The shrivelling of Scotland’s economy jeopardises independence

by | 18 Jan 2022

The lost of Scottish ownership of the Scottish economy is not a curiosity but an enormous danger for the country and for the independence movement

If you are a supporter of Scottish independence you should take a step back for a second and consider carefully what has happened to Scotland’s economy over the last 15 years. I don’t mean the UK/global economy as it appears in Scotland (Tesco, Amazon, Barclays, Serco, BP, Centrica etc.).

What I mean is an economy that is in any way distinctively Scottish – owned in Scotland, controlled in Scotland, run from Scotland, invested in the success of Scotland.

Equally, while Scotland has a big and home-grown small business base I equally don’t mean cafes, hairdressers, electricians, corner shops or the other plethora of economic activity which is common to almost everywhere in the developed world, crucial as it is for employment and local services.

What I mean is the kind of aspects of an economy which make you look less like a region and more like a nation. I mean the medium-sized industries which have been the bedrock of the Germanic and Nordic economies, the serious world players that create confidence in the reality of your economy, the supply chains which serve them, the types of economic activity that drive investment and innovation.

These matter. Sure, culture and history are essential to a sense of the possibility of nationhood, but a crucial aspect which made Scotland look like a viable independent nation was the sense that it had the characteristic of a national economy and not just a regional economy.

On my bookshelf is a seminal 1971 book about Welsh independence which is called Is Wales Viable?. Not as in ‘can you answer the thousand questions about technicalities’ that the ‘can Scotland afford it?’ debate involves. As in, fundamentally, can we see the possibility of Wales being a viable independent country? That has never been challenged by unionists as an issue of principle for Scotland.

Take away the characteristic of a national economy and Scotland drifts further towards to being just another region of the UK like Yorkshire or Cornwall. I mean, both even have their own flags.

The reasons for this are both practical and psychological. Practically, a nation state is a little bit like any other enterprise – if it wishes players both inside and outside the country to do the things that bring success (like invest, or relocate, or lend), those players will look at what they are investing in, where they are relocating too, what they are lending for.

They want to know that there is a strong indigenous business ecosystem, one that will both sustain a cluster of serious businesses around it and also drive wealth into the economy. They want to see a state which has a reliable tax base that means state intervention is possible, public services for staff are resilient, borrowing will be successfully repaid.

Think of a domestic industry base as like an asset portfolio which levers advantages in your interactions as a nation. Strip the assets, lose your leverage, watch your advantages melt away.

Take away the characteristic of a national economy and Scotland drifts further towards to being just another region of the UK like Yorkshire or Cornwall

Business ownership and headquartering bring enormous benefits. It’s where investment is made, where the best jobs are, where innovation takes place, where profits are booked, where the biggest growth takes place. Branch economies bring few of these benefits.

And by ‘business ownership and headquartering’ I mean real business ownership, real headquartering. I do not mean ‘subsidiaries with branch offices and delusions of grandeur’, the ‘nameplate’ fakery where businesses are called ‘Scottish something or other’ and have a building somewhere in Scotland but are little more than trading names, trading names that can be taken at will, headquarters that can be closed at will.

Think NatWest, which you secretly somewhere in your heart still think is the Royal Bank of Scotland Group which makes decisions in Scotland. That delusion is yours alone. It is the same delusion that makes you think ScottishPower or Scottish Gas are, well, Scottish.

The psychological impact of this is equally real. Strip a country of its big fish and it shrinks before your eyes. Scotland just feels so much smaller than the glory days when (for good and ill) RBS swaggered around, a major player in a big-old world.

Was Scotland a proper country with a proper politics and a proper media (we’re a region with a juvenile, polarised politics and a emaciated media) we would be in a major, existential debate about what has happened over the last 15 years. We have lost big player after big player after big player.

In fact last year I asked someone to name me a Scottish-owned business (outside of financial services) which was a serious global player. The only name offered was Aggreko – which was promptly sold shortly after the conversation.

