In 2020 Scotland is in a state of crisis. Immediately that crisis is caused by COVID-19 – a pandemic which was bound to happen sooner or later but has come along now. In the longer term Scotland is in crisis because it is a post-industrial country in an era heading towards climate catastrophe. A state of crisis is not a condition which can endure It has to resolve by transition to another state and there are at least two and often more possible futures but one of them has come into being. The immediate crisis facing Scotland and the human race on this planet is the impact of COVID but inequality and impending climate catastrophe set the scene for how we can get from where we are now to any possible future. To do that we need to start with what the fundamental economic, fiscal and social statistics tell us about the current state of Scotland as a system. There is a path dependency. So where is Scotland now and what futures are possible for it towards the middle of the 21st Century.
The current state of Scotland as a system
Behind the immediate and very serious matter of a pandemic, there is the longer term socio-economic-cultural crisis facing Scotland and all other formerly advanced industrial nations and regions: the consequences of an economic, political and cultural transition from being industrial societies in which a very large proportion of economic activity and employment was in production – in the UK 50 years ago nearly half – to being post-industrial societies in which the great majority of economic activity and production is in services – in the UK now more than 80% and in Scotland nearly 90%.
Scotland is a service dominated economic system with the most important components of private capital being in the interlinked domains of Finance and Real Estate. These generated double the value of Manufacturing – 18% of Scotland’s GVA – compared with Manufacturing’s 10% but generated just 4% of all employment compared with Manufacturing’s 11%. Public Services broadly defined – Education, Health and Social Care / Social Services, and Public Administration – are the largest component of the system both by GVA at 21% and employment at 24%. In Neo-Liberal terms such services are a drain on the “Real Economy” but they provide essential services without generating profits. Privatization transfers these activities from being done for the public good as Universal Basis Services to generators of profit.
In Fiscal terms Scotland is a relatively affluent part of the UK but after fifty years of operation of the very favourable outcome of the Barnett formula spends substantially more than it raises in revenue and has a fiscal deficit of 7% of Gross National Product. Under EU rules if Scotland were to re-join the EU measures would have to be put in place to reduce this deficit to 3% over a relatively short time period. The SNP’s notorious Sustainable Growth Commission called for even more severe fiscal controls in order to placate the financial markets and establish Scotland’s probity. This was adopted as party policy by the SNP at its 2019 conference.
The response to the implications of the COVID 19 pandemic for the Scottish Economy is the report of the Advisory Group on Economic Recovery Towards a Robust Wellbeing Economy for Scotland (Higgins Chair 2020). This begins by noting that: ‘The fragility of our society and our economy, like that of others, has been laid bare these past few months.’ (2020 1) Correct, but what follows is a mixture of the pious and the aspirational without any sense of the problems of a post-industrial capitalist system dominated by finance and real estate capital. The degree of inequality in Scotland is noted but the solutions rely on harnessing the private sector towards activities in which it has shown very little interest in the post-industrial era. Despite the presence of Grahame Smith of the Scottish TUC on the Advisory Group, there is no discussion of the role of Trade Unions as meaningful partners in the direction of recovery. Instead there is an emphasis on collaborative relationships with “the business community”. The discussion of Planning in this document deals only with the use of existing planning powers. There is no sense of the necessity for even indicative planning of the sort proposed by the 1964 Labour Government under the Department of Economic Affairs, let alone the Directive Planning as in the UK during the Second World War. We need Directive Democratic Planning to cope not only with the immediate crisis of COVID 19 but with the developing catastrophe of global warming. That will only be possible if something is done to redress inequality.
The group noted that the problems caused by the UK’s flexible labour market and argued for higher minimum wages and collective rights. Of course this is right but it is by no means enough. The flexible labour market was created by the dominance of interests focused on exploitation in the political and social structure of the UK through the Thatcher, Blair, Brown, Coalition and subsequent Tory Governments. Capitalism is taken for granted but we are in the era not just of the Anthopocene where nature is transformed by human activity, but of the Capitalocene where that transformation is driven by the logic of capital accumulation. Instead of recognizing the necessity for a planned economic and social system directed towards addressing inequality and contending with impending climate catastrophe, the most that the Advisory Group propose is equity participation in private enterprises.
The SNP’s programme of an independent Scotland is a mix of massively optimistic fantasy, misrepresentation of the fiscal reality, and – when it speaks to its business oriented masters – realpolitik endorsing severe austerity. The SNP asserts that the welfare state which has operated in Scotland since devolution, funded to a very considerable extent by transfers from the UK as a whole, is possible in an independent Scotland. Their campaign in the independence referendum asserted that independence would make this possible and presented independence as a way of reversing austerity. However, the SGC report showed the real nature of the SNP very plainly. For them independence must be achieved on terms with which international finance capital is comfortable. An independent Scotland on these terms would suffer the kind of severe public service cuts, including cuts to the pay of public sector workers, What the SNP has in mind is a neo-liberal independent Scotland with worsening austerity and continuing inequality. The report of the advisory group on the post COVID future is much better in terms of proposed action but still will not create the kind of future that is for the many not the few.
