Industry

The Issue

we have an unproductive, low-pay economy

We have been through a 40-year experiment of creating a new economic order based on incentivising fast profits over long-term investment, an economy where speculating and buying assets can make you more money than manufacturing things or selling high-quality services. The outcome of this has been a disaster - in a world of ever-faster profits, investing in the workforce is disincentivised and so employment has become lower-skilled and lower-paid. Along with economic deregulation for the most powerful in the economy and the fact that the public purse picks up the cost on behalf of the rich every time weak regulation leads to disaster, it has created the greatest transfer of wealth from the many to the few seem for generations.

The outcome of this is that we live in a country where most people in poverty actually have jobs but even a full-time job isn’t enough to pay the bills and raise a family. The outcome is that we have collapsing productivity since gambling on financial assets or buying assets and then renting them back to people at inflated prices can make more money than adding value through investment. It means rock-bottom levels of research, development and innovation. It means very low workforce morale. It means the taxpayer has to pick up the cost of welfare benefits for those who work but whose job doesn’t pay them a living wage. It means that instead of investment in the economy being productive it is extractive, buying up Scottish assets to exploit them elsewhere rather than building our own economy based on them.

It has also proved to be a highly volatile economy with repeated economic failures and financial crises - and that is before we begin to consider the environmental impact of lightly-regulated consumerism.

Add this altogether and you have a dysfunctional Scottish economy which is losing domestic ownership week by week as foreign entities buy up our most promising industries and which exports more of its own wealth out of the country than any of its comparable neighbours - by miles.

The Alternative

A productive, high-skill economy based on long-term investment

The alternative is an economy which is much more domestically owned, which engages in patient, long-term investment to improve its productivity, which is based on adding value rather than extracting value, which creates good jobs and pays good wages and which is a constructive member of its community both towards people and the planet. That economy would not need bailed out by government all the time, it would pay wages that people can live on reducing the social security bill, it would pay more tax because it would make productive profits, and because it would extract much less wealth from the economy into the pockets of overseas financiers, it would create a virtuous circle in which Scotland’s economy was rebuilding itself by investing in itself.

The Solution

An industrial strategy

To achieve all this, Scotland needs an industrial strategy. At the moment we treat economy policy as if doing as little as possible to interfere with the commercial interests of big business is the best way to grow an economy. It isn’t; the best way to grow an economy is to ensure the right kind of investment, the kind of investment not being made by big business. It is about encouraging the kinds of economic activity which clearly lead to public benefit and not encouraging economic activity which does nothing but enrich a few. It means creating new markets and supporting the development of new industries. We have waited and hoped that the kind of economy we need would ‘just appear’. It hasn’t, so it is time we created it.

The To Do List

  • Perhaps surprisingly, the concept of ‘the economy’ is a pretty recent one – if you asked most people before the post-war period what ‘the economy’ was or how it was doing there is a good chance they’d look at you blankly. The idea that the economy is a single thing to be man- aged in a single way with government setting the basic conditions and then staying out of the road is a recent phenomenon and in many ways it has been really unhelpful. Because the economy isn’t a single thing, it is made up of many different moving parts and not all of them need the same things or respond in the same way to the same conditions. An independent Scotland doesn’t need ‘a strong economy’, it needs a broad range of successful industry sectors and thriving small busi- nesses serving their communities.

    Therefore an independent Scotland doesn’t need an economic pol- icy, it needs a National Industrial Policy. Government must set out strategies for its aims and goals, for the outcomes of all of Scotland’s economic activity and then it must create a programme of action and effective structures to deliver them which will maximise the chances of successfully achieving those goals. The mantra of ‘low tax, low reg- ulation’ is far from the only way to create good economic outcomes. Instead we must identify how to ensure that industry sectors are con- tinually developing, constantly becoming stronger and more effective.

    To be as resilient as possible, Scotland should aim for not only a diverse range of industry sectors but a diverse range of forms of busi- ness. Limited companies, public limited companies, family-owned businesses, employee-owned businesses, social enterprises, mutu- als and cooperatives all play different and complimentary roles in an economy. Scotland should incentivise and support the development of as broad a range of ownership models as possible.

