2007 - 2022

Post-Covid Economic Recovery

A FIERCE debate has erupted in the national movement over both strategy (e.g. need for a “Plan B” if IndyRef2 is rejected) and tactics (e.g. should we pursue an alternative list party for Holyrood).  This column is primarily about economics, so I will leave commenting on the political bones of this discussion to elsewhere.  However, economic policy does bear directly on where the movement and the SNP Government is headed.
For the past six years, little has been written or said within the movement regarding the economic policy direction of the Scottish Government.  True, the party has discussed (endlessly) Andrew Wilson’s Sustainable Growth Report, but this looks more to a post-independence economic scenario than to existing policy issues.  In essence, the SNP and the national movement as a whole has taken it on trust that the Scottish Government is doing ok on the economic front.  Yet in economic policy world, nothing could be further from the truth.
For instance, there is the hugely negative response to the report of the FM’s Advisory Group on post-covid Economic Recovery (AGER), published last month.  Fronted by Benny Higgins, an ex-banker close to the FM, the AGER was meant to make the Scottish Government look prepared for the coming economic recession.  But things did not turn out that way. Instead, the AGER report has been panned by economists normally sympathetic to the Scottish Government (e.g. Tony Mackay) as well as those generally on the Unionist side (e.g. the Fraser of Allander Institute).
Mackay’s criticisms verged on the vitriolic.  He concludes that the AGER report “is very poor and very disappointing. It was a great opportunity to come up with radical proposals to revitalise the Scottish economy after the damage caused by the coronavirus pandemic. Unfortunately there is little in the report to do that”.  Mackay went on to blame the Scottish Government’s own economic team rather than Higgins per se, saying “most of the report seems to have been written by Scottish Government civil servants, probably from the Office of the Chief Economic Adviser.”
Mackay has a point.  The FM is surrounded by seemingly independent economic advisory groups such as the Higgins AGER and the prestigious Council of Economic Advisors (CEA).  The latter is stuffed with international experts who are supposed to give the FM and Scottish Government the benefit of the best independent advice available globally.  Unfortunately, it doesn’t seem to work like that.  One CEA member told me in confidence how frustrated they were by having their advice routinely ignored by the Scottish Government.
Tony Mackay concurs.  “The current Council of Economic Advisers has a dreadful reputation in Scotland, including among many professional economists,” he says. “Its recommendations have rarely been accepted or implemented…”
A look at the minutes of the CEA (on the ScotGov website) exposes what is wrong. These twice-yearly convocations are dominated by presentations from the Chief Economic Advisor, Garry Gillespie, and a phalanx of his technical staff.  Other presentations are given by ministers, including the CabSec for the economy, Fiona Hyslop. The “advisors” seem to listen then make anodyne comments praising what the Scottish Government is doing.
Of course, the published minutes are probably sanitised and I’m sure the occasional critical point is made.  But the CEA does not operate as a group of experts discussing in private and then offering serious critical advice regarding economic performance and management.  Which means the CEA has become a vanity project that gives the Scottish Government false reassurance about its economic performance.
However, there are signs that the worm has turned. In the wake of the Higgins paper on what to do to reboot the economy after Covid-19, long-time CEA member Jim McColl went public with a blistering attack on the Higgins document and Scottish economic policy in general.  Of course, Monaco-based Jim McColl has ulterior motives.  He recently fell out big time with SNP ministers in a dispute over a botched contract to build two ferries at the Ferguson shipyard, which he had rescued. The row ended with the yard nationalised by the Scottish Government, a personal humiliation for McColl. That mess aside, McColl has a point in that the Higgins report says practically nothing about aiding small businesses – the beating heart of the Scottish economy.
The current chair of the CEA is crusty veteran Crawford Beveridge, a millionaire hi-tech entrepreneur with strong links to US business, and boss of Scottish Enterprise during the 1990s.  Beveridge is a long-time supporter of independence, which is not uncommon in hi-tech circles, who want their own liberal state machine to provide investment capital and low taxes.  Beveridge has been chair of the CEA since 2011, an appointee of Alex Salmond.  He is a vocal supporter of indy Scotland keeping the pound sterling, which suits his globalist view of the world.
Even if the Scottish Government was listening, Beveridge has clearly been in the CEA chair too long.  His standard neoliberal perspective has long since been exploded by Brexit, Trump’s anti-Chinese trade wars, and the destruction of global supply chains as a result of the pandemic.  The market-driven world view that Berveridge represents on the CEA has had its day.  Hence his inability to criticise the Higgins report or offer any thoughts on how the Scottish economy should respond to the coming pandemic recession.
That said, Nicola Sturgeon has been slow to pick independent economic advisors with real clout.  Economist Salmond liked to appoint academic super stars such as Nobel Laureate Joseph Stiglitz, because Alex enjoyed the banter and the shared limelight.  Instead, lawyer Sturgeon has preferred to fill the CEA with non-economists, giving the committee a broader tilt.  The problem with this shift that is it justifies the morphing of the CEA into a cheerleader for a conflicting menu of social and economic policies, couched in impenetrable civil service jargon.
When she became FM, Sturgeon immediately appointed five new faces to the CEA.  But her choices were strangely eclectic: Harry Burns (Scotland’s leading public health expert), Amanda McMillan (ex-Diageo exec turned boss of Glasgow airport), Prof Anton Muscatelli (Principal of Glasgow University), Prof Sarah Carter (an expert on women and business), and Mariana Mazzucato (a lefty economist with an international reputation).
Certainly, the CEA desperately needed more feminist representation.  But airport boss McMillan merely used her new perch to push an agenda for cutting Air Passenger Duty, an anti-environment policy the SNP Government was only recently shamed into abandoning. Meanwhile, Burns, Carter and new recruit Brynhildur Davidsdottir (professor of the environment at the University of Iceland) have gladly boosted the Scottish Government’s welfare and wellbeing agendas – yet without simultaneously confronting how these policies fit with the neoliberal, free market view of the Growth Commission, or the latter’s target to double and triple GDP growth.
Only the appointment of Mariana Mazzucato represented any sort of radical voice on the CEA.  Mazzuacato has earned a global reputation for attacking the increasingly threadbare neoliberal arguments for permanent austerity and reducing the size of the state.  Her arguments for long-term “patient” capital investment have seen fruit in the new Scottish National Investment Bank.  But Mazzucato is known to be restive regarding the unwillingness of Scottish ministers to take radical advice.
Governments use advisory groups like the CEA or AGER in two ways.  First, to give political cover to do radical things: “the scientific evidence says…etc.” Or second, to mask passivity with pleasant headlines: “Our experts agree we are doing wonderful things!”  The latter course has the advantage of putting off difficult choices.  But difficult economic choices can’t be ducked for ever.  Especially if there is a second independence referendum in the offing.

