The British economic model is bust. Can Scotland be different?

Gerry Hassan

The Scotsman, November 30th 2013

Just over 18 months ago the much-respected journal, ‘The Economist’, turned its attention to Scotland and the independence debate with its famous ‘Skintland’ issue.

Its front cover was deemed offensive by some for the names it gave to imagined towns and areas that emphasised the world of no hope on offer from independence –  ‘Grumpians’, ‘Loanlands’, ‘Glasgone’, ‘Edinborrow’ and many more. Inside the magazine’s editorial declared that Scots had to face their decision on independence ‘in the knowledge their country could end up as one of Europe’s vulnerable, marginalised economies’.

Since then quietly and unnoticed ‘The Economist’ has been charting some of the success stories of the Scottish economy. It has noted what is happening in the world of Foreign Direct Investment (FDI) in an Ernst and Young survey for 2012. London with 22% of UK GDP took 45% of FDI, while Scotland has the highest figures for anywhere apart from London – taking with 8.3% of population, 16.1% of FDI.

It offered as part explanation that the Scots spend more government money per head than the neighbouring North East on economic development: £191 per head versus £73, claiming that many think, in the words of the magazine, that ‘Scots are offering more lavish subsidies to lure foreign firms’.

Another survey in the summer looked at why the then Scottish headline unemployment at 7.1% was below the British average of 7.8%. It found that the rate of private sector job growth north of the border in the last three years had been ahead of every part of the UK, with the exception of London.

It then tried to explain this away by talking of the benefits from two industries – the oil and gas sector and food and drink – which have experienced strong growth through the recession. It even tried to suggest that one reason for the robust figures was that ‘it may suggest that companies have been reading opinion polls’ on independence. They did, with grudging admiration, offer plaudits to the Scottish Government for supporting construction and investment in infrastructure.

What has ‘The Economist’ over the same period being saying about the state of the UK economy? It has noted the collapse of UK investment, which has fallen by a quarter in real terms over the last five years, according to figures for the first quarter of 2013. Worse, overall investment stood at 13.5% of UK GDP, significantly under the global average of 24%.

Perhaps the most damning figures to emerge about the international standing of the UK economy came when it emerged that the UK’s ranking in terms of research and development put it at a staggering 159th out of 173 in the entire world. This put only fourteen nations behind the UK; seven of which were in sub-Saharan Africa.

These shocking figures even broke through into the Westminster bubble, with one week ago, David Cameron, challenged on them at Prime Minister’s Questions by Michael Meacher, who even cited that reputable journal, ‘The Economist’ as the source. None of this prevented Cameron dismissing the figures at PMQs without engaging with the facts, while being rude to Meacher personally.

How does the UK fare on such wider indicators as economic democracy? A survey by the European Participation Index undertaken by the European Trade Union Institute looked at all 27 EU nations by a basket of indicators. It found that in a wide assessment of worker participation the UK came second bottom, 26th out of 27th, with only Lithuania behind it. The top rated nations were predictable combining economic and social success with workers having a say: Denmark, followed by Sweden and Finland.

Despite this and poor UK economic performance not just since the crash, but long term, there is little mainstream questioning of the fallacies of the British economic model. The entire political consensus at Westminster and in business circles points towards an uncritical acceptance of economic autocracy. Short-termism, takeover speculation, and the power of the City, are all unquestioned, rather than being viewed part of the problem and why the UK is in the mess it is in.

Where do the events of this week, the publication of the Scottish Government’s White Paper on independence, and the charges and counter-charges, fit in given this context? One response from ‘The Economist’ in tones a bit different from ‘Skintland’ stated that the kernel of this debate was that ‘Contemporary Scotland is neither so successful that it can clearly afford to go it alone, nor so impoverished that it has much to rail against’.

That sounds balanced whatever your view of independence. Neither Salmond’s panglossian upbeat box of tricks and sunbeam disposition, or Lamont and Darling’s search for negativity and nippiness, seems completely appropriate. Although at the same time, the two Alistairs (Darling and Carmichael) have to get a special award for not giving one inch and acknowledging the history or work in Tuesday’s White Paper.

If we are to aspire to better debate we could start by acknowledging some of the stories of achievement in the Scottish economy. This should not surprise anyone, as we are the richest part of the UK outside of London and the South East without oil, and the richest apart from London with oil. And we have consistently had political clout.

Yet the UK economy, once hailed by Blair and Brown in the tones of ‘the great British economic miracle’, along with their friends at ‘The Economist’, faces some profound structural problems exasperated by the kind of capitalism and state which has been inculcated there since the industrial revolution. And it getting worse by the year: going backward, become a more destructive capitalism, short-term and with a self-interested elite.

Is it possible to imagine a Scottish debate that starts to address this – about a different kind of economy and capitalism? In the shadows of our public life, this is slowly beginning, but the mainstream – the Salmonds and Darlings – need to realise the bankruptcy of the existing British economic order.