Even major financial services businesses have been sold to overseas owners at an alarming rate. And potentially more damaging, the list of medium-sized high-tech businesses which grew from high-tech start-ups and which should have represented Scotland’s future but were sold overseas is deeply worrying.

It is why selling off Scotland’s crucial assets cheap to overseas companies as happened with ScotWind yesterday is such a crisis for the country. Let me explain the consequences.

Right now the Scottish Greens are bizarrely crowing about ‘guaranteed supply chain jobs’, a factor explicitly ruled out of bid assessment by the tender document. But it doesn’t make all that much difference, because past failure in this area means there just aren’t many appropriate engineering and manufacturing businesses to give the contracts to.

This takes me right back to the point above – if you want economic success you must sustain an ecosystem of the business base which gives you the capacity to absorb and exploit the opportunities that emerge, an ecosystem Scotland barely has.

Was Scotland a proper country with a proper politics and a proper media we would be in a major, existential debate about what has happened over the last 15 years

All of this should send chills down the spine of a serious independence supporter. Were we serious we would be identifying the structural weaknesses and stepping in to do something about it. That was the great opportunity of ScotWind. It sold off one of the few highly valuable Scottish assets not already in foreign ownership.

A serious government that actually believed independence meant something a bit more substantial than soundbites about magical referendums and magical rejoining of the EU would see what this meant. It was the opportunity to lever a serious, national industrial strategy off the back of strategic ownership of that asset.

A massive national effort of training, capacity-building, industrial infrastructure development and coordinated decision-making could have reversed Scotland’s decline. Instead this lightweight and visionless Scottish Government is riding on the back of the ScotWind missile which is headed straight at the heart of Scotland’s economic future.

When I say that we should have ‘done a Norway’, the line-parroting loyalists who send out SNP propaganda complain that people like me are just lefties and public ownership isn’t the only way to exploit your assets in the modern world.

That’s because their grasp of economic history is as weak as their grasp of economic reality today. Norway didn’t just choose to own its own oil assets, it threw a massive national effort into becoming almost self-sufficient in the engineering, manufacturing, management and exporting capacity to make them rich from their oil. And they started from a zero base, achieving this in little over a decade.

Instead the Scottish Government is in total thrall to any short term media release and any pat on the back from the Charlotte Street set who can’t make their money out of a burgeoning banking sector like they did and so are now happy to be the midwives of the lucrative business of national asset stripping.

As a result, Scotland’s economy has shrivelled into a parody of the powerful international force it once was.

Labour and the Tories don’t care because they quite like the regionalisation of Scotland, a great tool in their anti-independence campaign. The SNP doesn’t care because it is an adjunct to a five-minute Government, bothered only about that next media appearance. The Greens don’t care because they are a wholly-owned subsidiary. The media doesn’t care because no-one else does.

I care, so I am in despair because as best I can tell there are about two (possibly three) chances left to leverage the kind of national industrial project I mention above. We could do it with marine energy. We could do it with a resource-based Green New Deal. And we just about might be able to do it with a hydrogen industry (but that is so closely linked to energy it is probably a subset of what we’ve just sold off).

But if this Government is still in control, marine will go the way of wind, hydrogen will be handed gift-wrapped to Big Oil (this is already happening) and a transformative Green New Deal has been ruled out. After that? I’m out of ideas. I think creating Scotland as a genuinely national economy may be beyond us. If you sell all your assets and your major business base is gone, what do you lever?

It’s hard to know what more to write. Just as the Scottish Greens will soon discover the ‘jobs boom’ is unlikely to arrive for the reasons given above, so I fear that in a decade or perhaps two, the rest of my predictions will prove right.

By then? I hope some generation to come will have a credible, viable rescue plan. I’m not currently clear what it is. But I also suspect that they will view the post-referendum SNP administration with utter contempt, the people who sold Scotland down the river. They will be absolutely right to do so.

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