The Renaissance of the Scottish Economy?

Charlotte Lythe, Madhavi Majmudar

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000437294
• Edition: 1
• Topic: Volkswirtschaftslehre
• Subtopic: Wirtschaftsgeschichte

Originally published in 1982, written at a time when Scotland was emerging from a recession, it offered a comprehensive appraisal of the Scottish economy. The book shows that long-term regional problems had not gone away and that the presence of North Sea oil was not a guarantee of future economic health in Scotland. A major theme of the work is the key role of government expenditure in the (then) recent restructuring of the Scottish economy. Many of the issues discussed remain pertinent today, as Scotland once again discusses the future shape of its economy and political identity.

1
The Renaissance of the Scottish Economy?

Introduction

To ask whether the Scottish economy has experienced a renaissance is to beg two questions, whether there is anything that can be called the Scottish economy and whether it has in the past enjoyed a period of prosperity followed by one of decline. Both questions seem simple, but as we shall try to show in this chapter the answers are not straightforward.

The Scottish Economy

An English tourist visiting Scotland for the first time cannot fail to be aware that in some respects he is in alien territory, and that this alienness reflects official recognition of differences. If he buys ordinary postage stamps to put on his postcards, he will find that they bear a lion rampant as well as the Queen’s head. If he visits ancient monuments, he will find that the notice warning him about the penalties for damaging them are in the name of the secretary of state for Scotland. He will find that the banknotes in circulation are not just those of the Bank of England - there are also notes issued by the three Scottish banks, and for ordinary transactions it is a matter of complete indifference to all parties which of the four different banks has issued a note. If he wishes to draw cash from a bank, he will normally be unable to find a branch of his own bank, and will have to use instead a branch of one of the Scottish banks.

Some of these differences reflect relatively trivial gestures towards regions in the UK - like the differentiated postage stamps - whilst others, like the relevance of the secretary of state, are the consequence of historical influences. Later in this section we will offer a thumb-nail sketch of the more important historical factors, and what they entail for the present administration of Scotland. But even differences which are firmly rooted in history and which affect the economic institutions of the area, like the existence of the Scottish banks, do not of themselves make that area an economic entity, and there are obvious senses in which Scotland is not an economic unit. Our English tourist did not pass through a customs barrier as he crossed the border into Scotland. He did not exchange his English currency for Scottish currency. He can remit income freely between England and Scotland, and can operate as an economic agent on much the same terms in the two countries. If there is such a thing as the economy of Scotland as an entity, Scotland’s economy is fully integrated with that of England so that there are no barriers to the transmission of goods or of money across their mutual frontier - in more technical language, the two economies are in complete customs and monetary union, both being part of the larger economy of the United Kingdom (UK). Further, as we shall show later in this book, the scanty evidence that exists about Scotland’s external trade suggests that the vast bulk of such trade is with the rest of the UK, and since the Scottish economy accounts for around a tenth of the economic activity of the UK it follows that Scotland’s economic fortunes are inextricably linked with those of the UK and that, as a small part of the total, Scotland has very little control over her economic destiny. We will return to these issues when we consider the outlook for the Scottish economy. The implications we wish to draw here are twofold: first, that there is some connection between the political framework and the extent to which an economy can be described as independent - although, as we shall show, that connection is a little complex: and second, that in the present political framework the relationship of Scotland to the UK is that normally labelled in economics as that of a region to a nation, and so when we refer to Scotland in this book as a region we will simply be using the most appropriate economic terminology and we do not mean in any sense to decry the sense of national identity felt by the Scots.

At the same time, there are institutional elements which actually or potentially give coherence to the Scottish economy and separate it from that of the rest of the UK. There is in practice a substantial devolution of administration, covering among other things economic matters, to the secretary of state for Scotland and his officials. In many important respects, the extent and nature of this devolution is the result of the constitutional history of the UK. Because of a dynastic marriage that had taken place a century earlier, the throne of England and Wales was united with that of Scotland in 1603, but the Scottish Parliament remained quite separate from that of England and Wales till 1707. The Act of Union that brought about the united Parliament was, like most such treaties, accompanied by considerable horse-trading, but for whatever reason its clauses guaranteed the perpetual existence of certain Scottish institutions as separate from their counterparts in England and Wales and as separately administered. The institutions thus given a separate Scottish identity were the Scottish Presbyterian Church, the legal system, and the universities. From the independence of the legal system has flowed both the necessity for a lot of what is really UK legislation to be separately enacted for Scotland and the continued existence in Scotland of laws, courts, and lawyers all quite different from those in England and Wales. From the independence of the universities and churches has grown an independent educational system in Scotland, where paradoxically the Scottish universities are now very like their English counterparts (and financed in the same way), whereas the school system is quite separate.

From these peculiarly Scottish institutions there has developed a correspondingly peculiar Scottish administration....