  • It is not the job of government to make people rich nor to maximise business profits as a goal in and of itself. Equally it is not the job of government to penalise success or to hinder businesses from growing and being sustainable. The role of government is to maximise the pub- lic good delivered by our industries. To do that we need to do some- thing which lies at the heart of so much of what has gone wrong in recent decades – we need to break the link between ‘public good’ and ‘growth’. It makes no sense to be pro-growth if all the growth is coming from companies which extract more wealth than they pay in tax, wages and buying from domestic supply chains. If an online gambling busi- ness grows its Scottish profits but employs no-one in Scotland, buys no goods and services from Scottish businesses, takes large payments from Scottish customers, banks them in a tax have and pays minimum tax, it doesn’t do good, it does harm. It is a net loss to the total wealth of the country of Scotland. But Scotland will be left with the costs, the price that is to be paid in tackling gambling addiction and its impact on its victims and their families. It is possible to imagine that a group of online casinos could grow faster than the impact of the loss of a

    group of manufacturing businesses. Scotland’s economy would ‘grow’ – but everything would get worse for Scotland and its people.

    The ‘economy’ is measured in just about the stupidest, most sim- plistic way possible. The whole complexity of the many currents which are flowing through Scotland’s many industries: businesses rising and falling; sectors declining and emerging; job quality and wages improv- ing or (mostly) deteriorating; environmental and social impacts helped or harmed, are all summed up and represented by a single number – Gross Domestic Product or GDP. It has been the great trick of the economic ideology which has dominated the world since the 1970s to believe that you should only ask whether GDP got bigger and you should never pursue government economic policy for any reason ex- cept to make GDP grow. The consequences of this are what this newly independent Scotland must untangle.

    But the fact that growing GDP has such a high tendency to create damaging social outcomes does not mean that falling GDP is better. When industries are doing the right things, creating good jobs and useful goods and services and generating profits so they are sustaina- ble and can grow, it creates wealth. When done right it creates wealth for its employees and wealth for the company and its owners. A society that creates national wealth can invest more of that wealth into public services and national infrastructure. If public investment is made in the right way it too creates good jobs and demand for domestic supply chains which in turn creates wealth. But for that virtuous circle to work the wealth has to work for the whole nation, which means it has to be retained in the national economy and it has to be spread across the nation. If the wealth is highly concentrated only in a few parts of the country or only in the hands of a few people, the virtuous circle is bro- ken. And if too much of your economy is foreign-owned and extracts

    too much of the wealth to overseas shareholders, again the virtuous circle breaks down.

    We need a panel or dashboard of national-level indicators which cover the real priorities we have set ourselves to achieve greater quality of life. As well as 'Gross Domestic Product' we need 'Gross Domestic Health' (a measure of whether aggregate health is improving), 'Gross Domestic Mental Health' (the same for our minds), 'Gross National Anti-Social Crime' (are we getting safer), 'Gross Economic Sufficiency' (are we reducing poverty), 'Gross Economic Security' (we are increasing economic security', 'Gross Environmental Wellbeing' (is our air cleaner, our seas clearer, our wildlife thriving, our carbon emissions declining). It must be a limited, deliverable set of indicators and they must always and only be published together. If GDP is rising and all the other indicators are declining, then we know that the way we are raising GDP isn't working.

  • The main aim of economic activity is to provide the essential goods and services that a society needs, and its second aim is to create and distribute wealth. So a government’s role is to encourage and support this, but to make sure these things are happening in a way that pro- motes the public good. There are then two other goals the government should have; the first is to help industry sectors adapt. Technology is always changing and the needs of the world are always changing. A business can maximise profits if it minimises its spend on research and development – for a while. But eventually a business which does not adapt and change will face severe challenges. And the businesses and industries we have today are not the same as those we had in the past and nor are they the same as those we will have in the future. New needs and new technologies develop all the time and a successful nation has industries which can not only adapt to and grab new oppor- tunities but can actually lead in creating them.

    Finally, you can of course have success by doing the wrong things, particularly if you’re not responsible for dealing with the damage you do. That may be in your interests but it is not in the interests of every- one else, and it should be in everyone’s interest that a government op- erates. No-one suggests that economic activity should be an absolute free-for-all where people can do whatever they want irrespective of the consequences – polluting rivers, dumping hazardous waste, kill- ing wildlife, holding customers to ransom, damaging people’s health.

