- - Sunday, September 14, 2014

As global investors fret for multiple reasons, an important drama plays out now over Scotland — voters there finally have the chance to cut ties that bind them to union with England, Wales, and Northern Ireland. And Scots should rush through the exit door.

Though leaders of larger nations with vested interests may say otherwise, the truth is that numerous borders should finally be redrawn to liberate vibrant hearts that can animate smaller, better proportioned and integrated countries to compete fleetly on international markets.

Why should the world and even Britons welcome the profound change that may start this week in Scotland? Surely in September 2014, Scotland is ready for independence after so many centuries of subjugation.

Citizens in Scotland and others spread across the world no longer need mammoth, slow-moving, high-cost social-welfare bureaucracies to pretend they care for the needs of distant constituents while, instead, overpaying too many ineffective and retired public sector workers gathered around capital cities and regional centers.

Arguments to the contrary notwithstanding, Scotland can flourish on its own. Moreover, thoughtful global investors will applaud the resulting short-term disruption because it will ultimately speed restructuring of sclerotic government bureaucracies that are strangling economic growth throughout Europe, Japan, and North America.

Liberating Scotland’s wealth

An independent Scotland will thrive, unless Britain assesses a withering and unfair exit tax.

Particularly in Scotland, arguments run deep concerning whether energy resources there have been exploited by the English to the disadvantage of Scots.

Leaving the important question to the side of how energy reserves, assets, and associated liabilities might be apportioned, is an independent Scotland large enough to prosper on its own?

According to 2011 census data, 5.3 million independent Scots would leave behind 57.9 million persons in the somewhat smaller United Kingdom. Data contained in the CIA World Factbook suggests that the United Kingdom (including Scotland) had external foreign debt of $9.5 trillion and foreign exchange reserves of only $87 billion as of Dec. 31, 2013, so the biggest remaining practical question is how might that debt be split up between Scotland and the residual United Kingdom.

An answer to this vexing question should hinge upon each entity’s ability to service its share of what is a towering debt burden. Overall in the United Kingdom, household consumption (roughly equivalent to household income) was $1.7 trillion in 2013 so external foreign debt was approximately 5.5 times household income, before considering negative or positive impacts of a potential divorce.

The Netherlands, with 16.9 million people, has managed to thrive even though it had net external debt of $2.3 trillion, or 7.0 times estimated household income of $327 billion. Meanwhile, the Republic of Ireland, with 4.8 million persons competes, with $2.2 trillion of net external debt (as of Dec. 31, 2012), or 19.0 times 2013 household income of $111 billion.

Ingenious Scots, with energy reserves, other assets, great universities, and the option to create another investor-friendly nation close to a large accessible market, should be able to forge a future.

Cut loose the ties that bind. Peacefully

In 2014, with tools emerging that allow humans everywhere to undertake complex, important tasks for themselves at rapidly falling cost, Scots residents in Scotland, and those who may return from places like Hong Kong and North America, finally deserve an independent state.

As voters enter polling places, they might heed famed countryman Adam Smith: “Never complain [about what] is at all times in your power to rid, yourself.”

To leave lethargy behind, Scotland, England and the wider world should “right-size” governments so these can slim down and so citizens can chase their dreams.

Charles Ortel serves as managing director of Newport Value Partners (NewportValue.com), which provides economic research to executives and to investment firms.

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