If one were to read what the Scottish National Party Westminster leader wrote in for The Times back in February of this year, one might be fooled into believing independence represents some sort of manna from heaven. An option which, if only a majority of the Scottish electorate could be convinced to pull it, would miraculously resolve all manner of economic and quality of life challenges currently faced.
“As UK taxes, inflation, interest rates and energy bills all go up, the Bank of England has warned families face the biggest fall in living standards since records began…The Tory cost-of-living crisis, and the damaging decisions of the past decade, demonstrate why Scotland needs to be an independent country — free from Westminster control” – Ian Blackford, SNP Westminster Leader
Naturally, things are invariably never so simple as the populist nationalism of the current governing party suggests. In fact, so misleading is the claim that independence would help not worsen the underlying challenges faced by the Scottish economy, that it beggars belief.
Millions are facing a prolonged period of real hardship as the economic forecasts for the UK look ever-increasingly grim. But even a rudimentary understanding of inflation, unemployment and stagflation should quickly dispel the pig-in-a-poke offer that Mr Blackford is seeking to sell the electorate.
So, let’s explain the relationship between inflation and unemployment, before going to understand the concept of ‘stagflation’. Once we do this, we can easily see the nonsense being peddled by Ian Blackford, MP.
Let’s start with inflation and its relationship to unemployment. The Phillips Curve explains that when we experience periods of low unemployment, we typically witness a corresponding period of higher inflation. Likewise, periods of high unemployment correspond with periods of lower inflation and potentially even deflation.