Scotch Myths 2

Scotch Myths No. 2 of an occasional series…
MYTH #2: Scotland needs to be part of the massive UK economy.
My next myth is about the economy, or more correctly, the size of the economy. Unionists often like to point out that the UK is the 6th biggest economy in the world, telling us that an independent Scotland wouldn’t come anywhere close. The implied point here is that Scotland will be a poorer nation as a result. Well, I’ll be honest, there’s no disupting the fact that the UK is the 6th biggest economy in the world, and that Scotland wouldn’t come close to that. They’ve got us bang to rights. Except that this little myth is based on an entirely false premise because, as Italians will tell you, size doesn’t matter. (Please note: the following uses  the IMF’s figures for GDP in 2010.)
It’s true that the UK is the 6th biggest economy in the world. However, it’s also true that China is the 2nd biggest, Brazil the 7th, and India the 9th. I mention these three countries because despite having huge economies, they all have massive levels of poverty. A quick look at the top 15 economies in the world and one thing should stick out like a sore thumb: they’re all massive countries. Perhaps not in terms of landmass in some cases, but all have massive populations.
Look further down the list – Sweden at 22, Norway at 25, Denmark at 31, even Luxembourg at 69. Taking the unionist argument at face value, one could only assume that these countries have vastly inferior living standards to the vastly richer UK. But no one in their right mind would argue such a thing. So what’s wrong with this picture?
The answer, of course, is that the size of a country’s economy tells you almost nothing about that country’s real wealth. Instead, we need to focus on the GDP per Capita – how much a country produces per head. Looking at this table tells a very different story, one which makes far more sense. Look at where those three countries I mentioned stand – Brazil at 56, China at 91, India at a pitiful 133. These nations may have massive economies, but they also have massive populations to spread that wealth around, something which they fail to do adequately. Conversely, we have Luxembourg, Norway, Denmark and Sweden at 1, 2, 6 and 8 respectively. That’s more like it – everyone knows these countries have superior living standards. Of course, these countries have small populations, meaning they can’t possibly generate as much total GDP as the big countries – but it doesn’t matter, because proportionately they’re more wealthy per person.

So where is the UK in this list? It’s sitting at a nothing-to-write-home-about number 22 (wait a second, isn’t that Iceland at number 20? Ireland at 12? So much for Jim Murphy’s “Arc of Insolvency”.) This perhaps explains why unionists are so keen to focus on the overall size of the economy, rather than this more important measurement, as it is somewhat at odds with the idea that the UK is an extraordinary nation that Scotland is fortunate to be a part of. John Swinney has already said that an independent Scotland would be the 6th richest of the OECD countries, with the UK at 16, so it’s safe to assume that an independent Scotland would be higher than 22nd on the IMF GDP per Capita figures. That, to me, sounds like as good an argument as any for voting for independence.

So the next time a unionist tells you that the UK is the 6th biggest economy in the world and that Scotland couldn’t compete with that, try asking them how they compare to other nations in terms of GDP per capita. Alternatively, you could just point out that the next biggest economy after the UK is Italy. You’ll have fun seeing them trying to wriggle out of that one.

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  1. Joe Boyle says:

    But then as Herman Goering said, in his cell at Nuremberg, to prison psychologist and U.S. Army Captain Gustave M. Gilbert :
    “Voice or no voice, the people can always be brought to the
    bidding of the leaders. That is easy. All you have to do is tell them
    they are being attacked, and denounce the pacifists for lack of
    patriotism and exposing the country to danger. It works the same in
    any country.”

    Sadly, I suppose that one can rephrase this into the current context and the continued importance of myths can been seen and understood.

    But please understand that I am certainly in no way implying an historical association with current myth makers back to Goring.
    Merely that his words are only reflections of the mind set that exists within all political organisations past and present that have an entrenched power base to feed and maintain.

    When constructive thoughts and ideas run out then all you may have left to play with is myth or violence, or possibly if you can see it …the truth.

    Fortunately our current political environment in Scotland, within the context, precludes violence.

    The big problem currently is that the myth makers are playing with a, traditional, stacked deck.

    I shudder to say this, but its almost as if an evangelical movement were needed right now to combat these mythologies, but this in itself carries it own dangers.

