Debate on the use of the pound by an ‘Independent Scotland’ has given the impression that it is a matter for political decision but in fact the management of a currency has strict requirements and deep economic consequences. This is because for a currency to retain its value key principles have to be followed. This was discovered by Karl Marx and explained in ‘Das Capital’.
The first fundamental is that paper money has real value, it is not just symbolic of value therefore it actually contains an amount of average labour used in the production of commodities in an economy. For this value to be maintained the amount of money in circulation has to be in balance with the amount of actual wealth and potential for wealth creation. This is one reason why the Bank of England not only monitors inflation and unemployment but other measures of ‘slack’ in the economy (that is unused resources which could be used to produce value). To ensure this happens Marx gave the following measures which must operate over a territory and economy on which a currency operates and is the dominant form of tender for exchanges, buying and selling of commodities (goods, services or labour power). These are:
- One central bank must control the printing and circulation of money in the economy.
- There must be one economic policy for the whole economy.
Ideally these principles must be applied so that the full economic potential is mobilised and sustained. In effect this determines matters like the basic interest rate for the whole country and influences the exchange rate of the currency compared to other currencies. In a modern economy like Britain the state is a major investor in infrastructure and it funds public services so it influences strongly activity and growth not only of the country as a whole but of each of the regions and economic sectors. However mobilising the full economic potential implies full employment and increased bargaining power for workers and that does not suit capitalism. In Britain the most powerful section of the capitalist class the financial elite and in particular its speculative part are not interested in the economic health of most of the country as they can make as much or more profit out of collapse and bankruptcy or from abroad as from serving productive activity.
The health of the whole British economy therefore requires an economic policy for the whole country that is based on production and need. Separation of any part of Britain would not isolate them or free them from the control of the financial elite. So what Scotland and the rest of Britain needs is not the false ‘independence’ of a shared pound but a united working class asserting the interests of all the people of Britain and removal of the economic levers from the financial and corporatist elites.