Progressive consensus versus neo-liberal stagnation

Mike Danson asks what sort of economic renewal and recovery do we want in Scotland.

As countries and governments struggle with the impacts of COVID-19, the positions of the city-regions and nations within Britain have come under scrutiny. The very limited rights and powers of the mayors and councils in the north of England have been revealed by their restricted capacities to cope without the permissions and funding from Westminster. Even for the three Celtic nations, however, the reserving of most monetary, fiscal and other macro-economic levers to the Chancellor has put them in an unenviable position of trying to balance the conflicting demands, priorities, and needs of a range of interest groups and policy areas. Within this complex context, governments in Scotland and Wales have been active in commissioning reports and plans from advisory groups and committees on ways to bring about economic recovery. Think tanks and others from across the political and social spectra have also been offering their suggestions for reviving and restructuring both immediately and in the longer term.

The reports in the summer of 2020 from these various authorities and agencies actually reveal a good deal of consensus over their promised destinations in terms of industries to be supported, groups to be protected, and inclusive and sustainable elements of their respective strategies. However, there is less agreement over how to get there and often communication of these alternatives paths has diverted discussions away from plans and policies. So, pursuing a just transition to a net zero economy in times of Covid and macro-economic restrictions is recognised by all as necessary but challenging; compromises and priorities then become crucial in discriminating between different approaches. Considering these different reports, therefore, requires both exploring each set of proposals and their common features but also their distinctive paths to a new economic future. On the one hand, some represent a near future driven by the neo-liberal and neo-classical economics of the recent past. On the other hand, some plans are based on a more radical and interventionist worldview.

The series of reports started with a special edition of the Fraser of Allander Institute’s Economic Commentary in June where 17 of Scotland’s economic experts reflected on: the immediate outlook for the economy over the next 12 months; their expected permanent changes to our economy emerging from this crisis; and what each considered the top priority areas for policymakers should be at this time. While this publication offered a range of views and opinions, subsequent outputs offered more focused contributions. The earliest and most publicised ‘official’ report was Towards a Robust, Resilient Wellbeing Economy for Scotland, chaired by, and often called, the (Benny) Higgins report. With neither specific recommendations nor ‘a shopping list’, the report argues for significant and substantial actions and interventions in the economy to avoid the type of 1980s recession and austerity which post-2008 has so needlessly blighted so many lives. The principles underpinning their suggestions include: needing a focus on a robust and resilient, wellbeing economy, and accelerating action to promote wellbeing and Fair Work and tackle inequality by mitigating the risks of unemployment, especially among groups hit hard by the crisis. Clearly nothing wrong with these aspirations as they argue for restoring employment, by prioritising a green investment and education-led recovery. Underpinning all this are calls for supporting freedoms and wealth creation, meaningless without definitions and considerations of equity and equality and so the direction of travel depends on teasing out what these are actually intended to mean. Even the appeals to seize the opportunity for a process of national renewal is fairly neutral as is, critically, the need for economic recovery [to be] underpinned by a new deal with business. Apart from a few interviews by Benny Higgins (for example, Times 5 August 2020), there is a vagueness about the details so that much criticism has been either personal or on the perceived reliance on the private sector to regenerate the economy through state subsidies.

Core to the Higgins strategy seems to be a perhaps reluctant recognition of the need for increased borrowing powers to be granted to the Scottish Government. Interventions such as the proposed Jobs Guarantee Scheme for young people have maybe been overtaken by ‘initiatives’ at Westminster but the peculiarly Scottish elements would rely on the further devolution of borrowing capacity and the establishment of ‘a top-level Council of Business Advisers’ to decide on economic priorities. While such a representative body would not be unwelcome in a pluralist social and economic environment, as in the richer and fairer societies of the Nordic countries and Germany, there would also be a countervailing and accepted role for organised labour. Despite a former STUC General Secretary being a member of the Higgins-led Advisory Group, there is but one inclusion of unions in the report: ‘genuine workforce engagement, such as trade union recognition’ and no mention – never mind insistence – of the need for a balanced social democratic countervailing power to the role and privileging of capital. Restricting workers’ involvement to benefiting from the practice and enforcement of Fair Work First does not offer a reasonable platform for creating the environment for genuine change. Although welcoming some aspects, this and related criticisms were made by the STUC, the Wellbeing Economy Alliance (WEA), Common Weal and others.

