A Socially Just Economy

Scotland’s Economy is Not Greek But, Both Countries Require Braver Socially Just Politics

There are 11.1 million people in Greece and 5.3 million people in Scotland.  Scotland shares some similarities with Greece.  For example, both countries: eat a haggis type dish; have tourism as a strong part of their economy; have a tradition of enlightened thinking concerning democracy; and know how to throw a party at the same time as shedding tears for past glories that involved a smaller nation standing up to its bigger neighbours.

Scotland has a very different sized economy to Greece and our economic trajectory has been very different.  Yet, this post will demonstrate there are some similarities between people’s political realities in each country, particularly, in terms of having encountered a lack of brave left wing politicians.

John Pilger in his article, ‘The problem of Greece is not only a tragedy. It is a lie’, tells us the Greek economy has been destroyed by three key things:

1: The inability of the Tsipras’ government to actually be radical and leave the colonial rule of the Euro.

2: The propensity of the Greek Government to try to negotiate for ‘softer austerity’ rather than delivering on their rhetoric of the completely rejecting austerity.

3 Syriza’s aim of ‘better terms’ within an overall status quo has reeked of liberal appeasement and inhibited a radical solution:

‘The true nature of Syriza has been seldom examined and explained. To the foreign media it is no more than “leftist” or “far left” or “hard-line” – the usual misleading spray. Some of Syriza’s international supporters have reached, at times, levels of cheer leading reminiscent of the rise of Barack Obama. Few have asked: Who are these “radicals”? What do they believe in?’

John Pilger tells us that Syriza are not socialists and that they have failed to find a solution to the German finance minister acting like an imperial thug because some members of Syriza are part of a highly-educated affluent Liberal middle class.

John Pilger argues, that the ‘well groomed’ members of Syriza follow subservient social democratic ideas related to concepts such as Tony Blair’s third way, rather, than a socialist approach.  He argues that Syriza lack the will to stand up to the anti-democratic forces in the Euro-Zone, they lack the will to utilise an effective strategy of change and tactics of resistance.

Paul Mason in his article, ‘Decoding The IMF: Greek Deal Doomed, Exit Likely’, also argues that Syriza are dogged by the status quo:

‘So we go back to the old problem that has dogged Greece since 2010. Yes it has an inefficient, state-dominated economy that needs to be reformed; yes it has antiquated and corruption-inducing restrictions on who can run certain businesses. But you can’t modernise a place like Greece amid the relentless downward pressure on growth that austerity measures produce.’

Paul mason tells us that in spite of the IMF report that argues that the Greek economy has tanked, Greece are not being offered a cent worth of debt relief and that the lack of relief will collapse the economy.

Let’s understand what the word tanked means.  Between 2008 and 2010 the Greek GDP topped out at around 354 billion dollars (according to this site) and now it has plummeted to an estimate of 237 billion dollars (at present exchange rate around 151 billion pounds) and is set to fall even more this year.

It is worth pausing to understand what has happened to Greece – their economy has been cut to the same size as Scotland but they have more than double the amount of people living in Greece – Greece was in recession for over five year. GDP per capita fell from €22,500 in 2007 to €17,000 in 2014, a 24% drop.

As if to prove John Pilger’s point, Paul Mason tells us that the Tsipras’ government will be allowed to impose further austerity on the Greek people if it is kept in power by the Greek centre right.  So the similarity between Greece and Scotland is not to do with our economies but to do with the political situation where apparently left wing parties are collaborating with centre right parties to introduce austerity policies that will ‘stick it’ to the poor.

It’s a bit early to tell if the Greek situation will eventual result in a shift to a braver politics that focusses on improving conditions for the poor and promoting policies of social justice.  It is too soon to know if the situation will actually result in a shift to the braver politics that the people of Greece voted for in the referendum and the exit from the Euro that Pilger believes will provide Greek politicians with the necessary freedom to promote social justice.

