Economics of Independence Scotland's Economy

It’s the wrong economy stupid

Screen Shot 2015-09-09 at 13.51.37We are living through an era of profound change.  Really?  Capitalism is dead, socialism is dead, the nature of work is changing. Are you sceptical yet? Soon everything will be bought online, technology will become wearable, integrating with our everyday clothing. Drugs will interact with and change our genetic code, eradicating inherited health problems and, apparently, artificially intelligent machines will destroy us and take over the world. All those statements may turn out to be true but they all have one thing in common – they are examples of the white heat of technology type hyperbole that has been doing the rounds in one form or another since the industrial revolution.

Futurologists always exaggerate the short term change and significantly underestimate the longer term change that new technologies and even global economic and environmental trends can have on our society.

The problem with predicting the future is how little understanding we have of the way that our world actually changes.  To get people interested, the futurologists massively overestimate the short term change that a new technology or behavioural trend will drive.  This gets articles published, conference speaking gigs confirmed and often contracts from big companies to advise on managing this change – after all, there is nothing big companies hate more than change, especially if they are making big money without change.  That creates a change bubble and when none of the short term predictions come to pass the bubbles burst, the hype calms down and the real slower, more gradual and often more radical change begins often unnoticed by the masses.

Sudden changes do happen. In my lifetime I saw socialism crumble as the Berlin Wall came down and without a credible opponent to keep it true, capitalism morphed into global consumerism and casino capitalism. The bubbles inflated, then burst, and as there was no alternative to free market economy the neoclassical economists who held sway in Westminster and Washington, concluded that if the markets were not growing at an optimum pace the only answer was to make the markets even more free. Every dip was a warning, every major fraud (Enron / Arthur Anderson) was a warning, but successive Westminster governments (blue, red and then blue again) saw those warnings as an excuse to deregulate, to privatise, to relaxed capital controls, to stick the regulators in the dentist’s chair and pull their teeth out one by one.  As a result, a falsely extended boom became an even bigger bust than ever seen before, and just as the fall of Berlin Wall and Glasnost signaled the beginning of the end for socialism, the credit crunch and bank bailout signaled the end of global consumerist capitalism – it’s just that the powers that be are still in denial.

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Westminster economics means building the economy around companies that drove global consumerism.

For generations Westminster went all in, betting the UK’s future prosperity on the narrow minded approach that was global consumerism, and so felt they had no option but to build the economy around the companies that drove global consumerism.  As a result the UK economy became dominated by the City of London; one of the most powerful and unregulated financial centers in the world began to call the shots and governments of all colours, found the City able to exert more influence even than elected politicians, altering the balance of economic power and setting the Westminster economic agenda.

As a result, UK economic policy focuses on growing large existing business, on extracting taxes from existing large businesses who ironically have significant influence over what the laws regarding taxation are.  This means that the companies that dominate our economy are those who extract value rather than build value.  Politicians are fond of quoting Cargill’s “it’s the economy stupid” but Westminster has failed to realise that it has invested in the wrong economy.  Germany invests in its middle sized companies (the Mittelstand).  The engine and stabilizing power of Germany’s manufacturing and export led success are family owned middle sized innovative manufacturing companies.

In Scotland the mid market companies only amount to 1% of the company base but 20% of private sector employment.  Scotland suffers from the branch office effect of the Westminster PLC focus, larger companies don’t employ directors of marketing, finance directors, operations or HR directors in Scotland, the sort of people that after a successful mid sized company career often start their own high growth potential companies that join and refresh the Mittelstand.  To get those high power jobs people often have to go south and so has our economy, slowly but surely the London drift has sucked people, wealth, power, influence and economic growth potential out of Scotland (and the English Northern regions).

There is no guarantee that more powers to Scotland or even an independent Scotland would allow us to plough a different path, but at least we would have the opportunity to attempt to forge a better path towards the real, sustainable and productive economy that Westminster is blind to.