  2. scottishnationhoodie park says:

    ” Alternatively, you could just point out that the next biggest economy after the UK is Italy.”

    Earlier in the article, you said that Brazil was the 7th largest economy.

    Good post by the way.

    1. Doug Daniel says:

      Sorry, that should have been next biggest European economy.

      Good spot!

  3. “It is the vice of a vulgar mind to be fascinated by bigness, to think that a thousand square miles are a thousand times as grand as one square mile.”

  4. This is a non-story and a non myth. Your point could have been made in three sentences, rather than 500 words.

    I think it’s a straightforward argument that Scotland would (on paper) be more than capable of being self sufficient, and able to maintain a good standard of living for citizens.

    The main impediment to independence, in my opinion, is the 20 years of grief and costs involved in divorcing the rest of the UK. As anyone knows, even with the best of intentions, most divorces get acrimonious, especially when there are so many dependants, income streams, assets and ongoing interdependance.

    1. bellacaledonia says:

      I don’t agree that it’s a non-myth. The myth of big business, growth economy and attachment to idea that ‘big is better’ in terms of both state and economy is probably the dominant meme of our era, and the reason for our demise.

    2. Steve – Amazon have just created 3,000 full and part time jobs in Scotland with the opening of their Dunfermline and Edinburgh operations, Diageo have been investing over £20 million increasing their whisky brand capacity (important for UK foreign exchange as is North Sea oil and gas).

      Mitsubishi and other large multinationals are investing nearly £1 billion in the Scottish Renewables industry, Target just bought an oil and gas field from Exxon with an estimated 40 years life with current extraction technologies for $1.75 billion.

      The only grief is for Westminster and the City of London as cash receipts decline courtesy of the lack of an English industrial manufacturing base to pick up the slack from lost Scottish tax receipts and extraterritorial income. England will also have to come to terms with increasing energy costs as the subsidy from Scottish generators will be lost, the same with increases in petrol, oil and gas prices.

      If Westminster did try to drag it out over 20 years, Scotland would simply declare UDI, sieze all UK assets remaining in Scotland and walk away having dumped the nuclear subs currently rotting away at Rosyth off Plymouth or in the Solent and charge the USA a small fortune to get their Trident missiles and war heads back from Coulport.

      If we were really fed up by English intransigence we could always take the English Government through the International Court of the Hague for reparations.

      By the way did I mention in Scots Law, the people of Scotland are sovereign and not the Parliament at Westminster – rather makes section 5 of the 1999 Scotland Act look rather sick.

      Still you could be right, maybe Scotland is too poor, too stupid, too wee to do anything but ‘muddle by’ with out gloriously venal Westminster but…. I hae ma doots.

    3. Doug Daniel says:

      648 words, actually! It’s not a non-myth though, it’s a genuine “argument” regularly brought up by unionists. If i really wanted to, I could probably find you a dozen examples of Labour, Tory and Lib Dem politicians telling us that one of the reasons Scotland needs to remain in the UK is because we’re “part of the 6th largest economy in the world”, or some such rubbish.

      Your argument about 20 years of grief and costs is the same sort of vague silliness Aidan on Better Nation always comes out with (and was/is probably next on my myth list). Where did you get your 20 year figure? What are you basing that on? It’s just a random number that has popped into your head. What’s to say we wouldn’t have everything done and dusted within a year? You use the word “divorce” because of the negative connotations it has, of two parties from a failed relationship giving up on each other. Why can’t we just call it Scotland finally stepping out on its own? Why the need for emotive, negative language?

      The main problem I have with your argument though, more so than the vagueness of it, is just how unrelentingly negative it is. You admit Scotland could be self-sufficient, and yet you think we should avoid it because the admin might be a bit cumbersome? Imagine if we adopted that sort of attitude for everything. We’d never have had a Scottish Parliament in the first place, because of the expense of building a parliament, paying extra politicians, the problems of Scottish MPs having a say on devolved matters in Westminster… And yet, our world keeps turning. Can you not see that the protracted, uneasy process of devolving a couple of extra, meaningless powers every ten years is going to be far more complicated and expensive (both in admin costs and the continued lost opportunities of sticking with the UK) than just making that short leap to independence?