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    These are all ‘externalities’, things which happen externally to the busi- ness or industry sector concerned but which are caused by them. Reg- ulating businesses to stop them doing harm is always necessary, but we can go beyond this. Public policy can help businesses to adapt, to do things differently or do different things. A genuinely great industry sector doesn’t just create wealth and provide goods and services, it creates positive externalities and minimises negative ones. Govern- ment is a partner in helping businesses and industries to achieve this.

    That is the broad goal of an industrial policy – to ensure the nation has the goods and services it needs (National Resilience), to build and distribute wealth (National Wealth Building), to encourage inno- vation and long-term planning (Creative Adaptation) and to maxim- ise positive externalities and minimise negative ones (Regenerative Industry).

  • This leads to a series of principles to guide an industrial policy. It is successful when it is creating useful businesses, businesses that do things people and society needs. If businesses do useless things or things which mainly benefit only themselves, there should be no public duty to support them. It should be non-extractive, supporting businesses that put more into the economy than they take back out and prioritising productive activity over rent-seeking (which is using money to own assets which enable you to take wealth away from some- one else without creating additional wealth). It should work to create sufficiency and security, enabling the workforce to have everything it needs to live good lives and to have the confidence that they will continue to be able to live good lives in the future. It should be coop-

    erative – yes, some businesses are in competition with each other, but even they will have many more interests in common than in conflict. The goal isn’t to help one beat the other, it is to search for ways to help both be better and do better.

    Finance is essential to industry – it creates the ability to invest and develop and to even-out cash flows. So financial industries should serve productive industries and not the other way around, and an in- dustrial policy should definancialise the economy to make sure that is the case and to make sure that we’re not reliant on financial specu- lation. It should protect our national resources for the future and max- imise the effectiveness of their use, so it should make sure industry is behaving in a circular and regenerative way. It is inevitable that industries will rise and decline over time so for the sake of national resilience an industrial policy should encourage an economy which is diverse and decentralised, not least to make sure that no region of Scotland is left behind. It should recognise that people have ide- as, and hopes, and plans and dreams about their future. An industrial policy should promote opportunity, the chance for people to develop rewarding careers, build innovative new businesses, live their lives well in the way they want without being financially penalised for it (such as if they want to start families or learn new skills). And it should, well, make things better, improve goods and services, increase wages, strengthen our communities, protect our environment.

    What all this adds up to is that we need a Post-Growth industrial policy. That policy is not about achieving growth for its own sake and it is not about ‘degrowth’, seeing growth as bad. It is a policy which pri- oritises the economics of development, an industrial strategy which pushes towards all the improvements and advancements discussed above. Most of the time ‘doing the right thing’ will probably lead to tra-

    ditional measures of growth getting bigger. Sometimes ‘doing the right thing’ might lead to measures of growth getting smaller, for example if resource waste is cut, there is greater reuse and repair of products or harmful industry sectors like gambling are brought under control. If we take a development approach our goals would be increased wag- es, improving products and services, more innovative and sustainable businesses, greater investment in public services and infrastructure, and constantly decreasing environmental and social damage. If we’re achieving that it simply doesn’t matter whether GDP is getting bigger or smaller, or by how much.

    There is a wide range of economic theories and concepts designed to achieve a development focus for an industrial policy – Foundation- al Economics, Modern Money Theories, Local Wealth Building, Green Import Substitution Reindustrialisation, Circular Economics, Sharing Economics, a number of theories of Economic Ownership and Democ- racy, Wellbeing Economics, Inequality Economics, the Entrepreneurial State, Creative Adaptation, Decentralisation and Economic re-democ- ratisation among them. This is not the place to discuss them in detail but Foundational economics is particularly important – the other con- cepts will recur throughout our work.

  • Far from success in business being entirely the doing of ‘entrepre- neurs’, it is in fact a success built on an enormous number of contri- butions from the nation state in which the businesses is based. The ‘foundations’ of success lie in having good housing for workers, good

    education for a workforce, a health service to enable workforce sta- bility, transport infrastructure to help move goods around, digital in- frastructure to facilitate business activities, police and law to ensure businesses can operate, and so on. This is known as the ‘Foundational Economy’.

