Scotland now has more of a ‘national economy’ than ever before in its history
Since the 1970s Scotland has become a significantly post-industrial economy with strong de-globalising elements, writes Jim Tomlinson. Political decisions made about public spending in Edinburgh, within some constraints imposed from London, matter a great deal. He argues, therefore, that there is now more of a ‘national economy’ than ever before in Scotland’s history.
Recent developments have made Scotland more of a ‘national economy’, imagined as an ‘economic community of fate’, than at any time in its modern history. This argument relies in part on the view that talk of the alleged triumphs of neoliberalism in the UK has obscured important trends.
For all the rhetoric about Britain living in a ‘neoliberal’ society, one of the most striking features of the last forty years has been the growing, direct, role of the state in sustaining employment. Since the 1970s the UK state has begun to subsidise wages by tax credits on a large scale, and, particularly important here, continued the long-run trend towards providing increasing volumes of employment directly in the public sector. This development has gone on largely un-avowed by the London political class, the post-Thatcherite ideological consensus having ruled out positive accounts of the benefits of public sector expansion, despite de facto recognition that such expansion must be sustained if electoral support is to be secured.
This growth has been obscured by the highly eccentric way in which public sector employment is defined by the ONS: ‘the difference between the public and private sector is determined by where control lies, rather than by ownership or whether or not the entity is publicly financed’. This means that not only are all employees in further and higher education treated as part of the private sector, along with all GPs, but so are the much more numerous workers in out-sourced activities supplied to the NHS, local authorities and other public bodies. Fortunately we have the analysis of researchers at the Centre for Research on Socio-Cultural Change (CRESC) in Manchester, who use a better definition whereby, if more than half of an entity’s activities are publicly-funded, it is deemed a part of the public sector.
Following ONS definitions, the official Scottish Executive figures give public sector employment in Scotland as 580,000 in 2012, having fallen slightly from its peak of 600,000 in 2009 (see Table 1). The 2012 figure represents 23.5 per cent of the total employed population. But there is good reason to suppose that these figures are a considerable underestimate given the amount of out-sourcing and publicly-funded but ‘non-state’ employment. Buchanan et al. suggest that adjusting for these boundary problems would inflate the figure for Scotland (for 2007) by almost a third, from the official figure of 580,000 (including financial institutions) to 772,000. As it happens, the official 2012 figure is the same as the official figure for 2007, so adjusting the later figure in the same proportion would suggest again a total of 772,000, 31 per cent of the total in employment. These figures seem broadly compatible with those provided by the Centre for Cities on a city basis, which give the Dundee figure as 38 per cent and that for Glasgow as 30 per cent.
Table 1: Public sector employment in Scotland in 2012
| Definitions | Numbers | Percentage of employed population |
| Official public sector employment: | 580,000 | 23.5 |
| Of which, devolved areas: | 485,000 | |
| Including ‘para-state’ (Buchanan et al 2009) | 772,000* | 31 |
| Centre for Cities: Glasgow | 30 | |
| Dundee | 38 | |
| UK | 27 |
This growth of public sector employment is part of the process of de-globalisation evident in Scotland as an accompaniment to de-industrialisation. The historical political economy literature has recognised that from the late nineteenth century workers have sought protection against the uncertainties and insecurities of a globalised economy especially by seeking state welfare to offset this market insecurity. In more recent years Dani Rodrik has shown that, contrary to fears of a universal ‘race to the bottom’ in tax and spending levels, exposure to globalisation has been positively correlated with state welfare provision. When this process of seeking security leads to expanding employment outside the private sector, in largely sheltered activities, it can reasonably be said to lead to de-globalisation
So in Scotland the route to greater economic security in the last few decades has consisted in large part of state subsidies to poorly paid service sector jobs and the growth of public employment. Of course, the forces making for this development have been complex. The rise in public sector employment has been especially notable in health and social care and education; labour-intensive services for which demand is driven relentlessly upwards by an ageing population, increasing expectations about levels of health, and similar patterns in beliefs about the desirability of educational expansion. The persistence of these trends over time has meant that growth has taken place under governments of all political shades, including, at the UK level, the Thatcher government of 1979-1990.
This growth of public sector employment is a key, but not the only, facet of de-globalisation, which is occurring simultaneously with the upswing in globalisation brought about by ever-increasing globalisation of manufacturing. But manufacturing is now a small part of economic activity (around 10-11 per cent of GDP and slightly less of employment). The largest part of the economy is now private sector services, whose level of globalisation is extremely diverse. Some elements, such as (part of) financial services and business services are very highly globalised. But others, and the biggest in employment terms, such as retailing, hairdressing, and entertainment, are highly labour intensive and ‘un-globalised’. In addition, the substantial growth of the public sector injects stability and security of employment into the economy, with a very high degree of insulation from global forces.
These processes are not peculiar to Scotland; they apply to large parts of post-industrial England and Wales. Where Scotland differs is in having achieved substantial devolution, meaning that while broad patterns of sectoral change are similar across the UK, the location of decision-making about much of the local public sector (and especially the labour-intensive parts) has moved from London. The scale of these public services is largely determined in Edinburgh: the official Scottish government figures show 485,000 out of 580,000 public sector jobs coming under devolved budgets, (NHS accounts for 156,000, local government 278,000).
Of course, most of the funding for these jobs currently comes from the national UK tax pool, and since the banking crisis Scotland has been subject to cuts decided in London. But these cuts cannot be seen as in any straightforward way as a result of ‘global’ fiscal pressures on London; they have been the result of political calculation made by the coalition. But in any event the London government has ring-fenced NHS and school spending (with qualifications about ‘efficiency savings’) so there is no major threat to these jobs in the foreseeable future.
To summarise the argument, since the 1970s Scotland has become a significantly post-industrial economy with strong de-globalising elements. Much more of the forces acting upon the Scottish economy are now internal than ever before; above all, political decisions made about public spending in Edinburgh, within some constraints imposed from London, matter a great deal. The state of the world economy, however manifested, matters much less to Scotland today than in the past. In this sense there is now more of a ‘national economy’, imagined as a ‘community of fate’, than ever before in Scotland’s history.
So the attraction of independence is that it offers the possibility of embracing the growth of the public sector as part of a positive-sum social settlement, in which high levels of employment in health, social care and education are celebrated as simultaneously fulfilling popular demands for such services, but also compensating for the absence of private sector job creation. Following the Rodrik argument, noted above, this pattern would fit with the evidence of trends elsewhere in the world, especially in small open economies.
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