      1. I think any Unionists making that spurious argument can easily be dismissed.

        I have no sense of patriotism and no interest in the country my children and grandchildren will live in. Using the term Divorce, is actually putting a pretty positive spin on things, I think. Your notion of having things put to bed in 12 months is ludicrous.

        I’d be very interested to read the detailed schedule of separation from the UK, and the anticipated settlements agreed for assets, liabilities and everything else. Has anyone published this? I’m sure the public would need to know, before voting on it.

      2. Doug Daniel says:

        You and I know it’s a spurious argument, but there are many people making it anyway. Even those who don’t specifically say “6th biggest in the world” go on about Scotland being “part of the much bigger British economy”. It’s something journalists should be taking them to task over, but I’ve yet to see it happen.

        12 months may be ludicrous, or it may not. That’s kind of my point about 20 years – it was just a random number I plucked out of thin air. The thing about independence is it isn’t a theoretical situation – there are a multitude of examples to choose from, even just within Europe. They reckon it took about four years for the Czech Republic and Slovakia to be completely settled, which sounds about right to me. Any longer than that would likely be a result of the UK government dragging its heels, for which Scotland could surely look to international agencies for support.

        But yes, a detailed schedule of independence from the UK would be good to see. But it would require assistance from the UK government to produce, as it won’t be a one-way street (unless we go down the UDI route…), and somehow I can’t see the Tories helping to thrash out a realistic timetable.

  5. chicmac says:

    Yes GDP per capita makes much more sense than economy size. Many also believe that GDP local purchasing power, GDP PPP, per capita is even more indicative of genuine wealth in a country since it eliminates things like exchange rate anomalies.

    However, another thing that needs highlighting is population size in terms of relative GDP PPP wealth.

    In the following graphic, you can see European countries listed in terms of GDP PPP, richest at the top. Population is also given and the colour coding also indicates whether the country has traditionally been a Western democracy (Yellow) or whether it has been an Eastern Bloc or Asian periphery nation.

    The thing to note is that the top ten of the (still) wealthier Western democracies average about the same population as Scotland, i.e. just over 5 million.

    It appears that Scotland’s size, far from being ‘too wee’ is just about the optimum in terms of wealth potential.

    http://i51.photobucket.com/albums/f390/chicmac/GDPPPPpcEurope.jpg

  6. Siôn Jones says:

    For anyone unaware of it, Adam Price, the former Plaid Cymru MP has spent a year in Harvard studying the effect of size on economic performance, and has produced a most scholarly and thorough report the flotilla effct that should put this matter to bed for ever.

    1. chicmac says:

      Thanks for that. Excellent read, lots of interesting data and input.

      I would point out a couple of things. First, the omission of Herman Kahn and the Hudson institute. In the early 70s Kahn, known as the ‘father of futurology’ and the guy who popularised the word ‘scenario’, along with the Hudson group made all kinds of predictions, mainly using Game Theory. More famously for nuclear warfare tactics, but also for rather less frightening things. In particular, I remember as a student reading their prediction that countries of about 5 million in size, like Scotland, would, on average, do better than those of other sizes. Certainly deserving of a mention.

      I can understand why there is little or no touching on the subjects of ‘effects on the machinery of Governance’, ‘bureaucratic inertia’ and its sibling ‘institutional corruption’ since these are areas which are necessarily subjective with little directly measurable evidence.

      However, we are all aware that, whereas elected assemblies may only be partially related to population size, the civil service and the numbers employed in government departments are more closely aligned to population. large countries have large bureaucracies. And the larger the size of the bureaucracy, the more people there are in elevated positions who need to justify their higher salaries by ‘innovating’, creating new bureaucratic initiatives. So the bureaucracy becomes ever more complex and obfuscating in nature.
      This lead to an ever increasing bureaucratic inertia which has the effect of
      slowing down even the simplest and least contested changes which are identified as being necessary in response to some new circumstance.

      But that is only the least problematic thing for large bureaucracies. The increased obfuscation and the sheer size of the system offers an excellent breeding ground for corruption. It is far easier for fiddles to be carried out
      under layers of complex bureaucracy. Easier to pull the wool over people’s eyes, easier to take ‘consultancy’ fees for helping requests through planning permission etc.etc. You know the score. This also has a very damaging effect on democracy and national progress as a whole.
      Those indulging in it are further encouraged by being just one in a huge herd and therefore less likely to get caught. And there is always the excuse that the rules were too complex to understand. i.e. more tempting for those so dispositioned.