What we can conclude from John Pilger’s article is that the situation in Greece is similar to the situation in Scotland in one way – the left wing party (replace Syriza for the Labour Party) is not actually left wing but a highly educated middle way social democratic party that has lost its way and is now promoting policies that will attack the poor.

Nicola Sturgeon challenged Ed Miliband in the GE2015 to be braver and to stand up to the Tories.  Paul Mason tells us the ordinary people of Greece seemed to have worked out quicker than the politicians that they need a courageous exit from the Euro:

‘I’ve found, among ordinary people who were passionate supporters of the No vote in the referendum, the widespread acceptance that – to go forward with measures on social justice or alternatives to austerity – Greece will have to leave the Euro. Most people I talk to want it done in a controlled manner, consensually and with some kind of mandate from the people. ‘

Paul Mason suggests that one of Tsipras’s arguments against leaving the Euro is that it would enable the people who have moved 250 billion euros out of Greek banks in the last five years to come back and buy up the country in devalued Drachma.  Yet, that at least would let the 250 Billion come back into the country to drive growth.

A more sophisticated Greek government would still be able to introduce radical political policies on social justice and equality to balance out the power of this new money (see such radical policies set out for the for Scottish context at the end out this post).

What is now lacking in the Greek Government is a willingness to see the bigger picture.  By controlling your own currency you can have political control of your own society.  This is an important lesson for a future independent Scotland.

Paul Mason raises the prospect that there could be radical political change in Greece that introduces policies based on social justice and that, for example, policies which attacked corruption in the judiciary might even lead to the Greeks being thrown out of the EU.

This is another important lesson for Scotland.  It we want to be truly independent we need to be prepared to develop an economy that cannot be held to ransom by international bankers, nor, the European Union.  If we choose to remain in the EU, as the SNP have argued , it will have to be a much more improved and socially just EU. At present that type of EU looks a long way off – but, hey, at the moment a week is a very long time in politics.

So how does the Scottish Government develop economic resilience at the same time as enabling social justice?  The Scottish Government figures tell us that the Scottish GDP for 2014 on-shore was 139 Billion (£26100 per person) and including off shore is 153 billion (£28600 per person).

Some people will tell you that the Scottish economy has just fallen off a cliff due to oil price fluctuation but in reality it still grew last quarter and this graph shows that since 1998 Scottish GDP has grown from below 80 billion pounds per year.

Scottish Economy Watch reports for the end of June 2015 indicated that current growth in the Scottish economy comes from areas such as electricity and gas, production and construction.  Scottish Government figures published today bear this out and also suggest a small growth in the service industries (e.g. hotel, tourism and other services).

Growth in the rest of the UK comes mostly from the service industry.  This is why Scotland is different – we actually produce stuff – although it should be noted that there was no growth in the manufacturing sector last quarter.  So, our increased GDP come from rises in home grown or blown products.  Growth last quarter was particularly related to increased energy production.

Scottish Economy Watch has connected growth over the last year to, rises in the EU and USA markets; internal demand borne of investment (In particular, infrastructure spending projects such as the new Forth Bridge); and overseas  money (80 inward investment projects in the last year).  These figures suggest that devolution and the Scottish Government are doing something right.

Key Scottish government target growth areas are: Food & Drink (including agriculture & fisheries), Creative Industries (including digital), Sustainable Tourism, Energy (including renewables), Financial & Business Services and Life Sciences.

You would think that higher exchange rates would create problems for growth (e.g. other countries can’t afford to buy our products) but Scottish Economy Watch suggests that problems with growth may relate more to problems with product quality and marketing and also a long term inability of different Scottish Government’s to establish an effective strategy for growth.

Other problems come from the Tory UK government’s addiction to austerity which will strip money out of the economy –  particularly local economies as hard pressed families run out of cash to spend on smaller locally produced items.

Of course the biggest threat of all to the Scottish economy, outside of the Greek crisis, is the boom and bust economics of Westminster that encourages citizens to fuel growth through the use of credit and in particular credit cards.   A lot of the recent UK growth is based on increased spending of money people don’t have and at some point we will again reach the point where they can’t pay their debts off.