    Scotland has a fairly strong foundational economy, but it isn’t strong enough to really facilitate the industrial development we want to see. Education is good but our housing stock and the extent of poverty in Scotland reduces the available productive workforce. Scotland has areas which are poorly served by transport links and this makes them harder to integrate into the wider economy. The incidence of stress and depression and the lack of services to support those who suffer has a negative impact on workforce continuity.

    There is no shortcut to getting the foundations right, and Scotland has plenty to do if it wants to maximise its potential. Those steps will be discussed throughout the book, but it is important to keep in mind that these are very much important economic steps and not just social ones.

  • So enough theory – what does this actually mean for an industrial policy for Scotland? It is clearly impossible to describe a complete industrial policy here, but it is possible to explain its shape and how it would work by explaining some key elements of it. First, the structures which would support industry sectors.

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    If we are to build a Scotland with a diverse industry base we should recognise that each industry has different needs and develops in dif- ferent ways. One size definitely doesn’t fit all, so the means of support- ing and developing industry should shape itself round industries, not public sector officials. Similarly government policy-makers are seldom best placed to develop meaningful development plans for individual industry sectors – they simply don’t know enough about each sector to do it justice. And in any case a new Scottish reformation is about setting free and empowering all the talent and knowledge we have. The best people to own, create and adapt development strategies for an industry sector are the businesses which make up those sectors themselves.

    Scotland’s centralised economic development agencies should therefore be abolished and replaced with Industry Sector Councils. Any business, supply chain business or service support business and relevant trade unions working in an industry sector would be free to become a member of the relevant Industry Council. These would be publicly funded (so they are not dominated only by the biggest and wealthiest companies) and would have policy and support staff. The members of a Council would be in complete control, free to appoint their own staff, free to develop (with support) what they think are the best policies or initiatives for improving and building that industry, free to use their Council in whatever way they think is best for them.

    This doesn’t mean that they can write public policy or spend public money (beyond their own budgets) but it does mean they can advise the government and suggest policies and spending priorities. It also means they can develop the support services they think they need (if an industry sector thinks it needs a collective sales platform to max- imise its market they are free to develop one). And it provides them a

    forum to explore the scope for greater communication and coopera- tion throughout the sector – a supply chain business can put its hand up and say ‘we could supply that’, a growing business could ask ‘does anyone know if there is a technology to...’ or a manufacturer could ask ‘is anyone interested in sharing the investment in a new manufacturing facility?’. Policy and strategy would be developed by businesses work- ing together, not companies lobbying individually.

    There are also policy issues which impact on all businesses, so each Industry Sector Council would also nominate a representative to a Na- tional Business Council. This would collect the views and opinions of all industry sectors in advising the government on broader economic policy and would be a body with which the government can engage with when setting macroeconomic policy, monetary policy, regulatory policy and more. Again, government is the democratic representation of Scotland and sometimes it will simply have to say ‘no’ to the Busi- ness Council. But it means that the nation can have an informed, open and constructive debate about its priorities.

The To Do List

  • What Industry Councils are not is trade bodies, staffed and financed to market industry sectors. Later this book will look at Scotland’s trade and cultural diplomacy strategies and there it will explain how Scot- land International will be created as a national agency to do these things. But there is an international trade issue which we must deal with here – our relationship to the European Single Market. As a mem- ber of EFTA we will have a pre-arranged trade deal with EU countries but friction will still be higher than if we were full members of the EU.

    Scotland will want to minimise that friction and so an Export Agency will be created to make exporting to Europe as easy as possible. It would undertake wrestling with red tape on behalf of businesses and would be an advisory service to businesses to help them make sure that their goods and services are compliant with EU rules. How the Export Agency could help even more than this will be discussed in a moment.

  • But first, it is important to recognise that an awful lot of Scotland’s economic activity and some of the most important economic activity to the wellbeing of the nation isn’t so much part of a national industry sector but is really part of a very local economy. Many of the most important businesses for Scotland’s citizens are local retailers, local tradespeople, local services, local construction companies, local hos- pitality businesses. Often their success will rely at least as much on the success of other local businesses as on national or multinational ones. The local electrician or plumber needs a local construction com- pany to buy their services, the local accountant needs the local pubs and restaurants to buy their services, the local farmer needs the local butcher to buy their meat. These are all local systems of economic interdependence and these are certainly not best supported by gov- ernment offices in a city a long way away from them.

