Analysis

Scottish politics – new year, same confused economics

by | 9 Jan 2024

Two economic interventions from political parties in Scotland show why our economy has drifted so badly over the last 20 years - with little sign of change

Well it seems that Scotland’s politics went away for a wee Christmas break and came back as clueless about ‘the economy’ as when they left. If you ever wonder why Scotland’s economy struggles, it would be worth just remembering what follows.

The two stories from the last couple of days which reveal this are the one about what the First Minister thinks an industrial strategy is and the one about whether Scotland looks like a third world economy because our oil refinery has been closed down. Both repeat the very mistakes that got us to where we are now.

First, Mr Yousaf’s attempt to persuade us that he has an economic vision for an independent Scotland. It isn’t much of an attempt, and it captures the four defining features of his predecessor’s failure to develop policy or vision effectively.

Feature one is to generate ‘the illusion of wisdom’, with some initial framing to make what follows appear to be thought through. Feature two is that the future is described in adjectives, not nouns and verbs, that future’s qualities disembodied from their corporeal form in the world the rest of us live in (or perhaps he is following Starmer’s lead…)

The third feature is that this quality, this ill-defined ‘better’, is stuck behind a firewall and that firewall can only be breached by an indispensable Mr Yousaf himself using the power of his political party – under certain conditions. The fourth feature is that, lacking any substance, you outsource the substantive element completely, making your ‘indispensable’ role that of commissioner of a brilliant future you can’t describe.

So what Mr Yousaf says is that independence won’t be a land of milk and honey overnight (how wise!) but it will be fairer and greener (what will?) because after independence he’ll set up a ministry for industrial strategy (but not before!) which will actually be another committee of the kind of people who go on quangos (after all, Yousaf’s vision and theirs was always going to be the same, right?).

It is hard to know where to begin with this. Facing the Second World War, Mr Yousaf would have explained that it would take years to build up the industrial capacity to make bombs because stroking your chin sounds erudite. (Seriously, want nods of approval at a meeting with civil servants and quangoistas? Just make like Father Jack and repeat at random ‘that will require a multi-generational effort’.)

Economic transformation doesn’t happen overnight and there are clearly barriers to rapid implementation of change – but the difference between five years and 30 years is political will

So he then looks at someone else and says ‘if I were him I’d be six inches taller’ without explaining why or how. He just wants to be them. Not too quickly mind. And having had Common Weal pushing for an industrial strategy for a decade now, he knows that saying what we say is probably a good bet when stuck. But crucially, none of this must happen before independence for some reason.

At which point he’ll create the umpteenth committee of business leaders to rewrite the same economic ‘plan’ over and over again. I’m weary counting these now – they appear and disappear at a frequency which goes beyond annual.

Let me try and explain to Mr Yousaf why none of this is credible. First, economic transformation doesn’t happen overnight and there are clearly barriers to rapid implementation of change – but the difference between five years and 30 years is political will.

Economies change themselves over time without intervention, but Roosevelt’s New Deal, the 1940s war effort, the post-war reconstruction of Europe and the Thatcher-Regan ‘big bang’ reforms of the 1980s show that politicians can change economies much quicker than they change themselves.

But only if they want to and only if they know what it is that they’re changing and what it is that they are changing it into. You cannot claim economic transformation unless you understand what flaws there are in your economy that require its transformation in the first place.

If you know that you can use your words and explain it to people. If you don’t know, none of the rest of it is of any consequence because you’re just blowing adjectives into the air. Of course that is something you might want to do if you want to distract people from the fact that you could implement an industrial policy now if you knew what you were doing.

Why is Yousaf intending to wait until after independence to create an industrial strategy? Let us just assume that this is another form of “the decision was made in the kind of 24 or 48 hours before the speech” when he realised he didn’t have anything of substance to say.

As for another committee of big business figures? Perhaps we should just remind ourselves that if this was happening ten years ago, Michelle Mone would have been a shoo-in for that committee. Get over the idea these are made up of visionary geniuses. They’re not.

But it is here that we drift towards the other economic misreading of the day. If you are trying to improve the business base that you have what you do is business development support. This is a series of practices which exist to improve the businesses that already exist – training support, international market development support, financial support and so on.

That is not what an industrial strategy is. That is to help you create the economy you don’t have. A succession of Scottish Governments have fallen into this same trap over and over. They think the future is made out of the present, but tarted up, with a generous dash of bribing other people to bring their successes here (which they call Foreign Direct Investment).

That is a process of trying to build a different future by tweaking what is already there and bribing in better businesses. The problem is that you can’t bribe in better businesses unless you are offering them more than they are offering you, at which point they are simply extractive. And all of this is backwards-looking anyway.

For example, what did AI look like before it was AI? It did not look like a tech support consultancy firm but bigger. So you don’t start with SkyScanner (the online travel agent which was the poster boy of Scotland’s future until it wasn’t) and then try to make SkyScanner bigger because SkyScanner was a web-scraper which would never have spontaneously turned into ChatGPT.

An industrial strategy is best thought of as Marianna Mazzucatto’s Entrepreneurial State. It is state intervention not to grow the economy you have but to build the economy you don’t have. For two decades successive administrations have believed that you could create a renewables industry by blowing smoke up the ass of the existing energy companies. It failed miserably.

If the market you want doesn’t exist or if the one you have is so dysfunctional business support won’t transform it, you use an interventionist industrial strategy

Think of it this way; if the existing market is working tolerably well you can improve it using business support (which in Scotland is truly dreadful, but that’s a whole other thing). If the market you want doesn’t exist or if the one you have is so dysfunctional business support won’t transform it, you use an interventionist industrial strategy.

This is what drives me up the wall about this ‘Scotland is a third world economy because we don’t refine our own oil’ story. At face value there is merit in this; the failure to capture the national economic gain of vast mineral wealth is exactly the problem of many developing countries.

Here’s the thing though; when Alba points this out they seem under the misapprehension that what is exported from Africa is just big rocks. It really isn’t. Africa does indeed refine its minerals into export-grade materials like copper and lithium. It has its oil refineries.

So why does it struggle? It is really, really simple – it’s because it doesn’t own its mining industries and it doesn’t own its processing industries. It gets basic jobs but little wealth and no powerful corporate headquarters.

Want to know what a third world relationship with your resources looks like? Go and look at the 2013 industrial dispute at the refinery whose demise Alba is lamenting. Wealthy owner gets everything he wants by threatening to walk away from a nation which owns none of its mineral wealth leaving that nation with no option but to bend over when told? Scotland 2013, Nigeria 1993.

Getting an oil refinery back which is still owner by Ineos is pointless. You would need an industrial strategy to create a Scottish-owned refinery to make any difference, but putting that much effort into rebuilding a refinery for a dying industry is the definition of poor thinking. Which takes us right back to why politicians are so bad at this.

The reason is simple; they don’t make these speeches or these media interventions because they’re worried about the economy but because they’re worried about themselves. Alba is turning into a 1970s tribute act because it thinks there are a load of 1970s voters ready to walk away from the SNP.

So when they look at their prime rival, Yousaf’s SNP, and they see a weakness around oil and go for it. Yousaf is perfectly aware of his weakness too so he does all he knows how to do and turns himself into a 2015 tribute act, mimicking the steps of Sturgeon who was mimicking the steps of people who actually knew what they were doing.

If our economic options remain Trussonomics (the Tories), Blairism (Labour), Sturgeonism (SNP) or nostalgia (Alba), then our future remains much like our present. None of this is going to work. I don’t know which of the politicians know this and are playing games and which are just confused.

What I can reassure you is that none of this has any chance of working. No chance whatsoever.

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