In the SNP’s ideal world the Sustainability and Growth Commission Report might in normal circumstances WHICH ARE NOT COMING BACK have provided an economic base for affluent parts of the country and in particular the affluent parts of the Edinburgh region – the area covered by the South East of Scotland Land Use Plan. Even that base would have been fragile. An independent Scotland would have been hit much harder by the collapse of RBS than even Ireland was hit by the collapse of the Irish Banks. Betting an economic future on financial services was always risky. But much of the rest of the country would have been in a parlous state. One very likely impact of the COVID-19 pandemic will be a collapse in real estate activity, particularly but not exclusively commercial real estate. That will make things even worse. Is there an alternative? Of course – a real social democratic Scotland (either as part of the UK or as independent – the constitutional issue matters far less than the basic class politics).
The Socialist Alternative – confronting inequality and climate crisis
COVID has demonstrated that when faced with a crisis, the supposed free market – actually characterized by monopoly, oligopoly and other forms of imperfect competition – cannot cope. We had this before when governments stepped in to save banks and bankers from the consequences of their speculative idiocy in 2008 but that was passed on to ordinary people – the many, not the few. Austerity was applied to slash public spending on services whilst quantitative easing was offered to save the skins of the rich – socialism for the rich, not the mass of people. COVID demonstrates that what is needed when faced with a crisis is a planned and ordered economy. Scotland and Wales are in a better positions here because through devolution they retain an administrative structure at a population scale which has the potential to engage with necessary coordination and Public Health has been retained as a Health Service function. In England the abolition of the Government Offices of the Regions in 2010 got rid of an administrative structure which would have provided the basis on which coordination could have been managed. Public Health was hived off to massively underfunded local authorities. All this was part of the programme of setting up the English NHS as a happy hunting ground for private health providers paid from taxation and making massive profits if they could with the public sector always stepping in when they failed to do so – look at the experience of the railways.
COVID is the immediate issue. Inequality is the ongoing running sore. Middle income people – people living in households with an income between 80% and 200% of the median household income, have seen a substantial reduction in their incomes relative to those of the top 10% of households by income. The Scottish Government Housing and Social Justice Directorate in September 2020 reviewed The Impacts of COVID 19 on Inequality in Scotland and showed that COVID will make inequality worse. However, that review did not take account of the way that not only the poor but the mass of middle income households are already relatively much worse off than in the industrial era and that their children will be even worse off again in the near future. This is the theme of an important report from the Organization for Economic Cooperation and Development: OECD (2019) Under Pressure: the squeezed middle class. To be blunt substantial change happens when people who have been doing fine discover that their future, and their children’s future, is going to be worse.
The ability to pass on a middle class secure standard of living to children has been severely eroded. The medium term growing crisis is the potential of the collapse of our social world consequent on climate crisis. Socialists must address inequality but they have to do so in a context of developing climate crisis.
And there is a way to do this for which in the UK we have an excellent historical model / precedent. That is the organization of the whole of UK society – economy and civil society – on the basis of what Devine (1988) in his excellent book called democratic planning through negotiated coordination. As he says: ‘… a condition of working class cooperation was the sense of equality of sacrifice.’ (1988 32). Note that his description of wartime UK planning which is sustained absolutely by the documentary and oral historical record is not one of absolute central direction but rather of one of constant negotiation. In some ways the system without using the word operated according to the principle of subsidiarity: the principle that a central authority should have a subsidiary function, performing only those tasks which cannot be performed effectively at a more immediate or local level.[i] A key level was sub-national. Most social functions were organized on a regional level at the levels which more or less correspond to the region / nation levels in contemporary UK administration. Interestingly the development of information technology makes this kind of coordinated and discursive social and economic management much easier to achieve. This is what the Labour Party was trying to do generally from 1945 to 1951 when it was stopped by a combination of the first past the post electoral system – won the only absolute majority of votes ever in Britain but lost on seats won – not least in TORY Scotland. England and Wales stayed Labour. This is what we need now. Without it we are in the words of Private Frazer in Dad’s Army all doomed.
Devine, P. (1988) Democracy and Economic Planning: The Political Economy of a Self-Governing Society. Polity Press, Cambridge UK
Streeck, W. (2013) The Politics of Public Debt: Neoliberalism, Capitalist Development, and the Restructuring of the State MPlfG Discussion Paper 13/7 Cologne: Max Planck Institute for the Study of Society
[i] This originates in Catholic social teaching.