It will be a few years at least till we have a another independence referendum and in that time we must remember that independence is not an end in its self but a means to an end. Rather than obsessing about when the next plebiscite will be be, we need to focus our national, political, social and economic awakening on the creation of a new economic policy approach. We need to focus on setting our nation on a more inclusive, fairer, greener, confident and economically successful path. Futurists will go on exaggerating the changes in the short term but the longer term economic changes are likely to be far more focused on medium sized company growth, on added value production, on ways to significantly increase spend on research and development, on ways to drive high value exporting and increase productivity leading to increasing wage levels and employee engagement.  In Scotland our focus must be on the middle sized companies with rapid growth potential that will add value to Scotland rather than take from it.

If we achieve that then we will possess a more compelling, detailed Vision for Scotland that is impervious to scaremongering and the people of Scotland won’t be discussing whether or not to have another referendum – they will start demanding one.  Last year, those of us that hoped for a yes vote overestimated the short term change but we may have underestimated the longer term change, and with it how fundamentally beneficial those changes will be for our shared prosperity.


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About the author

Gordon MacIntyre-Kemp

Gordon MacIntyre-Kemp is the Founder and Chief Executive of Business for Scotland. Before becoming CEO of Business for Scotland Gordon ran a business strategy and social media, sales & marketing consultancy.

With a degree in business, marketing and economics, Gordon has worked as an economic development planning professional, and in marketing roles specialising in pricing modelling and promotional evaluation for global companies (including P&G).

Gordon benefits (not suffers) from dyslexia, and is a proponent of the emerging New Economics School. Gordon contributes articles to Business for Scotland, The National and Believe in Scotland.


  • Excellent piece Gordon. I wholeheartedly agreed with most of it. I particularly liked the bit about Mittelstand. I saw a really good piece of Australian TV journalism on that, and it’s certainly a very different way of doing work and employment to the one that prevails in the English speaking countries. But it’s humane, it’s all about manufacturing, which is after all how you create wealth, and hey, the Germans must be doing something right. They manage to stay a high-wage, high-skilled economy by going for the quality niche. That’s clearly a far better strategy than the race to the bottom our local neolibs are intent on.

    I know a few Marxist journals that would publish this, if you just changed just one word – paragraph 4, ‘socialism’ to ‘Stalinism,’ or some other alternative. You see many people who call themselves Socialists would not acknowledge the Soviet Union as proper socialism. But perhaps that’s not the point.

    The real lesson of the Soviet Union is the economists’ dirty little secret: all the models work. They just do different things. You can’t say that a model that lasted for 70-odd years didn’t work, and it’s growth at some periods was phenomenal. It did collapse (except Cuba of course), but the point was made. Consumer capitalism’s new manifest destiny myth is just that, myth. So that means there is no ultimate truth, no perfect model. So what we need to do is turn economics as the neoliberals do it on its head. Instead of looking for the perfect theory that if we only stick to it will eventually come good, we should first work out our objectives. What kind of economy/society we want to be, then tailor the policies towards the desired outcome. Learn from whatever works, be it the Mittelstand in Germany, or urban produce gardens in Havana. Clydebank should definitely do that. There’s so much empty space.

    Anyway, I’m rambling, there was another point to this, and I think this was it – the way you describe the City State of London, it’s something I semi-intuitively knew when I was still in my teens, in the early 80s. It factored into my decision to go to Australia. The moment of revelation came interestingly. I had this Australian friend in London in 1984. He was a talented artist. He showed me a pencil drawing he’s done once, I think (hope) I still have a copy of it. He had been more or less stuck in London for over a year at this point, and as an avid surfer it was depressing him. He thought the drawing was just of a random piece of coastline that he’d invented, with towering cliffs and louring clouds. It was incredibly realistic, and to me, having grown up on the island, I immediately recognised the distinctive coastline of the South Eastern corner of Great Britain (I use the term geographically), from half way along the South coast all the way up to East Anglia. The only difference was that although the Thames Estuary was there, where London should have been was just a great big hole. The heaviest of the clouds loomed over it. And I realised that’s exactly what London is, a black hole, sucking the life and soul out of the rest of the island, economically, socially, politically, every conceivable way. The size alone makes it inevitable. I’ve been to 35 or 40 countries, and I can’t think of many that have one city that size, then the next biggest a quarter of the size, if that (Iran is the only one that springs to mind oddly enough). The imbalance is inevitable. And right in the centre of the black hole, the densest part, the singularity, is the City.

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