    So what remains of business support services should be decentral- ised right down to the most local area. First, there is an important role for Regional Economic Development. The Regional Councils should all be given additional budget and economic development responsibility as the centralised national economic development agencies are abol-

    ished. Each of these should create Regional Industrial Strategies. Scotland has been terrible at recognising that every region, every dis- trict, every part of Scotland has unique strengths and weaknesses and that an economic strategy for each of these regions should be built on its strengths. In fact it is almost certain that most Regional Councils will be serving areas where it makes clear sense to have a number of regionally-focused industrial strategies.

    Take Dumfries and Galloway as an example. Many of the economic problems of the very South West of the country are directly related to its poor transport links (served by only one rail line and only two trunk roads which are largely single carriageway). And yet it has one of Scotland’s most important transport links – by sea to Ireland and beyond. It has great food and drink infrastructure, a good quality of life which is attractive to those who can remote work, stunning scenery and picturesque towns which offer boundless tourism potential, some of Scotland’s best-developed forestry and so much more. Why does it struggle so much economically? Why doesn’t it have much more wood processing industry? Why does it struggle to market its food products to the rest of Scotland? Why aren’t we building export strategies based around Cairnryan’s port? Why isn’t Scotland building better transport links to the area? The answer to all of this is that Galloway’s economy has never been a priority for central belt economic development which has been obsessed with financial services.

    But Annandale, a different region of Dumfries and Galloway, has quite different strengths and weaknesses. It is a major gateway to the UK, has extremely good transport links thanks to the M74 and the di- rect road link to the exporting infrastructure around Stranraer, and also has wonderful food and drink production. Why isn’t it a distribution hub for goods coming from England? What other opportunities does the

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    new national border open up? It was an important region in Scottish history and so has much tourism opportunity based both on landscape and history. It has an existing timber processing industry which can expand and diversify and extensive forestry. This means it has over- lapping but not identical opportunities to its next nearest neighbours. And this is why regionalised development is important.

    Scotland needs an industrial policy for... everywhere. And this goes down below the regional level to the really local level. Even more than regional economic development Scotland lacks development plans for its towns and villages and for parts of its cities outside the city centre. So much of the responsibility for on-the-ground economic develop- ment should be led by Development Councils working at the town, village or sub-city level. If a town believes it can invigorate its high street by converting some empty shops into interesting cooperative buildings, or by providing better off-street parking, or by having more places to stop and have a coffee, or by greening and beautifying the street, or by marketing itself as a niche market for a product (perhaps like Wigton has marketed itself as ‘the book town’), it must have the re- source and power to do that. If local businesses need help, they should be able to go to the Community Support Office and access it there in the context of the local plans.

    Development Councils should have no limit on their ambition and should be free to be creative. If a town has a great, under-developed tourism offer it should create a plan to develop it. If it has natural features which could be made better use of (a river suitable for active sports, lovely but un-signposted walks in the area) it should be able to create a plan. If a town fancies being really creative and developing an Augmented Reality interactive game based in the town, it could try that too. People in the places where they live are best able to identify their

    own assets and strengths, opportunities and development options. And, crucially, local businesses can also network and come together to build better links and development plans for themselves, easily engag- ing with each other through a Development Council where they live.

    This leaves a number of functions currently the responsibility of centralised economic support agencies which would revert directly into government, in particular the large, focused interventions which make up a national industrial policy. This model results in support for industrial and business development being as close to those it is supporting as possible. Industries get support and develop their sec- tors through Industry Councils,; the business community as a whole interacts with government via a National Business Council; regional- ised development plans and direct support for medium-sized busi- nesses would come from the Regional Council; and local development plans, support for small businesses and advice for new-start business- es would be accessed via Development Councils and the Community Support Office. The international networking and marketing of Scot- tish businesses would be done by Scotland International and what is left, including direct economic interventions via an industrial policy, would be the direct responsibility of government.

