The first meeting of Scotland's council of economic advisers (CEA) convenes on 20 September 2007. Among its eleven members are a couple of Nobel prizewinners (Finn E Kydland and James A Mirrlees), and the economics journalists Frances Cairncross and John Kay; its chair is George Mathewson, until recently governor of the huge Royal Bank of Scotland. The composition of the CEA was announced by first minister Alex Salmond on 28 June, less than two months after the elections to the Scottish parliament in Edinburgh which brought his (and my) Scottish National Party to power after it won the narrowest of victories over the Labour Party.
Gordon Brown, who became British prime minister on 27 June, received far more publicity in the London media for his own rather odd collection of economic advisers (among whom the TV tycoon Alan Sugar and the head of the private-equity company Permira, Damon Buffini, figure prominently). But as the financial sector‘s troubles accumulate and the Bank of England is forced to bail out one of the country's leading mortgage-lenders (Northern Rock), the impact of Brown's longstanding economic record should be a matter of focused deliberation in the new Scottish body - and not only there.
The starting-point for discussion might be 1975, when Brown's Red Paper on Scotland clunked onto the Scottish political scene, full of very small print and generous anger against capitalism. In the same year a Glasgow academic co-produced a pioneering book whose assessment of economics was cooler, and far more disturbing. John A Mack and Hans-Jürgen Kerner's The Crime Industry argued that under pressure from computers, globalisation, tax-havens and the endless ingenuity of villainy, the shadow-line between sharp business practice and clever criminality was disappearing - and with it the necessary detachment of government.
Christopher Harvie is a historian and professor of British and Irish studies at Tübingen University, Germany. His homepage is here
Among Christopher Harvie's many books are Scotland: A Short History (Oxford University Press, 2002), Deep Fried Hillman Imp (Argyll, 2004) and Mending Scotland (Argyll, 2005).
Christopher Harvie was elected a member of the Scottish parliament, representing the Scottish National Party (SNP), in the elections of 3 May 2007. He is an adviser to the SNP leader, Alex Salmond
The book had been commissioned by the Scottish Office, which was worried that the liberalisation of gambling would bring the Mob in its wake. (Without realising the theoretical background, I had already experienced the infection at full strength as a member of Robert Maxwell's Labour Party branch in Buckingham, 1970-74, and been alarmed at the toleration by Labour's establishment of this epically corrupt businessman. The "socialist millionaire" wasn't a weird exception but a precedent).
A policy in dissolution
The new SNP government (thus renamed from the designated "executive", to general assent in Scotland) has been doing well up to now, and a broad economic consensus from the new economic council can strengthen its position further as well as helping to carve out a strategy that suits Scotland's distinctive needs. True, there are limits to what a minority government can do in this field, and Salmond's ratings will inevitably vary according to his performance in meeting voters' demands for strong legislation and clear results. Meanwhile, the Britain-wide polls remain in Gordon Brown's favour, though the evanescent popularity of John Major (successor to Margaret Thatcher, Brown's new-found friend, in 1990) is not for him an encouraging augury.
Indeed, Brown's highly political approach to this situation is likely to have echoes of Thatcher's rude but effective tactic in the early 1980s: namely, using his control over much government expenditure in Scotland by (in the fortcoming central spending review) fomenting discord between Scots spending ministers - and refusing to show any flexibility over oil policy, which remains a mainstay of the Scottish economy.
Such political calculations, however, raise the fundamental question of the divergence of interest between the Scottish and British economies, in circumstances where the accumulating problems created or facilitated by a generation of London-centric economic policies are starting to bite. Brown once seemed to understand the need to modernise manufacturing industry, infrastructure and social capital (see the programme of Where There is Greed, his swingeing 1989 assault on...Thatcherism); but after ten years as chancellor (1997-2007), the fissures in his financial record are increasingly exposed (see "Britain's tax nexus: able fraudsters, useful idiots", 25 September 2006).
Among Christopher Harvie's articles in openDemocracy:
"Gordon Brown's Britain"(25 January 2006)
"Britain's tax nexus: able fraudsters, useful idiots(25 September 2006)
"Union in a State: a Scots eye" (16 January 2007)
"Life on Airstrip One"(5 February 2007)
"The democratic intellectual: George Elder Davie"(11 April 2007)
"Scotland's election, history's tides" (23 April 2007)
Brown carries responsibility for most of the projects where public expenditure has ballooned out of control - misapplied health-service funding, badly planned big technology schemes, the tax-credits fiasco, the VAT frauds, selling off oil for $10 a barrel at its 1999 nadir and then gold at the bottom of the market, piling up future debt through "private finance initiative" (PFI) schemes designed to keep investment off-budget. The pensions-fund raid and stealth taxes galore can be added to the debit slate, leaving his opponents with a powerful array of evidence to undermine the aura of economic competence that the prime minister has managed to retain.
It gets worse. As the Guardian's Larry Elliott proved in Fantasy Island (written with Dan Atkinson), Brown's combination of toleration for the unchecked housing-retail driver of exploding debt and "light-touch regulation" has aggravated two potentially lethal structural distortions. First, the cost of a serious housing shortage and inflated consumer expenditure is a chronic balance-of-payments deficit which can only be paid for by "inward investment" (so often a euphemism for "flogging off British firms": London Electricity to the French, British Airports Authority to the Spanish, most recently ICI to the Dutch). Second, the result of the indiscriminate welcome of hot capital (from post-Enron Wall Street and billionaire Russian oligarchs alike) in an avalanche of hedge funds and impenetrable "financial instruments" is that the City is more vulnerable than most to the global ripples of the sub-prime credit crunch.
In this light, the crisis over Northern Rock is structural as well as symptomatic (see Ann Pettifor, "Debtonation: how globalisation dies", 15 July 2007). Financial regulation in Gordon Brown's Britain has been less "light-touch" than disorganised and incompetent, with reorganisations and duplications - police, customs, revenue, financial services authority (FSA), serious fraud office (SFO), serious and organised crime agency (Soca) - trampling over each others' bailiwicks. The Bank of England's rescue of Northern Rock - preparing the way for the sale of the stricken company - cannot disguise the failures of coherent thinking that have led to this pass.
A punctured bubble
This concatenation of problems makes it unsurprising that the sub-prime minister is determined to defend "his" oil - a last, reliable source of British bounty - to the last drop. But the Scots need the black stuff too (which could treble in value over the next decade, as "peak oil" looms), and in a different way: as collateral for European-level infrastructure, for technology and training to build the renewable-energy economy Alex Salmond prophesies, and for the sort of bond finance that will purchase them. When the depression hits, public works - such as a new crossing over the Firth of Forth or high-speed rail lines - will be needed as a new counter-cyclical booster.
There is little appreciation of any of this in a London media trapped in a perspective that disconnects it from realities outside the "green zone" concrete ring of the M25 (and therefore inside too). Salmond, then, has much to gain by engaging directly with London, and Europe, in the immediate future. He would do well to explain Scotland's diversifying economic thinking, and the purpose of the Council of Economic Advisers, to the growing number of London financial journalists who find Brownite laissez-faire strategy scary - as well as to London's mayor and his sometime ally, Ken Livingstone (whose own City-constrained politics are fascinatingly revealed in a sympathetic interview with Doreen Massey).
As all that is solid melts into air, Alex Salmond has a good chance of appearing as a figure of Gladstonian rectitude - a northern rock, even - and Gordon Brown as less like John Calvin and more like the United States president of the mid-to-late 1920s, Calvin Coolidge, viewing a fevered stock market with dour complacency. The times are transformative. Scotland cannot delay.