‘Naïve’ Growth Commission policies won’t improve Scottish growth or productivity, pro-indy economists argue

Articles published by George Kerevan, Jim Cuthbert, Tommy Sheppard MP, Chris Stephens MP, Carolyn Leckie, Maggie Chapman, Colin Fox, Cat Boyd and Jim Sillars on the Growth Commission

TWO pro-independence economists have published articles criticising the central tenets of the SNP’s Growth Commission report, saying its policy prescriptions would not deliver increased growth or productivity for an independent Scotland.

The articles, published in the July-August edition of the Scottish Left Review magazine which includes in total nine articles from pro-independence writers specifically on the Growth Commission, are authored by former SNP MP George Kerevan and former Scottish Government statistician Jim Cuthbert.

Critiques of the Growth Commission report - which was led by corporate lobbyist Andrew Wilson and published by the SNP at the end of May - have tended to focus on the plan to continue using pound sterling outside a formal currency union with the UK for at least 10 years post-independence, and what the Institute for Fiscal Studies and Common Weal have described as a plan for austerity in the early years of independence.

Kerevan and Cuthbert, while critical of the currency plan, both argue that the austerity claims have been overblown, but focus their fire on the policy proposals for growth and productivity, which they say are unlikely to achieve the improvement in economic performance which they are intended to.

READ MORE: Australian economist reviews Growth Commission: ‘Not conducive to the creation of a vibrant, progressive nation’

Kerevan writes that the currency plan would leave “Scottish productivity and growth rates… tied to England’s unless – and this is key – we were to try to reduce wage costs directly through a combination of austerity and liberal market labour ‘reforms’.”

Kerevan also says the Growth Commission’s primary proposal for boosting growth through population growth driven by immigration lacks credibility.

“Formally, population growth will boost GDP. However, in an era when around a million existing Scottish jobs are threatened by developments in Artificial Intelligence, I am sceptical that relying wholesale on immigration as a growth driver is economically or politically sustainable.”

The only way productivity can be boosted without suppressing wages, he says, is through capital investment, with the UK’s among the lowest in Europe, attributing this to “a private banking system wedded to speculation in existing property portfolios and which has looted around £50bn in assets from foreclosing on viable small businesses since 2008.”

He says the soon-to-be established Scottish National Investment Bank allied to a Scottish currency could address this, but that it gets a “casual mention” in the Growth Commission.

Kerevan concludes: “The Commission has failed to offer a decisive plan for rebuilding a Scottish economy deflated by years of genuine Tory cuts and a City banking system that is nothing more than a giant casino.”

Cuthbert argues that “the commission has adopted a naive, almost formulaic, reliance on standard neoliberal doctrines to get the economy moving, and to reduce the government deficit”.

Explaining what these are, he say the commission makes “the mistake of looking at its ideal group of twelve small advanced economies as they are now and then assuming that the policies these countries espouse are what led them to their present status. This is one of the biggest fallacies in the neoliberal book. There is a marked difference between the policies which are optimal for a country once it has achieved a competitive edge in one or more fields, as compared with the policies which led it to achieve that edge.”

Cuthbert goes on to cite countries within the commission’s analysis like Austria, Finland, Sweden and Norway which “had high tariff, protectionist regimes historically… to get their strategic industries established and competitive.”

Cuthbert adds that the Growth Commission is “naïve about how successful economies actually work”, citing examples of the historic importance of state-led investment and intelligent procurement in “virtually all of the technological developments which have transformed the modern world”.

READ MORE: Growth Commission: Sticking with UK banking regulation rulebook would be a ‘curious miss-step’, finance experts say

The second part of Cuthbert’s critique relates to public finances. Cuthbert says there will be a need to increase borrowing in the early years of independence and it will have to “convince markets that it is actually getting a grip on the resources of the Scottish economy” to do this.

“Paradoxically, this increases the need to be radical,” Cuthbert explains. “At present, within Britain, the resources of Scotland – the land, fisheries, the renewables potential, the hydrocarbon assets, even industries like whisky – are not run and taxed primarily for the interests of state revenues, or the common people…An independent Scotland would have to demonstrate that it was willing and able to modify these relationships to secure the interests and resources of the state, if we are to convince the markets that we are serious about securing our own resources, and the basis of our economy.”