  • These are the structures of industry development. The whole aim of these is to get away from the idea that a government is an all-knowing entity which is capable of devising and deploying economic policies all by itself. It isn’t; rather what we want is to let industries take charge of their own development, regions to take control of theirs, communities

    their own. Government doesn’t need to have a ‘policy for everything’ if it is confident enough to trust those with real experience and knowl- edge do develop their own policies and approaches.

    What that does is leave government freer to pursue interventions which are about big strategic change. These are the big ideas which a government pursues to try and create real change. Here the govern- ment isn’t some kind of technocratic manager but a big thinker, an ideas body, an entrepreneur. This is known as the ‘Entrepreneurial State’, a government which is a player and not just a referee. It is these big interventions which are generally the backbone of an indus- trial policy and this is how transformation and step-change can come about. Governments can make things happen that no-one else can.

    Scotland has far too much potential to be able to explore more than a fraction of what an Entrepreneurial State could do in a chapter this size, but let’s look at some big examples – Green Industrialisation, Energy Utilisation, Procurement and Import Substitution, Platform Fa- cilitation, Leasing Economy, Domestic Tourism, Coastal and Marine, and Rural and Land.

  • This newly independent Scotland has three giant tasks – to rebuild its economy, to take urgent action on climate change and to break the cycle of failure-demand. Bringing these two together through a Green New Deal creates an industrial strategy of Green Industrialisation. There are many tasks that lie ahead to reduce Scotland’s negative

    environmental impact to zero and below, and many of them create enormous economic opportunities. Almost every house and building in Scotland needs to be insulated to 90 per cent thermal efficiency (or close). This will require an initial workforce of about 6,000 people but this will double in time. It also requires a broad supply chain – insulation products, wood and construction products, draft-proofing materials and so on. Currently almost all of these products are import- ed and are generally themselves harmful to the environment during production and eventual disposal.

    Yet Scotland could produce all of them – insulation based on bio- mass (particularly hemp), wood-based construction materials, bioplas- tic or other organic tapes and draft-proofing materials. If we move on to change building regulations to favour construction materials such as wood and hempcrete (a highly-insulating, hemp and concrete mix), the scope for the rapid development of Scottish supply chains is enor- mous. The government, though the National Investment Bank, should pump-prime this industry sector, invite existing businesses to pro- duce rapid scale-up plans and to seek entrepreneurs ready to start new manufacturing businesses in the sector. This creates many, many high-quality jobs.

    An even more challenging task is to decarbonise heating. Common Weal continues to believe that by far the best long-term solution to this is to retrofit District Heating to every house where it is feasible. It is an enormous job but again creates lots of jobs (again, at least 6,000 in- stallation jobs to begin with, rising steadily). Much of the supply chain needed is not dissimilar to the supply chain for the oil industry and this creates excellent opportunities for diversification. Other components (particularly solar thermal panels) are not highly complex technologies and scaling up or stimulating wholly-domestic supply chains for this

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    should be entirely possible. Common Weal is more sceptical about the universal use of Air Source Heat Pumps, but if they’re deployed at scale then we should be looking at manufacturing opportunities here.

    The other big labour and supply-chain-intensive task is in energy. Scotland’s failure to capture supply chain jobs in renewable energy is a national disgrace and it must be rectified with urgency. Later in the book how to bring all of Scotland’s energy system into public own- ership will be explained, and once it is, supply chains will finally be in the control of Scotland and can be developed for the public good. Energy infrastructure is long-lasting and creates important export op- portunities; that Scotland’s labour costs are higher than those in China (where most of our energy infrastructure is currently manufactured) only modestly increases the likely cost of technologies that are pro- duced in Scotland and given the longevity of the equipment (which can be extended greatly through proper maintenance, not currently industry practice) means that the extra cost is marginal to the cost of producing energy – but it would produce an enormous economic boost for Scotland. Yes, that means major investment to scale up our ability to make our own wind turbines, but even more importantly given Scot- land’s strategic advantage in this area, it gives us the opportunities to pioneer new technologies such as subsea turbines, electrolysis plants for Green Hydrogen production and other forms of energy storage.