Comments (4)

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  1. Mark Bevis says:

    “or the latter’s target to double and triple GDP growth.”
    OMG. Has nobody in these think tanks heard of the Exponential Function?

    Which bits of Scotland do you wish to sacrifice to oil giants, coal giants, rocket firms, nuclear power advocates and factory farm despoilers?

    The UK economy was already headed into recession before the Covid19 breakout. Scottish economy might have been pushing up the averages, or pushing them down, I can’t say for sure myself. But the overall trend is gonna be the same.

    The Consciousness of Sheep sums up the predicament far better than me:

    Is anyone versed in the concept of Degrowth actually allowed within vocal range of Sturgeon?

  2. Andy Anderson says:

    Thanks, George for another very interesting article. The is no doubt that this is the time when the Scottish Government should be ditching much of the neo-liberal baggage and taking steps to develop the economy in a new direction. We must not allow this time to be wasted we need to put forward an alternative strategy and campaign for it.

    1. Blair says:

      What is required is more efficient government(s), taking whole life approach when developing the systems with which we interact. This can be achieved without eliminating the need to retain some aspects of previous experiences & business practices. The power of any government must be suitably distributed. The problem we have Today is too much power is centralised and we don’t have any real control over worldwide markets. Scotland has plenty of resources to help us develop new practices, within 20 years Scotland’s greatest natural resource will be water. We have a lot to campaign for and to protect, but we have to have a government that is protected from being corrected if we are to create a fairer way for all.

  3. thom cros says:

    I It is exactly 60 years since Harold McMillan made his “Winds of Change” speech in the face of numerous demands for sovereignty from the anti-colonial movement. Kwame Nkrumah just months later made his maiden UN “Independent” speech by stating ‘ the true solution lies in the application of one principle, namely, the right of a people to rule themselves.’ Indeed through the 1960s, 17 former UK colonies made that mighty step to sovereignty. But what kind of sovereignty did they achieve? Whose nationalism grabbed state power? There was the challenging context of a war out there: a cold war forcing new nations to take ideological sides either side of the Curtain. Then a number of the new Independistas joined the Non-Aligned Movement in an attempt to create a third-way model. Post-independence provoked a number of competing internal forces that damaged development scenarios and retarded economic and social progress. (In the one I knew best, Jamaica, the post-colonial progressive movement led by the Peoples National Party imploded into bloody failure allowing right-wing reaction to gain power).
    As we speak we are watching an ideological battle right here in Scotland (See George K passim) with competing ideological forces laying out their economic aspirations for an Independent Scotland. Yet there is the underlying contradiction that in order to secure sovereignty we need (at least) tactical unity across classes, cultures and communities of ideas/idealism.
    Nationalism is politically at least a highly promiscuous movement requiring tactical broad-church alliances demonstrated in the All Under One Banner marches. Unionism’s rightwing populism will not go away or fall asleep. Under the Johnson-Cummings dynamic –duo’s neo-Trumpian agenda, all of the British state’s levers of power will be employed; all of their forces above and below the line, covert and overt, will be brought to bear in their efforts to create division and so keep Scotland in its imperial grasp. The magic mix of romance, resolve and resistance, idealism and pragmatic state-craft, mass movement management and leadership with the capacity to offer folk an empowering, fairer, participatory future is required. Let us not forget however that it is (still) the SNP that is the key agency of Independence. George K and so many others are fringe voices of and for the discontents.

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