIE: On that upbeat note—when I introduced our guest, I talked about how he truly had intellectualized the debate on independence, regardless of where one comes down. I think his remarks today and his answers to the questions have amply illustrated that claim on my part.
I think also, First Minister, since you're at the Carnegie Council for Ethics in International Affairs, your comments about the fairer society that is part of the grand design and the civilized process in which the constitutional question is now being decided are very much on point and quite inspirational.
What else can I say but ask the audience to join me in thanking you so much.