In the run up to the next independence referendum, we can expect economic arguments to be emphasised in debates, discussions and commentaries. This is unusual in itself as most independence campaigns have been based on identity, race, and other more divisive and discriminating criteria. But this opens up a number of areas for wider consideration. In particular, a key focal point last time became what sort of Scotland people wanted, perhaps the first opportunity many had had to consider this fundamental question and, indeed, to believe that their own visions and opinions mattered.
However much the wealth or deluge of claims and counter-claims, of boom or doom, confused and polarised the electorate, being part of this conversation was critical in establishing the terms for subsequent elections, referenda and discourse. It also moved many to re-evaluate where their own and their nation’s economy and interests might be best located in the future. Reorienting long-held perspectives, beliefs and certainties was a significant outcome, therefore, which makes further fundamental change not only desirable but also possible.
Instead of encouraging and nurturing another national debate, however – as if the economy and society was at some optimum already – much of the mainstream, alternative and social media are already becoming consumed with a narrow bubble of swapping insults over ‘facts’ and statistics. Here, I will offer a guide through some of the noise generated already so that there might be room for some deeper understanding and thinking.
Some of the key economic indicators we can expect to hear about in the coming months will relate to the macro-economy – GDP, trade, debt, currency, North Sea oil revenues; and, to a lesser extent, there will be reference to effects on individual’s pensions and taxes, to jobs in specific firms, to passports and border controls. The former will depend upon, and create, the conditions for how well Scotland’s economy is performing overall. Unlike projections in 2014, though, the comparison cannot be between staying in the UK and being independent but rather between being in the UK after it has left the European Union and Single Market, and being independent. The uncertainty and risks involved in leaving ‘Europe’ mean a period of insecurity, job losses and falling incomes, with consequent and subsequent attacks on workers’ rights and further decline.
The next few years promise a period of exaggerated austerity, an exacerbation of the uneven development of the British economy and no recovery or alternative economic strategy on the table from the British Government or Opposition. It is against those alternative futures that fearful projections of how Scotland would fare under independence should be judged, and these projections should not be extrapolations of Scotland in the UK based on unverifiable Government Expenditure and Revenue Scotland (GERS) or equivalent figures.
To an extent, the failure of successive British governments to regenerate all regions after the deindustrialisation and financialisation of the economy is blatantly apparent in the recent GDP statistics. Despite the recent headlines of a lagging performance against Britain, the reality is Scottish GDP per capita lies only behind London and the South East of England within the UK, and if an independent Member State, it would be ranked ninth in the EU.
Other official figures actually show Scotland’s aggregate economic performance – measured in terms of Gross Value Added (GVA) per head and unemployment, the attraction of inward investment and enterprise creation – continuing to be comparable with Britain and EU averages. Despite the adverse winds of change, therefore, and the reduction of activities in the North Sea oil sector especially, this suggests an economy which has demonstrated a capacity to recover better than most.
Indeed, productivity in Scotland has now effectively caught up with the British average. In manufacturing, it is just above and in the rest of the economy fractionally below. Significantly, again only London and the South East achieve higher levels. The poor performances of the other regions of Britain reveal the underlying problems created by centralisation and concentration of power which generates further inequality – now the highest in the OECD – and ongoing underdevelopment; and within this environment, Scotland has managed to outperform everywhere but the greater south east.
An important consequence of the neo-liberal policies of deregulation and privatisation, which accelerated the de-industrialisation of the Scottish economy, was the further loss of local management and control. This restructured the economy away from manufacturing, with production and service sectors increasingly incorporated into supply chains where the headquarters, higher functions and incomes gravitated to London and other seats of multinational enterprises.
Compared with the 1970 and 1980s, there has been but muted reactions to these developments and yet our nearest neighbours in northern Europe have maintained their own strong national production companies, able to supply the domestic market as well as trade internationally. Rebuilding these elementary components of the economy encourages innovation, the creation of well-paid and graduate level employment, and enterprise according to analyses of why the Nordic countries, Germany and the Netherlands are more successful than Britain. So, although Scotland has performed relatively well in the British context, it remains unable to achieve its potential in European terms despite its natural and human capital resources. Looking for explicit descriptions and consequences of the uneven distribution of power should be expected in the current months if workers and voters are to be enlightened on what options can be considered.
