Towards economic self-rule?
Allan Massie
That Scotland is badly governed is a truism. We experience government which is simultaneously excessive, remote and irresponsible. It is excessive because it has long worked on the assumption that the solution to Scotland's problems was a socialist one (Conservative governments haven't dissented from this view). It is remote not only because political decisions have been taken in London but, more important, because, outside the narrow confines of Scottish legislation, Scotland has been treated as the northern extension of England, what Sir Walter Scott described as 'a subordinate species of Nor- thumberland', and subjected to economic, especially monetary and fiscal, policies con- ceived with English conditions in mind. And it has been irresponsible because the administration by the Scottish Office has been far too free from scrutiny and accoun- tability.
There seems no immediate prospect of better government. We have tried adminis- trative devolution to Edinburgh, and the result was more bureaucracy, more socialism. We tried, or had imposed on us, a reorganisation of local government: with the same result, so that now we see the paradox of an administration, nominally committed to reducing the role of the state, increasing the power of central government at the expense of local authorities. Then, as I indicated in my last article, the proposed political devolution of the late Seventies fizzled out, partly because of the self-doubt instilled in many Scots by their long exper- ience of dependence.
So, if we can't have better government, is there a chance of less? This is the starting point of the Adam Smith Institute's Report on Scotland, and they would of course maintain also that less means better. Hence they call for 'the systematic removal of powers, especially economic powers, from central government'. They are in fact ask- ing for a return to the 18th century when, as Scott put it in his 'Letters from Malachi Malagrowther on the proposed Change of Currency', Scotland was left 'under the guardianship of her own institutions to win her silent way to national wealth and conse- quence'. He added that 'neglected as she was, and perhaps because she was neglected, Scotland had increased her pro- sperity in a ratio more than five times greater than that of England'.
Benign neglect, however, is not enough. There has been too much benign inter- ference for that. A degree of dismantling would be necessary before neglect could be fruitful. For what we see in Scotland is an intense reflection of what we see all over Britain: the fruits and folly of rationalism. Glasgow is well known as the epicentre of Scotland's economic disaster. It is ironic to recall that the city's motto is 'Let Glasgow Flourish'; it is something that has been abandoned; the policy for the last 50 years has been 'Make Glasgow Flourish', not the same thing at all. The. original motto ap- peals to the ebullience of natural forces; the revised one asserts the superior wisdom of imposed rationalism, The Adam Smith team are by no means the first to identify a principal cause of Scotland's ills as our obstinate attempt to maintain our traditional industries. The Toothill Report came to the same con- clusion back in 1961. Then, they seemed to be shouting against the wind; time however has done the job, and the traditional in- dustries — coal, steel, shipbuilding — have all contracted despite massive and wasteful public investment. Nevertheless this history reveals more than bureaucratic inertia. It is evidence of Scotland's defensive posture, of the belief that natural forces no longer work to our advantage. Such a belief is not ill-founded: the Institute's report suggests a bit glibly that the old industries 'would have been replaced (as they were in much of England) by companies making consumer goods which were the keys of future pro- sperity' if we had 'not insisted on preserving them'. This takes no account of the demographic magnetism which pulled English industry to the south-east.
That is a fact which has conditioned all our thinking: it has made employment, and the prospects of employment, the criteria by which public investment has been deter- mined. Profit, and the prospects of profit, have been secondary. It is a fair criticism that few in authority in Scotland have believed in profit as an energising and expansionary force. Intellectually we have been digging ourselves in for decades, blind to the fact that natural forces obstinately continue to exist, and perform panzer operations on the Maginot Line of our economy. Changing our habits of thought is a priority. Fortunately the impact of the oil industry on the north-east and the suc- cess of electronics have begun the job. Reports like this should provide intellectual impetus.
That being so, its attack on grants, sub- sidies and monopolies is welcome. Grants and subsidies of the sort we are accustomed to are an expression of the attitude of mind that puts today's employment above tomor- row's profit. It is characteristic of the faith in public investment which neither requires an adequate return on money nor depends on success to provide future investment. Reliance on grants and subsidies is another expression of the Verdun-Maginot Line mentality. This does not mean that there isn't a case — which the Institute does not consider — for a Scottish Oil-Bank offering cheap loans to new or expanding busi- nesses; but it should be run by bankers, not public officials. It should take the place of the SDA (Scottish Development Agency), which the Institute would abolish, pointing out that its return on industrial investments averages minus 14 per cent.
Even more welcome is the onslaught pro- posed on the state energy monopolies. Their existence and performance are scan- dals here, for Scotland produces energY surplus to our requirements. In a free market, that would reduce prices. Natural- ly, energy should be cheaper in Scotland than in the South of England; its high cost here is one of the unnatural disadvantages from which industry suffers. OnlY government-controlled monopoly main- tains this ridiculous state. It should be abolished.
The Institute's most challenging proposal is to free Scottish banks from Bank of England control. At present, though Scot- tish banks issue their own notes, the quanti-
ty they may issue is controlled by the 1845 Banking (Scotland) Act which placed them
Under the supervision of the Bank of England. If they were free they could 'issue as much of their own currency as they judg- ed to be right for the Scottish economy'. This would actually work against the debasement of the currency, for Bank of England notes would no longer be legal tender in Scotland — i.e. it would not be compulsory to accept them at face value; if the government embarked on inflationary Policies, its money would only be accepted at a discount in Scotland. Only those who believe that the government should have a Monopoly in printing money can logically oppose this; and these might remember that historically governments have been far less concerned to maintain the value of their currency than bankers. Debasement of the coinage is after all a constant temptation for governments. It can hardly be so for bankers who would then see their own notes discounted. Nothing would be more calcu- lated to restore vigour and self-respect to the economy than this proposal. I don't stIPpose it has a cat's chance in hell of be- ing accepted. But if you believe that diversi- ty is more energising than uniformity, free- dom than control, you will see its attrac- tions.
A buoyant economy depends on the quality of the human material and on local administrative arrangements. I propose to look at the Institute's ideas on education and local government in my last article.
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