September 19, 2014
In the world of financial speculation there is something known as an asymmetrical trade. This means that the downside is very limited – or none at all – and the upside is considerable.
I have long thought that the in/out referendum in Scotland was a superb move by David Cameron, but reading his speech this morning, I realise just how seriously I underestimated that. He made a huge asymmetrical bet and it has paid of handsomely for him. It is going to be the gift that keeps on giving for him and the Conservative Party.
He made two bold moves that many thought were foolish errors. Firstly, the vote allowed 16 and 17 year olds to vote. What would this do to the electorate? How much risk did this add? Who could say? Secondly, the actual question being asked was simple and straightforward. Compared to most questions asked, this was a triumph of democracy.
He was rewarded with an active and passionate debate and a very strong turnout. Though the winning margin for the No campaign at 55.30% to 44.70% was not huge, it was large enough.
My initial thoughts have been for some time that Alex Salmond is a canny fellow and a smart political operator. By beating him, David Cameron could see that the landscape in Scotland could be changed decisively. Since the SNP has beaten Labour to power in Holyrood, a defeat for Salmond would probably remove a thorn in his side in Scotland and render an entire political movement impotent.
If the Yes campaign had won, then the Labour Party in Westminster would have lost it’s 40 seats and the likelyhood of winning a general election outright would plummet for years to come. Cameron would have lost Scotland from the UK, but secured Westminster for the Tories.
It might have cost Cameron his job had the Yes campaign won, but I doubt he would have resigned as Alistair Darling was leading the campaign, not David Cameron.
However, the questions raised by the debate in Scotland about who votes for what have given a new impetus to democracy in the UK. All three main party leaders in Westminster came together to block the currency issue. They also broadly agreed on their joint campaign approach, which was that more power would be devolved to Scotland if the No campaign won.
Now that they have all agreed to that and the vote was won, there is very little that they can really say or do to disagree with Cameron’s speech this morning. In it he promised to address the West Lothian question, which will reduce the power of Labour in Westminster. He also plans on a similar move for Welsh votes for Welsh laws etc. This can be seen as devolving more power, but it will also likely strengthen the Conservative Party in Westminster.
By doing all this while the stakes were so high Cameron has played and won at the highest political poker table. Without a referendum these issues would have laid simmering for years more without resolution. By pushing the electorate to decide on such a large issue that he could bring politicians of all parties to his cause, he united a team to win for the country that has now won for him.
We have witnessed a bold strategic triumph and it will cement Cameron in power for some time to come.financialguy