      By contrast. Small countries with small bureaucracies mean clearer systems. Smaller departments. Most likely everyone knows everyone else. Easier for corruption units to weed out miscreants. Therefore less temptation for miscreants in the first place.

      In short a bureaucracy which is far clearer, easier to use and responsive. One which is far more trusted and less amenable to corruption.

      Over all leading to a much more responsive and flexible governance of the smaller country.

      Lastly, I also read on an IMF report that no significant negative due to economy of scale was discernable until countries were below 2 million in size. Therefore, they used 2 million as the figure for defining small country or large country.

      1. Siôn Jones says:

        Good points – why don’t you suggest it to him, as he is doing another year at Harvard. (You can get him via Jill Evans at Plaid Cymru – details on their site)

        Another criticism put forward by Dylan Jones Evans – a rare breed in that he is an intelligent Welsh Colservative – is that the study does not include nations that are not independent. He has a point – Euskadi(basque country) and Catalunya have both prospered
        mightily since they achieved full autonimy, without full independence ( devo max if you like) – but there is great pressure in both countries to achieve full independence.

      2. chicmac says:

        Much as I appreciate your suggestion I regret that my personal time constraints necessitate that any spare time I do have for political activity is already over-subscribed in the name of Scottish independence. However, feel free, if you deem it worthy, to intimate these ideas to your friend. I would expect he was already aware of them anyway but recognises that in terms of gaining academic beeny points their subjectivity and immeasurability renders them limited in value, even though most intelligent individuals would see the truth of them.

  7. Caadfael says:

    USA biggest, richest?
    Hmm why do they have middle class citizens living in storm drains? Why do they have police pepper-spraying people like they were cockroaches?
    Not exactly aspirational is it!

    1. chicmac says:

      Even less inspirational 😉

  8. This is by no means as serious as what you outline in the article above but it does qualify as another Scotch Myth….

    http://michaelgreenwell.wordpress.com/2010/04/21/och-aye-the-noo/

  9. You are right that GDP per se is not a determinant of a nation’s economic sustainablity (in the eyes of the money markets). But this is hardly a revelation to anyone.
    GDP per capita is indeed a better yardstick of how wealthy a nation is. Better still to adjust it for Purchasing Power Parity to cover off the ‘affordability’ of things relative to the wealth.
    But then you also need to factor in the total outstanding level of debt – public and private – public sector annual budget deficits (or surpluses), when these debts fall due for repayment, and what rates in interest are being paid on different chunks of debt.
    Of course, you can then also build into your model the anticipated boost from industries such as offshore wind. But this is a fairly imprecise exercise – I would not dignify it with the word ‘science’ – and it all depends what model of the economy you are using.
    So let’s not replace one myth – size matters – with another one: GDP per capita is all that counts. If you wish to argue from an economics standpoint, at least understand what you are talking about.
    All that said, I am convinced that an independent Scotland would be entirely viable, though neither as wealthy as some of the most starry-eyed of forecasters suggest nor as strapped as the gloomiest doomsters craw.
    A free market economy signed up to EFTA rather than the EU – and certainly not the asphyxiating euro – , but with low corporation and personal taxation, minimal red-tape and a much shrunken public sector would have every chance of thriving on the backs of its people’s hard work, intelligence and inventiveness in a market close to the continental EU, the Baltic, the UK, and not a million miles by sea to the USA and Latin America (by the way, did you know that a great chunk of the UK’s coal imports now come from Colombia and the USA as it is the costs of extraction and closeness of their mines to deep sea ports that is the key, not the breadth of the Atlantic).
    My greatest concern would be that independence would be followed not too many years afterwards by the election of a Scottish government – majority or coalition – run by tax and spend dinosaurs that once grazed the pastures of local authority areas where sticking a red rosette on a donkey would get it elected. Still, as I always say, there are only two things to ask when walking into the referendum polling booth: ‘What do I feel about this? Am i up for it?’

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