Empty Pockets Square

Politicisation of our economic activity (and beyond) will not make us wealthier

IN THE CASCADE of commentaries that followed Nicola Sturgeon’s departure one thing is striking – how Scotland has been dominated by the extreme politicisation of its public affairs.

This politicisation is much deeper than the interminable neverendum; all left-wing polities inevitably demand control over property, economic action and, lately, thought. Their Utopian goals cannot be assuaged any other way. Leftism is defined by its interest in constructivist design; usually in favour of itself at the expense of others. This also eventually destroys its leaders.

The emergence of Nicola Sturgeon as a purportedly strong leader demanded a robust characterisation of “progressive” change towards constructed goals. Her self-adopted character and approach to communication, but acting as a chieftain of a tribe, fitted well into the closed system of patronage that Scotland’s electoral system created.

A parcel of leftist rogues have driven the decline in Scotland’s fortunes. The question arises, how the heck does the nation get out of this?  Scotland’s politicised core involves a cabal of like minds intent on spending other people’s money on other people; but that cabal has forgotten, or does not realise, or does not know how (take your pick) to create that money; it’s seeping away just as it has in the rest of the UK due to centralisation and an over-weening bureaucratic invasion of private innovation and endeavour.  Saying goodbye to Nicola Sturgeon will not change this by replacing her with someone advocating the same leftist ideas; socialism has always been the route to penury.

I have to wonder if the situation is now worse than we realise; I have written before about the seepage of talent away from Scotland. But there is another reality about the UK, our businesses have fully integrated supply chains across the Union and those who work in Scotland’s procurement departments are rarely part of the SNP tribe and are not employed to be politicised. They may well favour using Scottish companies for supplies, but margins will always trump sentiment. Business will be done where it can thrive.

In this sense, the notion that Scotland is successfully standing on its own feet now is as mad as the notion that an independent Scotland can somehow thrive successfully as an independent nation on its natural resources.

What happens if in addition to the myth of a natural resource-based economy, the networked business economy shrugs and slowly moves away?  I often travel South towards the Scottish border on a Friday; too often, I already see commercial service company vehicles from Northumberland, Yorkshire and Manchester on the motorways out of Scotland. They are not carrying Scottish exports, their going home to send invoices to Scottish companies for services rendered. Is this not a symptom of decline?

Intra-UK trade involves an entirely hidden set of highly diffuse networks, different from those that any Scottish public service has to operate within. The cohort of politicians who make up the SNP Holyrood cabal are imbued with the latter circuitry; separated from the revenue-earning and overhead constraining realities of any business. Holyrood is really a huge Department of Public Sector Over-spending.

Indeed, the idea that any nation can operate as a politicised centrally planned technological powerhouse is, frankly, laughable. Today in business, even the idea of “intra-UK” trade is thin. I run a small Ayrshire based technology business and we are linked to England, North America, Singapore and of course China by default.  What any government means by “supporting innovation” is spending public money on entities whose overheads are covered by taxpayer funds; their ability to develop new outward looking networks is hugely limited by the political need to serve their paymasters’ vote incentives and preserve their future flows of public funding.

That’s not how business works. Economists have a phrase, the “spontaneous extended order” that describes how hidden knowledge, supply and demand in markets and flexible pricing combine to generate new streams of wealth-creation.  These three words all have meaning.

“Spontaneous” is a reference to a discovery process in which individuals land on ideas that create change and pursue them. That change is actually unknown by any entrepreneur when they set off, it is each businesses appetite for and coping with risks and uncertainties that produce unanticipated innovation.

“Extended” refers to a mystery that non-economists always forget; there are just under 500,000 businesses in Scotland, most of them trading with around 5 million business elsewhere in the UK. Can anyone know what these businesses are doing? Of course not, especially politicians focussed on public services and squawking about referendums. It’s only business-to-business trade that can generate new growth through new discovered networks creating extended trading.

“Order” refers to a set of rules within which businesses have to operate to be successful. The key ones are secure private property, honesty, and good contract, while low regulatory or political interference and effective people management induce higher productivity.  There are very good reasons why Anglo-Saxon nations where cultural traditions that value these axioms exist aplenty –and other parts of the world where they are missing, tend to be respectively better and worse at creating new wealth. In this, some of the shady undercurrents of Scottish political activity are genuinely damaging – honesty and good contract matters greatly.

The goal of any Scottish government attempting to build prosperity needs to be to create a ferment of spontaneous innovation within this extended order; the way to do this is to ensure that property rights are respected and intrusions into trade are minimised.

The SNP’s record in governance, and indeed the UK state as well, has been opposite to this; interferences with the drinks industry, intrusions into the food industry, endless acceptance of EU regulatory fiat, then gilding it, political purchasing of ferry companies and railway operators, public energy companies and national investment banks are all visible manifestations of politicisation that crush a vibrant and spontaneous extended order where entrepreneurial innovation can thrive.

There’s a paradox here, in its fetish about independence, politicians of the SNP often kowtow to Scottish exceptionalism; lauding how creative and innovative our the people of our nation have been in the past. Indeed the very difference of “being Scotland” are at root the driver for their secessionist emotionalism. It’s really quite bizarre that the tools they use for this drive are the opposite of the freedom and individualism that created the exceptional progress Scotland provided to the world.

Perhaps we need to re-interpret Robert Burns’ sentiments. To make Scotland’s future better through “force and gile” we need to connect his “rogues in a nation” not with England but with wages taken from their own state purse as hirelings. As he put it:

What force or gile could not subdue through many warlike ages
Is wrought now by a coward few for hireling traitor’s wages.

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