In a recent interview in the Sunday Herald, Blair McDougall of the No campaign makes a series of claims about the British economy. The pound, he says, is “the tangible expression of the strength and security of the UK”. He goes on: ‘Our message will always be the economic risk and gamble of independence versus the safer, better way to create a better Scotland through devolution, which offers you distinctive decision-making with the back up of the UK.’ Such invocations of economic strength and stability fly in the face, of course, of the recent report from a range of charities which conclude that Scotland faces a humanitarian crisis.
The No campaign is based on the repetition of two basic messages. Firstly and most obviously, it seeks to spread fear of the ‘unknown’. Secondly and intertwined with this, is the projection of the ‘broad shoulders’ of the British economy as a security blanket. But the public is being deceived in the process. The reality is that Britain is undergoing a long political and economic decline which is undermining to the brink of destruction the very idea of social security. This long-run decline is punctuated by acute crises. Britain’s economic performance since 2008 has in terms of jobs and living standards been the worst of all leading nations.
The economic model of the British economy run from the City of London is unstable, and the political paradigm in which it operates knows only one way: more privatisation and cuts. The only conclusion that can be drawn is that the leadership of the No campaign are either deliberately misleading the public on the economy or they are pursuing ideological goals to the detriment of the majority of the population. In the era of food banks, and at a time where no less than a million people live in poverty in Scotland , only the most cynical can argue that UK is OK. As Graeme Brown, director of Shelter Scotland, says: “People across Scotland are being battered by welfare reforms, stagnant wages, rising utility bills, higher living costs and job insecurity.’ It is a strange world that the leadership of No inhabit, where economic strength is cited as a reason to stay in a union of increasing rates of poverty.
The Financialisation of the UK economy
But to nail the argument we need an explanation of how we got here, and why it feels like we are moving backwards instead of progressing. Understanding the financialisation of the British economy is fundamental to explaining the insecurity of its economic framework and the worsening living conditions of the mass of its people. Financialisation and associated privatisations of formerly public enterprises are the primary mechanism by which there has been achieved a huge transfer of wealth from the public purse to private hands, laying the foundation for social injustice on a massive scale.
Financialisation is the increasing mediation of all social interactions by financial institutions and the extraction of fees from such interactions. Costas Lapavitsas, a professor of economics at the School of Oriental and African Studies puts it simply (‘The financialisation of everyday life must be confronted‘):
The term reflects the ascendancy of the financial sector. Even more important, it conveys the penetration of the financial system into every nook and cranny of society, including housing, education, health and other areas of life that were previously relatively immune.
Financial services dominate the British economy. And right now the Tories are making and implementing decisions that entrench that dominance. The greater the profits of the financiers, the greater their influence on government policy becomes and the more the state is rendered dependent on creating the conditions for future financial profitability. The profits extracted by private healthcare providers, privatised universities and over-charging energy companies are not only great news for a tiny minority, they also set the framework for economic decision making. It is crucial then to recognise British economic mismanagement not simply as the result of the poor decisions of a given Westminster government, but rather as an expression of fundamental contradictions and as part of an overall economic trajectory.
It means that the British economy is enslaved to big finance. Thatcher’s victory over working people in the 1980s set the course for a reorientation of the UK economy, away from production and manufacturing and towards a titanic financial industry. This has resulted in a permanent economic re-structuring which means the economy is based on financial transactions more than it is on the production of goods.
In addition to fostering inequality, financialisation is inherently crisis-ridden because it creates ‘bubbles’ as the value of financial assets departs from the value of concrete things produced in the real economy – these bubbles inevitably burst. But the blowback for these crises is not felt at the commanding heights of the economy. In fact, paradoxically, the great institutions of finance can actually make more money in a crisis as they handle the increasing debts of workers, businesses and ultimately states.
