Financial Meltdown Hits the Highlands

Cross posted at Scoop44 and Daily Kos.

These past few months have made it abundantly clear that the financial crisis is being felt around the world. Countries that have seen unprecedented financial gains in the past two decades are now struggling to keep their economies afloat. Developing nations who were the beneficiaries of an open global economy are now bankrupt. The world's poorest nations are left with no one offering them a helping hand.

All of these problems have seen mainstream media attention, except only recently have international news publications started examining one country that the financial meltdown has hit particularly hard: Scotland. Back in the fall, many stories detailing UK Prime Minister Gordon Brown's intervention in the United Kingdom's financial collapse appeared in numerous global news sources. However, few of these stories focused on Scotland.

Scotland has always been proud of its banking. However, these days, the Royal Bank of Scotland (RBS) is giving the country little to be proud of. RBS has undoubtedly seen some tough times during these past few months. Some of the bank's problems were out of the bankers' control, and some of them were directly related to the policies the bank's executives' supported. The Financial Times is quick to point out that Chief Executive Sir Fred Goodwin had to move quickly from leading RBS down the path of becoming a world financial powerhouse to adapting his methods to a global economic downturn, something that is clearly no easy feat.

However, many of these articles fail to note that there is a unique element to Scotland's banks: they must adjust to different governments' finance policies. Operating in a devolved country in the United Kingdom, Scotland's banks not only have to shift their policies to meet UK Government financial goals, they must adapt to suit the needs of the Scottish Government as well. This task is difficult in and of itself, and becomes even more challenging when there are two competing political parties involved. The Labour Party runs the UK Government, and the Scottish Nationalist Party runs the Scottish Government; the two parties are political adversaries, and disagree on many things, including tax policy and the question of Scottish independence. The consequences of both political debates have significant effects on Scottish banking, and it can be challenging for the private sector to make the best economic decisions in light of uncertainty in the political arena.

Back in September, when the UK Government provided funds to facilitate the Lloyds TSB and HBOS merger, Gordon Brown was quick to point out that the deal would not have been able to happen had Scotland been independent (a statement that directly challenged Scottish First Minister Alex Salmond's claims that Scotland would be able to ecomically thrive independently). Today, it was much of the same - Scottish Labour leader Iain Gray went toe to toe against the First Minister at First Minister's Questions on Thursday over the issue of RBS executive pension payouts. It is clear the bankers have made poor decisions across the globe, and Scotland is no exception - however, one must not forget the role that political parties play in framing these debates.