Scottish Independence Will Kill Socialism on Both Sides of the Border

Much has been said about the impact of Scottish independence on British politics. With the predominantly socialist parliamentarians from Scotland gone, the Conservative Party would likely come to dominate British politics for the foreseeable future. The much needed economic reforms and, perhaps, withdrawal from the European Union would become very likely. 

What about the impact of independence on Scotland? The breakup of the Czech and Slovak Federal Republic some 21 years ago provides an interesting example.

The 1992 elections produced dramatically different results in the two parts of the former Czechoslovak federation. In the Czech Republic, the election was won by the Civic Democratic Party (ODS) led by Vaclav Klaus. Klaus was a highly regarded former federal Finance Minister, who later became Prime Minister and President of the independent Czech Republic. The ODS was dominated by economic reformers whose main goal was a speedy transition of the Czech Republic from a centrally planned economy to capitalism.

In Slovakia, the election was won by the left-leaning Movement for Democratic Slovakia (HZDS) led by Vladimir Meciar. Meciar, a former communist who instinctively opposed dramatic economic reforms favored by Klaus, won by promising the increasingly nationalistic Slovaks some type of a confederal arrangement with the Czechs, but not outright independence. Since the HZDS, with support of smaller Slovak National Party, had enough votes to block all legislation in the Federal Parliament, the future of the federation would depend on an agreement between the ODS and the HZDS.

While demanding an increased autonomy for Slovakia, the Slovak leadership did not bother to find out how far the Czechs were prepared to go. The Slovak leadership seemed to believe that the Czechs, who were more emotionally attached to the continuation of the Czechoslovak federation than the Slovaks, would simply accede to whatever demands the Slovaks chose to make. That turned out to be a colossal miscalculation.

The Czechs were determined not to have their economic reforms hindered by the more socialist Slovaks. If the federal government in Prague were to be rendered ineffective by the Slovak veto and thus prevented from reforming the socialist economies of both parts of the federation, then the two nations would have to go their separate ways. As such, the Czechs flatly rejected a confederal arrangement that would provide for a common currency, but autonomy of economic decision-making in the two parts of the federation. As the Czechs saw it, Slovak statism would destabilize the Czechoslovak crown, and thus harm the Czech economic prospects.

The Czechs called the Slovak bluff and the two republics went their separate ways. 

It turned out that many of the concerns that the anti-independence Slovaks had were well founded. Slovakia was not ready for independence. Virtually all the ministries of government were in Prague and the Slovaks working there did not return to Slovakia. While the Czechs simply “repainted” the signs on government buildings from “Czechoslovak” to “Czech,” the Slovaks would have to do everything from the scratch.

The Czechoslovak federation was dissolved on January 31, 1993. In the Czech Republic, Klaus introduced his far-reaching economic reforms. The Czech Republic pulled ahead and became one of the early post-communist success stories. Even better, the Czechs no longer had to feel that they were subsidizing their “younger sibling.” 

Slovakia, in contrast, suffered years of economic and political decline. Meciar’s style of government became increasingly authoritarian, leading the U.S. Secretary of State Madeleine Albright refer to Slovakia as the “black hole in the heart of Europe.” The Slovak economy remained unreformed. While some of the more lucrative enterprises were sold off to Meciar’s friends (who, in turn, financed his political campaigns), most of the obsolete state-owned firms kept on losing money. By 1998, when Meciar left office, Slovakia was near bankruptcy. 

Following the change of government, Slovakia returned to a full-fledged democracy and embraced far-reaching economic reforms. The Slovaks partially privatized their pension system, introduced a flat income tax and reduced regulation. In recognition of those improvements, the World Bank’s “Doing Business in 2005” report declared Slovakia the world’s leading reformer and ranked it among the top 20 countries with the best business conditions. By 2006, the Slovak economy was growing at 10 percent per annum and Slovakia was the world’s largest exporter of cars per capita. 

Independence forced Slovaks to realize that they had no one to blame for their misfortunes but themselves. Likewise, the success of the “Tatra Tiger,” as Slovakia came to be known in the mid-2000s, imbued the Slovaks with optimism and confidence. As for the relationship between the Czechs and Slovaks: it has never been better.

Since Scottish devolution in 1997, the socialists in the Scottish National and Labor parties have been busily over-regulating those parts of the Scottish economy that were unfortunate enough to fall under their control. According to the 2010 United Kingdom Competitiveness Index, the region with “the largest fall in relative competitiveness” between 1997 and 2010 was Scotland. 

Scotland’s greater statism and, ironically for the birth place of Adam Smith, suspicion of capitalism, is a potent obstacle to reform in England and Wales. It is also a serious danger to economic prosperity north of the border. Sooner or later, Scotland will need to introduce reforms that it would never accept from a Westminster government. The end of the Union maybe a high price to pay for the end of socialism on the British isles, but the rewards from a more robust, long-term economic growth are not negligible either.