As Saskia Sassen explains: ‘Finance has created some of the most complicated financial instruments in order to extract the meagre savings of modest households: by offering credit for goods they may not need and (even more seriously) promising the possibility of owning a house. The aim has been to secure as many credit-card holders and as many mortgage-holders as possible, so that they can be bundled into investment instruments.’ (‘Too big to save: the end of Financial Capitalism’).
It is through this and similar processes that profits are generated. Whenever you hear Osborne et al talk about retaining the ‘leading lights of industry’ or the best brains in business, don’t for a second believe that they are referring to actually productive growth. They mean big finance, and big financiers. Only in a world where peoples lives are left out of economic analysis does this make sense. James Meadway of the New Economics Foundation concludes: ‘As investment in financial assets and property has risen, investment in the sort of assets that create jobs – infrastructure, machinery, equipment – has fallen and fallen. Our financialised economy privileges financial returns at the expense of real prosperity. Real wages for most people have fallen for the last five years, and this current ‘recovery’ looks sustainable only with increasing debt.’
This is the trajectory of the UK economy, and this is what the No campaign are defending as economic strength.
A productive economy: Labour, class and democracy
Not only does a No vote give an undeserved extension of life to a decaying British political-economy, it prevents us from bucking the economic trend internationally. By voting Yes we will have economic choices to make. We can go down the same road of British failure or we can make the decision to invest in industry, re-establish productive and manufacturing sectors and move towards public ownership of our key utilities. That we will go in this direction will be contested, but a No vote guarantees more of the same – and worse. Most of the cuts are still to come, and Labour will not reverse them even if they do come to power in Westminster.
Instead of our assets, such as North Sea oil, remaining an insurance policy for big finance in London, we can use its revenues to plan a massive scheme of investment in long-term, socially useful jobs. By doing this we not only increase the living standards and prospects of the majority, but we can start to counter-act the toxic dominance of the corporate lobby on political decision making, and ensure political independence from the US, who are needed to augment the power of the City. By building a real economy, not only can we get people into well paid, and long term jobs rather than low paid, precarious work, but we can build the power of working people throughout. Our industries should be run by trade union labour – to provide an increased representation for workers who have for decades been trampled on by the corporations and their governments, and who are now more often than not working in non-unionised, temporary conditions.
Independence must be about power. It is about the power to change the road the current status quo have been driving for decades. It is about democracy. But democracy must be fought for society wide, just as its opposite – financialisation – has dominated every sphere of our economic and social reality today. A productive economy means that instead of being held hostage by big finance, that we can raise through taxation the money necessary not only to defend, but to extend a holistic framework of world class social security. A productive economy, based on social use rather than on a quick buck can reverse the downwards spiral of decay, poverty and worsening living standards.
The ‘lost generation’ of young people can be at the fore of this revolution. Instead of hopelessness and despair, given the right economic framework they can pioneer new industries. We can harness the wealth of Scotland and focus it on our education system. As well as an intensified programme of apprenticeships, we would encourage people to under take study in the University departments currently being shut down in UK academia because such subjects are not direct feeders to the market: sociology, history, philosophy. Scotland really can lead the way if we genuinely develop an economy which is based on the needs of people. The sort of initiatives outlined here really would represent a beacon of progressiveness.
We stand on the verge. The options on the table are clear. a Yes vote gives working people the chance, if we fight for it, to redress decades of economic injustice. A No vote in that sense, is a disaster for the working people of Scotland, and in fact England as well. Scotland is unmistakeably on the frontline not in the battle of ideas. We should embrace that challenge, rather than fudge its outcome. We should stand strong in the face of the City and corporate elite, and present a people’s prospectus for lasting social change. Its time to start thinking independently of the economic dogma that has driven millions to poverty and despair. McDougal and company need to face up to reality. They must accept that the British regime has failed the people, or provide an argument to the contrary that paves a way out of the present situation. Both are impossible for the forces behind No to accomplish – it’s why they rely on Shell. Remember this when they assert the merits of the UK economy.
Thanks to Gregor Clunie and James Meadway for comments on this article.