Scotland can be different.  Key changes that are required centre on the need not stimulate sustainable growth by creating a more equal economy.  Robin McAlpine of the Common Weal suggests that the real problems with our economy are issues such as low productivity, low pay, inequality, inherent economic instability, weak real exports, lack of investment in research and development, etc.

McAlpine tells us that our central problem is that successive Governments have been wedded to a failed policy which attempted to stimulate growth by cutting taxes to Businesses rather than promoting social justice. Similarly, the Common Weal book argued that the basic problem that got our economy into trouble was that the economy rewarded speculation rather than productivity and investment.

The two main solutions in the Common Weal book included: 1: Shifting to an industrial policy that balances national and devolved decision making through Scottish Government development of collaborative sector forums/diversification agencies. 2: Rebalancing our economy towards a high-pay ‘Common Weal’ economy that rewards worker productivity and encourages citizens to create wealth by collaborating, building, creating, and inventing.

Such a shift requires the development of a new industrial democracy that supports self-empowerment in the work place so that workers and employers learn and collaborate together to solve problems, develop new ideas and respond to issues that impact on productivity.  For example, if our products are not of high quality and not marketed properly to other countries, employers and worker need to collaborative identify solutions to this issue and deliver change.

The Common Weal book and the papers it was based on (see Mike Danson’s here on the economy) called for a new National Investment Strategy and a Scottish National Investment Bank that would enable us to reach EU investment levels and support investment in infrastructure, communities and the economy.

We could see the influence of this work during the GE2015 where Nicola Sturgeon called for public spending for investment (e.g. in infrastructure) rather than to give tax breaks to the rich and wealthy.

Scotland would become more resilient if we raised taxes to pay our bills in ways that are equitable (those who have more pay more) and used borrowing to stimulate investment that enables wealth generation because growth would be based on sustainable change rather than credit stimulated cycles of boom and bust – deficit and borrowing.

At the centre of this shift is a need for increased local ownership and the Land reform Bill will be crucial in stimulating this shift in our economy. A resilient and sustainable economy would increase local ownership of the economy by reducing food miles, expanding local food production and developing new innovative local businesses.

This would also enable us to achieve a more mixed economy of food processing, distributions, retailing and catering that emphasised quality and nutrition and reduced the production of processed and unhealthy foods.

A mixed and resilient economy would enable the government to take braver decisions to reduce poverty and inequality in our society e.g. policies that would tie the wage of the highest earners in a company to the wages of the average earners.

Braver decisions that would enable us to create resilience by diversifying the banking system and ensuring that it meets the needs of all citizens and not just the wealthy e.g. by developing credit unions, mutuals, smaller local banks, etc..

A braver society would challenge the way that an unfettered free market has created unemployment, challenge the way that land is monopolised by the few and challenge the ability of the wealthy to form elites (see commonweal reprint of early paper on Land Reform here).

A braver society would not use those who live with outwork as political footballs.  No one should live in poverty, the fact that we currently have an economic system that means that people who work are so badly paid that they continue to live in poverty is a disgraceful indictment of UK politics.

Work should always pay and people who are working should not need to claim benefits we need to be braver at enabling a proper living wage (not the Tory con-trick) and develop approaches to welfare that reduce anxiety and provide support, such as, the citizen income or a workable alternative – see paper here.

Currently, growth is being stimulated by renewable energy but we cannot make the same mistakes as the UK Government made with oil.   We cannot let all the profits go out of the country, to be lost to generations (see Common Weal paper on energy here).

We should no longer be the only EU member to have an all privatised energy system, the ‘grid’ should be owned by the Scottish people, we need to break the monopoly of energy service providers and we should ‘de-centre’ the grid by placing more of these services, e.g. renewables, in public and community ownership.

This is the type of brave politics that should also be being promoted in Greece – Greek people need to bite the bullet and be courageous.  Both Scotland and Greece need to stand together, show the courage of their convictions and develop a socially just economy that works for the people not for speculators and failed bankers.