Good evening! This week's edition of the In Common newsletter comes from Rory Hamilton, communications co-ordinator for Common Weal. To receive the newsletter direct to your inbox every week click here.
While the SNP gear up for another change of leadership, the signals coming from the front and backbenches make it clear that the political orthodoxy that has prevailed since before it took power in 2007 will continue under the next leader.
Under this economic programme, successive Scottish governments (both Labour and SNP) have aimed to create "net flows" of investment into Scotland. However, our latest policy paper on profit extraction has found that this policy actually increases greater flows of profit extraction out of the Scottish economy. As a result, Scotland has one of the most foreign-owned economies in the world.
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What our research found, is that Scotland has recorded a net outflow of wealth every year since 1998, accumulating to a staggering £277.4 billion extracted from the Scottish economy by 2021. The only comparable polities in the World Bank database for profit extraction are San Marino, Singapore, Ireland, Luxembourg and the Cayman Islands.
READ MORE: How foreign investors extract wealth from Scotland
In other words, for the relatively high net flow into Scotland, we should not be leaking upwards of £5.1bn in 2017, or £10.1bn in 2021 (the equivalent of 5.59% of Scotland’s GDP), out of our economy as a "first world economy".
What’s important about this vast level of profit extraction is that the leaking of wealth inevitably leaks power. If, therefore, we are faced with a new first minister who will continue to push a neoliberal FDI model, which includes the Green Freeports programme, and the selling off of Scotland’s natural resources, then we will see no change in whose interests the economy is being run.
Our over-reliance on foreign capital has and will only lead to the capture of Scotland’s democracy in the hands of small group serving the interests of financial capital. Why else would tax breaks, erosion of workers rights, or the capture of environmental standards be highlighted as a fair trade off for "investment" while sadly the ordinary Scot will have to cope with a Council Tax freeze that will result in key local services being closed down.
We should hear the alarm bells ringing when the Scottish Government ministers cheer the "success" of attracting foreign investment – don’t read it as investment, read it as extraction.
Perhaps, under the SNP the signalling made to business through FDI rhetoric is somewhat a ploy to win over the views of global capital to the idea of Scottish independence. By saying international companies can come and invest in Scotland because they have a guaranteed rate of return, they are sending a signal that they are not economic nationalists – far from it practically anybody else can own Scotland’s economy apart from Scots themselves.
Not only this, but considering the interest shown by foreign state-owned energy companies such as Vattenfall (Sweden), Eni (Italy), Ørsted (Denmark) in the ScotWind auctions, it becomes apparent that had Scotland established a publicly owned energy company (in some capacity), we could not only be in control of our own renewable assets and therefore recirculating the wealth generated into public services, but we could also be reversing the balance of our economic flow to favour Scottish taxpayers over foreign shareholders.
What makes even less sense about the Scottish Government pursuing this economic programme is the heavy rhetoric pushed on attracting FDI at events like Tartan Day in New York, whilst also having a minister for community wealth building and being in the process of producing a national community wealth building strategy. The two positions are at odds with one another.
Where community wealth building has been successful, in places like Preston, is where key anchor institutions, such as universities, the NHS, the local council, or a particularly large employer, repatriate their spending to local quality supply chains. In Preston, between 2012 and 2018, anchor institution spend in the city itself increased from 5% to 18% (by £70m) and spend in the wider Lancashire area increased from 39% to 79% (by £200m).
The success story of the "Preston Model" has been widely told and caught the attention of the Scottish Government enough to pursue this strategy at a national level. However, they clearly prefer the headlines to the detail if they believe that they can push community wealth building alongside foreign direct investment without actually acknowledging that the two policies are entirely incompatible.
Community wealth building is among other things about shortening procurement chains, investing in local businesses and recirculating wealth in a local economy. This is simply impossible to do if you are hell-bent on inviting companies from outside Scotland to "pump and dump" finance for maximum gain.
If we are to enable better living standards for ordinary Scots, we need to pressure all parties in Scotland to adopt a more public-led approach which will prevent profit being extracted away financing our public services in favour of shareholders dividends.
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