ACTIONS always have consequences. If it votes for independence later this year, Scotland could theoretically introduce its own currency. In practice it won’t, and will have to choose: keep the pound, which will remain in the hands of the Bank of England, or join the euro, controlled by the European Central Bank. That means Scotland would not be fully independent, and that its national debts would face a greater risk of default than the UK’s, a country able to borrow in sterling, a currency it controls.
Mark Carney, the governor of the Bank of England, was merely stating the obvious yesterday when he explained what the economic consequences of Scottish independence would be. Scottish nationalists may point out that this doesn’t really matter to them: better, from their perspective, to be politically independent even if compromises still need to be made over economics. Fair enough – but the Scottish establishment will then face another choice: either embrace sensible free-market reforms to make sure that its economy and labour market can adjust to shocks, or face a Eurozone periphery-style crisis next time there is a problem. Sadly, we know politicians aren’t always rational.
I hope Scotland votes to remain part of the UK – but the UK then needs a constitutional revolution, with England, Wales and Northern Ireland given the same powers of self-government – and parliaments – already afforded to Scotland. In the meantime, the referendum is moving closer, the polls are narrowing and the fate of the UK lies in the balance. Britain faces an historic decision, and it is time for business leaders to have the courage of their convictions. Please speak out now – or forever hold your peace.
INDIVIDUALS DO MATTER
There are two theories about individuals tasked with running long-established, giant corporations.
The first is that CEOs are over-rated: that given the competitive nature of the market for company bosses, and the relative predictability of mature markets, it doesn’t really matter who is appointed. Of the handful of potential, qualified candidates that would end up on a head-hunter’s shortlist, all would adopt roughly the same strategy and perform in roughly the same way.
The second view is that a good CEO can make a huge difference. Proponents of this theory argue that outstanding leaders can, in many cases, turn around even the largest businesses, changing their culture and entire modus operandi, and shareholders can do much better from backing a great boss than an ordinary one. Justin King shows that the latter category of leaders certainly exists; Sainsbury's remarkable success was by no means guaranteed when he took over.
I generally agree with the second view. Most bosses at the highest levels are good, with the likes of Fred Goodwin an exception, and the quality has risen – and individuals generally make a real difference.
There are exceptions, of course: in declining industries, the difference between a great and a decent CEO is small. One can merely buy time; and it is hard to bring in good people if everybody knows that the company’s value will eventually fall to zero.
Individuals matter even more in entrepreneurial companies where founders take unique risks and pursue unorthodox strategies. It is also immensely important to pick the right person in politics: sadly, many ministers and even PMs get hemmed in by received wisdom, bureaucratic inertia and self-interest. But a few change everything: Winston Churchill, Margaret Thatcher and Mikhail Gorbachev, to name but three. In each case, another person would have acted very differently and the world would have ended up a very different place. Don’t believe the sceptics: the right person at the right time can make a huge difference.