Further, he argues, Scotland is not an optimal currency area with the UK and therefore the move to a Scottish currency “should be much more aggressively prepared for and implemented.”

The other articles mixed outright opposition to the Growth Commission with more nuanced critique.

READ MORE: STUC criticises lack of trade union involvement in Growth Commission

SNP Glasgow West MP Chris Stephens said “the report disappoints in respect to corporation tax” and was critical of the lack of trade union involvement in its creation, saying that was “to say the least disappointing”.

Stephens also raised questions about proposals as part of the Growth Commission’s currency plan to stick to the UK’s regulatory framework for 10 years before moving to a Scottish currency, saying “many of us who look to a route to re-join the EU will have to consider whether this timeframe is compatible with EU membership application rules.”

Tommy Sheppard, SNP MP for Edinburgh East, said that “there is good and bad in the report and a lot that needs more debate and thought”.

He welcomed the emphasis on immigration to boost population growth and GDP and “setting serious and ambitious targets for reducing poverty and ending the gender pay gap”.

Sheppard defended the plans to reduce an independent Scotland’s deficit, saying “there’s nothing left about running a deficit if you don’t need to”.

He said that “perhaps the most problematic aspect of the report is currency”, but said there would be little difference in practise between the sterlingisation plan and a currency union, adding that the proposal to move immediately post transition period to a Scottish currency would also be fraught with danger.

READ MORE: Growth Commission: Plan for independent Scotland to pay into UK Foreign Aid programme criticised

Carolyn Leckie, women for independence activist and former SSP MSP, said there was a danger that the Growth Commission could see existing Yes voters “start to lose interest unless the document is either given a makeover or treated with a little bit less reverence by the SNP leadership”.

She said that there was a number of proposals in the report which are positive, but that the proposals on public spending could be used by Labour “to whip up anxiety across the most deprived parts of the country and will become a millstone around the neck of the entire independence movement”.

Maggie Chapman, co-convenor of the Scottish Greens, was highly critical of the Commission, saying “it is hard to separate Wilson the author of the Growth Commission from Wilson the PR man at Charlotte Street Partners, whose clients include the fracking firm Cluff Natural Resources”.

“The first victory for the radical independence movement has been to deny this report the veneer of being uncontested”, she wrote, adding that “we need to take Nicola Sturgeon at her word: the Wilson report must start a debate”.

READ MORE: David Jamieson: The Growth Commission, Charlotte Street Partners and Scotland's ruling class networks

Colin Fox, SSP national spokesperson, lambasted the report, saying  it was a plan for “ten years of fiscal austerity” and “completely undermines the message that Independence is about manifest social change”.

He said that as a result “a sizeable opening has appeared to the SNP’s left” and that the SSP would be putting forward its programme as an alternative.

Cat Boyd, co-founder of the Radical Independence Campaign, said the report was “the boldest mainstream statement of Scottish neo-liberal thinking for more than a decade”, saying that it wrongly equates “neoliberal policies…with economic success.”

“We know this equation does not work,” she added.

READ MORE: SNP reveals details of National Assemblies to discuss Growth Commission with grassroots, but questions over engagement remain

She argued the commission had “led to dejection in the radical wing of the ‘Yes’ movement”, but called for that constituency to “write our own reports and raise our own demands” in presenting an alternative case to the Growth Commission.

Jim Sillars, former SNP deputy leader and now vocal critic of Sturgeon’s leadership of the party, said the left should engage with the commission, arguing that there was “two obvious merits” to the report: it was “the only substantial document on the economy that has emerged in four years” and it “does not claim, as did Alex Salmond’s 2014 White Paper, to be definitive”.

He said there was two big faults in the Commission: there was an “inbuilt bias against Brexit”, saying it cites evidence from the Treasury to support this which has already been credited, and that it has an attitude to oil which does not seek to reap its potential benefits.

“Only mention oil tax revenues, which can disappear, not the oil itself, who owns it, and how much it is worth,” he wrote.

The Growth Commission is due to be debated at SNP National Assemblies, which will be led by new SNP deputy leader Keith Brown and are taking place on 25 August in Ayr, 1 September in Aviemore and 9 September in Edinburgh.

Picture courtesy of First Minister of Scotland