Recent interviews and analyses have illuminated further the beliefs and expectations that underpin the other significant economic strategy coming from the (centre) right for plotting Scotland’s development. Specifically, the Sustainable Growth Commission established by the SNP in 2016 under the leadership of Andrew Wilson has been criticised before but this was renewed following an extensive feature in the Herald on Sunday (18 October 2020). This was argued in a similar vein to the Higgins report, especially and crucially in terms of its conservatism and lack of ambition of vision for what Scotland could and should aspire to be in a decade’s time. Without wasting space here, it is sufficient to conclude that a recovery based on and effectively limited to a reliance on the market and private sector-led but subsidised growth will not be inclusive, sustainable nor promote wellbeing for all. As described by the title of the book by respected economic journalists, Larry Elliott and Dan Atkinson, Going South: Why Britain will have a Third World Economy by 2014, a neo-liberal economic future offering a blueprint for the recovery of Scottish capitalism as promoted by ex-bankers holds no reversal from the past nor from the wider UK’s continuing and current trajectory of decline. Contrariwise and represented by the 2020 reports and proposals from Scotland’s other commissions, advisory groups and think tanks, there have been a series of detailed, complementary and feasible visions and roads to a better place.

From the Just Transition Commission, with a broadly based membership which includes several union representatives and members, the interim report of February 2020 was supplemented with specific Advice for a Green Recovery in July 2020. The Interim Report made recommendations for actions to: maximise the economic and social opportunities that the move to a net-zero economy by 2045 offers; build upon Scotland’s existing strengths and assets; and understand and mitigate risks that could arise in relation to regional cohesion, equalities, poverty (including fuel poverty), and a sustainable and inclusive labour market. Consistent with this approach, the Green Recovery used the following criteria to assess individual measures: Do they set Scotland on a pathway to net-zero? Do they ensure the benefits of climate change action are shared widely, while the costs do not unfairly burden those least able to pay, or whose livelihoods are directly or indirectly at risk? And: will they contribute to a just and fair economic recovery for Scotland once the immediate emergency, created by COVID-19, has subsided? These criteria established a different environment and forum for deliberating what should be pursued for a green recovery from the Covid pandemic. Based on substantial and considered evidence, recommendations were made for immediate actions to help build a fairer, greener economy: boost investment in warmer homes; back buses and support the supply chain; help the rural economy by helping Scotland’s nature; maintain and create new jobs for oil and gas workers; align skills development – for young and old – with the net-zero transition; and, give a clear sense of direction and attach conditions to funding. Each of these was supported with evidence, rationale and contribution to achieving a just green recovery and offered specific proposals for practical actions.

In effect, these were the headlines and short-term interventions derived from the evidence of sector, rural, community and union analysts and representatives. Reports from the STUC in its ‘Analysis of Infrastructure Investment options for Economic Recovery’, the Climate Emergency Response Group’s (CERG) ‘Eight Policy Packages for Scotland’s Green Recovery’, Community Land Scotland’s ‘Built-In Resilience: Community Landowners’ Response to the Covid-19 Crisis’, and North Ayrshire Council as the first Community Wealth Building authority in Scotland informed and coalesced around a set of understandings, analyses and prescriptions for how Scotland and the Scottish people could pursue a more inclusive, prosperous and sustainable future. Proposed interventions were costed and employment and income impacts identified and quantified. Recently, the Institute for Public Policy Research (IPPR) Scotland offered interventions in ‘Better than Before: A Scotland Built on Social, Economic, and Climate Justice’, echoing and reflecting the foregoing analyses and prognoses. Their suggestions around paying for the pandemic ironically display some of the limitations of the neo-liberal approaches, specifically dependency upon agreement of Westminster. However, in promoting concepts of social solidarity and a new social contract, IPPR Scotland recognises potential for radical underpinnings to recovery. In ‘How Productivity Could Deliver Inclusive Growth in Scotland’, their economistic modelled approach complements ideas of the circular economy, improved low and precariat wages although centralised industrial structures and ownership patterns are neglected in the analysis. Reports from each of these bodies, the Just Transition Commission, the Common Weal’s Resilient Scotland programme and the principles embedded into their respective strategic agendas (including WEA and embedding the UN’s Sustainable Development Goals into Scottish economic strategy) offer a coherent long-term vision from a workers’ and citizens’ perspective to complement these immediate proposals.

The high degrees of collective bargaining, union membership, gender equality and tax and spend that underpin the success of the Nordic economies and societies display the elements that would support moves to an inclusive, sustainable and wealthy Scotland as envisaged by the STUC and others. Indeed, partnership working which is the foundation of their respective models is at the heart of many of the organisations proposing Scottish economic paths for the coming years, from Business for Scotland to Common Weal. Where there are differences and gaps across these programmes and plans they tend to be around the limits and constraints to powers and responsibilities devolved to Scotland (and other nations and regions). Without devolution of powers over employment law, procurement and the utilities, much enhanced borrowing capacity and the ability to vary taxes on wealth (including over dividend and savings incomes), all the more progressive and radical strategies will be restricted to marginal variations and ameliorations from the dominant Westminster neo-liberalism. While all of the publications reviewed here recognise these limitations, without being able to address costings and funding implications and so their constitutional requirements the STUC’s The People’s Recovery: A Different Track for the Scottish Economy, for example, will struggle to take us onto a different path to prosperity and wellbeing.

Mike Danson is Emeritus Professor of Enterprise Policy at Herriot-Watt University