Greece without the sun

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In the wake of the most last GERS (General Expenditure & Revenue Scotland) figures, which showed a deficit of £14.8 billion pounds for the financial year 2015 – 16, there were howls of derision from pro-Unionists. Scotland was said to have a ‘basket case economy’ which was like ‘Greece without the sun’  This latter slur was based on the assertion that Scotland’s annual debt as a percentage of GDP (9.5% ish) was higher than Greece’s.

First some perspective; Scotland’s GDP per head is approximately twice that of Greece, whilst our unemployment rate is about one quarter.  There’s been a lot of scrutiny of GERS recently, notably from Richard Murphy,  Professor of Practice in International Political Economy at City, University of London, who stated: ‘There are no facts to discuss on the Scottish economy… 25 of 26 income figures in GERS are estimates… there is no financial data for Scotland’  Startling stuff. As a former small business owner I find it extraordinary that there are no proper accounts for Scotland. Accounts are a basic business tool with which to make effective budgets that can then be used to track performance. The culprit for the lack of data appears to be the UK Government who, rather than create effective data capturing systems, prefer instead the highly questionable GERS methodology.

Robin McAlpine of The Common Weal has also commented on GERS. His view is that the UK Government isn’t out to diddle us, rather that GERS illustrates a lot that’s wrong with our relationship with the UK. To illustrate his point he used the hypothetical example of The Netherlands joining the UK as a devolved country. In such a scenario The Netherlands would immediately be worse off because it would outsource some functions previously carried out ‘in-house’ to the UK, like defence and foreign affairs, for which they would then be charged by the UK via the Barnett Formula. The expenditure would be similar to that previously incurred directly by The Netherlands so wouldn’t unduly affect expenditure. The major change would occur on the income side as the staff and infrastructure required to run the services in-house transfers to other areas of the UK. So while still paying its share of the costs (via Barnett) The Netherlands would no longer receive the tax income and economic stimulus previously generated by the Dutch staff. McAlpine estimates that around 20% of Scotland’s expenditure is for services provided outside Scotland. Given that these services would be repatriated to an independent Scotland there would be an immediate positive change in our balance sheet irrespective of any other changes we might make.

Be that as it may, I’m more interested in the processes that contribute towards prosperity. These aren’t data driven, quite the reverse in fact as it’s the underlying foundations that get the results that the data illustrates. Prosperous Western nations share a number of common characteristics. They’re all democracies, underpinned by the rule of law and an independent judiciary. They have low corruption, high standards of education and a mixed economy in which R&D is a key function. They have robust and trusted financial institutions; taxation is fair and respected as a common good. Finally they have strong civic institutions and a free press.

By contrast with prosperous nations, Basket Case economies (sometimes referred to as Banana Republics) have few, if any of the aforementioned characteristics. Greece, for instance, falls short in a number of key areas.  Its financial structures are notably weak. Greece joined the Euro when it was known that corruption and tax evasion were rife. It was then unable to manage inflation by controlling interest rates and is now in a debt spiral from which there appears to be no escape (not the EU’s finest hour).

Scotland has nearly all of the characteristics of a prosperous nation, the only missing piece being control over the entire economy. However, some would have us believe that our economy is as broken as that of Greece. Scotland has even been likened to a Banana Republic. So on the one hand we are very similar to other prosperous nations, yet on the other hand we are a Banana Republic. This would make Scotland unique in being the only country on the Planet that inhabits both these worlds simultaneously. This is nonsense and I’m confident that Scotland’s economy is fundamentally strong and that with Independence, a proper set of accounts and a firm grasp of the economic levers, we’ll be able to demonstrate this to the World.

 

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2 thoughts on “Greece without the sun”

  1. Well said Phillip , call me a “conspiracy theorist” but I suspect, tucked away somewhere in Whitehall, there is a unit which knows only too well aware that an independent Scotland would be a very viable economy. We only need reflect back to the McCrone Report of the 1970’s, embargoed for 30 years, to know that this report was suppressed such was the strength of Scotland’s economy and prospects if independent.

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