This is how the independence movement can learn from Sir James Mirrlees

READ MORE: Nobel Prize-winning Scots economist dies at the age of 82

It would still be fair to say Mirrlees’s name means nothing to 99 out of 100 of his compatriots. But that makes my point for me: It is, or should be, one of the Scottish press’s jobs to educate us, and not merely to reflect our ignorant prejudices back at us. I hope The National will long continue and prosper in the excellent job it is doing – not least in refuting the usual tales of woe about our economy.

Mirrlees was the Nobel Prize winner in economics in 1996. Born in 1936 at Newton Stewart, to the end of his days he preserved in his speech the soft burr of Galloway, even though he spent all his adult life elsewhere. He took his first degree at the University of Edinburgh then went to Cambridge, which in the 1950s was a seedbed for left-wing economists. They would at length be challenged by the revival of the free-marketeers, but Mirrlees stayed true to the tradition he had been educated in. He always voted Labour, less because he thought the government should run the economy than because he wanted an effective welfare state.

He had a reputation for almost heroic amiability. It will therefore come as no surprise to readers of The National that, in my only contact with him, I managed to rub him up the wrong way. This occurred in the early stages of devolution. I was still a paid-up Tory member, and set about producing a series of pamphlets trying to make my party discern in the new Scottish politics a chance to take the initiative, rather than sit there supine in the resentful silence of rejection. I thought it would be good if Mirrlees penned a few words of recommendation for one of my bright ideas, so I sent it to him c/o Trinity College, Cambridge. The reply was testy, to say the least: What you can call a flea in my ear. Oh well, you win some, you lose some.

READ MORE: Nicola Sturgeon pays tribute to James Mirrlees

But I watched with interest as Mirrlees began to cosy up to the Scottish Government, since he clearly supported devolution (at the very least) for his homeland even though he had no vote in it. After the SNP gained power at Holyrood, he joined the First Minister’s council of economic advisers. Alex Salmond may have other things on his mind just now, but he generously took time out for this tribute: “Jim Mirrlees was both a Nobel laureate and a thoroughly nice man. For no fee, this internationally renowned economist served on the council of economic advisers and made a massive contribution to its work.”

And Nicola Sturgeon added: “Like many people of great intellect, Jim had a way of conveying the essence of any economic issue in a manner which was clear, thoughtful and accessible.”

So what was so special, so Nobel prizewinning, about Mirrlees’s economics? The basic work he did was in the modern manner highly theoretical, with hypotheses tested by mathematics. Yet unlike for some of his more abstruse colleagues the further reaches of econometrics never in themselves set him his final destination, but rather gave him a kind of turbocharged flight path into the real world. For a typical example, those interested might take a look at a video starring him and available on YouTube under the title “Why does India have twice the productivity of capital compared to China?”

Mirrlees explains how India and China are the prime examples of developing countries with amazing economic growth rates which have come to offer an almost western living standard at least to their elites – still some tens of millions of people, given that they both house such huge populations. Progress is more visible in China than in India.

China is full of cities with thickets of skyscrapers linked by eight-lane motorways or high-speed trains that leave our unbuilt HS2 looking paltry. India, apart from the high-rises of Mumbai, has vast shanty towns without amenities, and travellers who hitch precarious rides along rutted roads on overladen lorries or, for longer distances, on the roofs of railway carriages. Yet India is the one with the higher productivity, in the technical economic sense of getting more outputs for its inputs.

The origin of the contrast seems to lie in the fact that China has been a centralised nation for the last 5000 years. The period of collapse and chaos in the 20th century under the assaults of western imperialism has turned out a mere interval before the old order was restored, now in the form of Communist dictatorship.

Everywhere, despots love to erect monuments to their own rule for the sake of posterity: Here in the past the Great Wall, Forbidden City, Temple of Heavenly Peace, today the Three Gorges Dam or whole cities constructed and then left empty till they might be needed. But these grandiose projects obviously entail much waste of resources that should be concentrated in better profit-making opportunities. They are in fact poor investments. For this reason the Chinese economy is less productive than it might be.

By contrast, India is agreeably, even unnervingly, anarchic. Except for brief periods, such as the British Raj, it has never been united since the Aryans invaded it in prehistoric times. It was always open to trade, both westwards and eastwards (whereas the Chinese Emperors tried to run a closed economy).

In recent decades, the age-old caste system has been breaking down too: VS Naipaul described the process in his book, A Million Mutinies Now. Since the Congress Party lost office in 1996 and ditched its decrepit socialism, there has been a capitalist explosion. Indians are advancing far and fast, not under state direction but because they possess infinite commercial energy and talent for improvisation. They are computer buffs and mathematical wizards. They are individualists happy for their society to shape itself rather than be squeezed into politicians’ moulds. They invest what they need to invest in productive assets and are content to remain slumdogs otherwise, at least for the time being. But one day they will be richer than the Chinese.

The reason is, as Mirrlees pointed out, that India achieves twice the rate of capital productivity compared to China. This rate is what will in the end determine the people’s living standards, because for each rupee invested there will be more profit and more income for them. It may seem far-fetched to compare gigantic India with tiny wee Scotland, but the same economic laws apply.

We have a government which regards capitalism as a necessary evil, profit as immoral, the demands of productivity as an irritation. In any event it will be for the Scottish state, present and future, to control these things as far as it can – more like China, then, than India. I reply that till such attitudes change, our economy will continue to languish and our living standards to stagnate. And national independence will be put off into a distant future.

These are the kind of thoughts that strike you when you seek to understand Sir James Mirrlees. He might have thought me Tory scum, but I will remember him as a great economist whose ideas are worth visiting again and again.