SINCE the Covid-19 pandemic, it has become increasingly obvious that our economy is built on fragile foundations.
One of the main reasons is that we have chased only one thing for decades: An efficient economy.
In a modern economy, we must make space for efficiency, but not at the expense of justice or efficacy. There is no point in efficiently ensuring planetary destruction.
This desire for efficiency, above all else, has ensured that our economy is not resilient.
While we wait for Scotland to become independent again, the Scottish Government can and must focus on making Scotland more resilient.
So, what do I mean by making Scotland more resilient?
The better-known definition of resilience is the ability to return to the current state after a shock. Bouncebackability. Alternatively, resilience can be defined as the magnitude of disturbance that can be absorbed before the system changes its structure. And this is much more relevant as we discuss Scotland’s economy.
In this sense, resilience is very much a systems concept.
I like to use what Donella Meadows, one of the authors of the Limits of Growth report for the Club of Rome and a leading system design thinker, said about resilience: “The ability to self-organise is the strongest form of system resilience. A system that can evolve can survive almost any change, by changing itself”
In other words, our power to be resilient comes from our ability to organise, affect and exert as much control over the system as possible.
When you think this way, it is not too difficult to see clearly that Scotland lacks resilience.
And how does that lack of resilience play out?
The Government stopped storing PPE to save money, so we were terribly prepared when a pandemic arrived.
When Russia invaded Ukraine, we were immediately affected by an increase in gas prices, as our governments had decided that stockpiling such an important asset was not “efficient.”
Prices rose so high and so quickly because the UK institutions have prioritised corporate profits over our cost of living. I must clarify one thing: Profits are resilient in the UK. Our institutional design ensures that.
Profits are secure for those who earn rent from assets previously owned by us. In his 2020 book about rentier capitalism, Brett Christophers wrote: “The UK has come to be seen as the world's undisputed privatisation trailblazer."
I am unsure if another policy damaged the UK's resilience more than privatisation.
We import so many of our goods and services that any disruption to the international supply chains will soon increase the prices we see in our shops.
Despite producing more oil and gas than we use in Scotland, we pay prices based on international markets.
(Image: NQ)
Domestic supply is not shielded from international demand because that would place our domestic supply outside the market, a cardinal sin in a system designed for efficient allocation.
Over the last four decades we have thrown open the doors to foreign capital and global supply chains, leaving Scotland vulnerable to too many areas out of our control.
The situation leaves us celebrating the wins when we are lucky enough to find the scraps in the supply chain for major infrastructure and energy contracts given to foreign multinationals and governments.
We lose resilience when we entrust almost all of our important infrastructure to investment managers or foreign-owned private equity firms. This ensures that decisions about our most essential assets are made on our behalf rather than by us.
All of this is by design.
Our institutional setup does not create a resilient economy. It is similar in many countries, but most of them are responding to this new world as they attempt to make their economies and societies more resilient.
This has been China’s strategy for decades. Russia has been forced down this route. A by-product of the west’s response to the invasion of Ukraine has been to make the Russian economy more resilient.
A Ukrainian serviceman with a gun
The USA and the EU have passed legislation to kick-start homegrown industrial strategies to develop and protect essential industrial areas and sectors. Even a small nation like Iceland, which is very well protected in terms of energy security, focuses much more on food security than the UK or Scotland.
But these concepts of food, technology, and energy security are still foreign to the policymakers in Holyrood, and part of that reason is the economic advice they receive.
For decades, we have relied on one school of economics, a neoclassical neoliberal framing that holds that markets and the price mechanism can solve all of our problems and that with open global markets, we are never far away from everything we need.
We suffer from groupthink and a lack of alternative voices regarding our economy, and this significantly hampers any approach to creating a resilient economy.
We do not have to wait for independence for our economy to become more resilient. The Scottish Government can do a number of things now to improve our resilience.
Over the coming months, we will examine policy areas that must be addressed to create a resilient economy. Next week, we will start to lay the groundwork. You can find out more about our work on resilience by clicking here.
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