The realisation and exploitation of the world-leading research and development in Scotland’s universities should be the basis for a new industrial revolution in a triple helix of academia-industry-government, commercialising innovations to re-establish the Mittelstand that underpins the German model and the ‘smart specialisation’ of the Nordics.
Commentaries and debates in the media, though, seldom address such knotty questions as to how to progress this agenda, largely because that would challenge the cosy neo-liberal consensus that ‘business knows best’. For example, the mainstream commentators were slow to challenge their own and others’ explicit and strong support for the entrepreneurial culture based on the two major banks with ‘Scotland’ in their titles, RBS and HBOS, and then willing partners in misrepresenting how ownership, control and operations of these ‘Scottish’ banks had forsaken their Scottish roots.
Again, asking simple questions about financial institutions and their motivations during the independence referendum would have been a minimal service to trade unionists and others losing their jobs rather than warning about moving brass plaques. Similarly offering some analysis of how the Nordic countries had dealt with their recalcitrant bankers in past crises and so avoided post-2008 recessions would have been expected of a mature commentariat.
The reality is that most countries have faced banking crises, and the Nordic countries have led on how to manage the bankers to avoid damage to their economies. International banking regulations, policy and practice meant that where there are banking failures, it’s not the name that matters but where the shareholders, customers and employees reside. Scotland would not have faced a meltdown because of the failings of RBS and HBOS. Attention, therefore, needs to be focused on rethinking our banking and financial sector so that it is fit for purpose – saving for population needs and ensuring that investment is there for our enterprises.
Is Scotland an outlier with regard to debt? Well debt – public and private – across Britain is about the worst in the world, and one measure – net government debt as a percentage of GDP – is higher than any of the Nordic countries and, apart from Iceland, they are actually in net credit. As with some other bad news regarding Scotland’s position, the parable, ‘And why do you look at the speck in your brother’s eye, but do not consider the plank in your own eye?’, seems apposite. By comparing the calculated debt and deficit challenges facing Scotland with Britain’s, economic commentators are not standing back and asking what on earth is happening to Britain economy and how come our small, open economy neighbours are the most prosperous in the world and have managed their development so sustainably.
The isolationism of the Brexit debate is being applied to analyses of Scotland’s performance and potential, missing the lessons and experiences of countries in the same part of the globe with arguably poorer levels of human capital and skills and natural resources. So, if they can do it, why wouldn’t we be able to prosper?
An economy with our competitors’ levels of skills utilisation with workers directly involved in innovation and management will not appear in the metropolitan analyses or proposals for how Scotland might develop. Relatedly, the need for better management and leadership is a matter of urgency if Scotland is to realise the benefits of its investment in a highly skilled and educated workforce and research in universities and laboratories. Yet, where do we see such analyses compared to the focus on minutiae of institutional structures and the latest official statistics?
The threat of a post-Brexit Britain characterised by deepening neo-liberalism in industrial and workplace relations, dismemberment of employment and human rights, and further privatisations is diametrically opposed to the evolving needs of working class Scots. Repatriating these powers and controls to move the Scottish economy forward is essential if there are to be the sorts of fundamental changes towards the models of our globally successful neighbours. That would see the promotion of an economy with more local production, growing enterprises based here, using skills and expertise nurtured and attracted to Scotland, with workplaces thriving through innovations from the bottom up.
But privileging discussions on the currency, border controls and trade figures – see countless examples across the world including Canada/USA to see how these are all made to work – allows the debate to be skewed away from alternative visions. The next referendum should be the opportunity for all social partners – unions, management, entrepreneurs, government – to be involved in challenging and proposing an array of types of organisation: public, private, community and worker cooperatives. An inclusive and democratic approach is the foundation of successful societies and economies and offers different prospects from today’s branch plant economy. Dare our commentators enter those debates?
Mike Danson is Professor of Enterprise Policy at Heriot-Watt University
Eurostat (2017) 2015 GDP per capita in 276 EU regions, 30 March http://ec.europa.eu/eurostat/documents/2995521/7962764/1-30032017-AP-EN.pdf/4e9c09e5-c743-41a5-afc8-eb4aa89913f6