    These are only some examples of what is possible. These are all going to have to be done somehow or other – these are all national priorities over the next three decades. So, the question isn’t ‘should we do them?’ but ‘how do we do these such that Scotland gets the maximum benefit?’. Common Weal has shown that, developed over a 25-year period with the investment repaid over a 50-year period (we only do this once if we do it right so it becomes a multi-generational

    project) it creates so much new economic activity that it actually cre- ates more tax and other direct income than it costs to service the debt. It more than pays for itself.

  • Scotland’s energy capacity leads directly to other big opportunities. The first of these is Energy Utilisation Industrialisation (no, econo- mists are not great at snappy titles...). Scotland has so much renewable energy potential that we can meet all conceivable domestic needs for electricity now and into the foreseeable future using only onshore and offshore wind. Our enormous marine energy potential is entirely additional, free for us to use as we think best. There are three great economic development opportunities for this energy.

    The first is most straightforward – we can sell it directly to other nations via interlinking cabling (through the grid to the rest of the UK, or to the continent via subsea cables). This is straightforward and prof- itable, but it does limit our options because we become reliant on only one group of purchasers. A second option is to develop a green hydrogen industry. The hydrogen economy is set to grow rapidly and since Green Hydrogen is basically a form of renewable energy, the national capacity to produce it is linked directly to how much spare electricity a nation has – and Scotland has absolutely loads. We could create oil-rig-style at-sea electrolysis plants connected to subsea tur- bines directly below. These would produce hydrogen which would then be collected by hydrogen-powered tankers which could export them anywhere in the world there was demand, making Scotland a leading global player.

    The third option is to target energy-intensive industries (whether they use electricity like say aluminium production or hydrogen like ‘green steel’ production) and offer them long-term, low-cost energy deals to either attract them to set up in Scotland or even to encourage the creation of new domestic industries based on these energy re- sources. All create enormous direct income for Scotland, and the latter two also offer the potential for significant employment in manufactur- ing and make Scotland a potential centre of energy-based research and development and technology innovation.

The To Do List

  • The other big opportunity which emerges from a Green New Deal is for a Rural and Land Industrial Policy. Seeing ‘the countryside’ as only a place for traditional farming and (worse) blood sports for the rich (particularly grouse shooting) is far too narrow a vision. Most of the supply chains mentioned above are reliant on organic feedstock – hemp, timber, wood biomass (from coppicing), bamboo, even sting- ing nettles (which produce good fibre for fabric). And Scotland has absolutely enormous amounts of unused land, all that bare and empty moorland we see all over Scotland. Almost all of it is suitable for some kind of planting (trees used to cover 98 per cent of Scotland’s land) and much of it for commercially useful planting. As long as this is done intelligently and sensitively it also does enormous good for our wildlife, biodiversity and carbon sequestration.

    But we have to pursue major land ownership reform if we want to open up these opportunities. Scotland’s land is owned by an absolutely tiny number of people and is used as either an investment opportunity,

    grant-harvesting (like ‘greenwashing’ or agricultural subsidies) or as a plaything for the wealthy. We need to break open the opportunities for Scotland’s ‘land entrepreneurs’, people who have the vision to build ru- ral industries creating the organic feedstock for crucial supply chains.

    The opportunities for rural Scotland extend well beyond this. Bio- mass is bulky and so it doesn’t make sense to transport it long distanc- es, which means that it makes good sense to locate the processing and much of the manufacturing near where the primary production is – rural Scotland. That is everything from advanced timber products to bioplastics and the things that can be made using it. That is also where significant amounts of renewable energy is produced so that increases the logic of co-location. Renewable energy storage will be discussed later in the book but it makes sense that that too is done near where it is generated, so inter-seasonal hydrogen storage is another oppor- tunity. And with greatly increased potential for remote working as well as this rapid increase of a critical mass of new industry, lots of things suddenly become possible in rural Scotland.

  • But all of the above needs support with rapid market development. Building new industries needs intensive investment, skills develop- ment and business-building. Sustaining this successfully is absolutely key, particularly in the early stages. Providing baseline order books for these businesses is a crucial step in supporting their rapid de- velopment. But it is not just about new-starts – the Scottish public sector spends many billions of pounds a year on procurement, buying the goods and services that public services need. Most of this money

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    leaves the country, because most of the public sector’s supply chain providers are headquartered outside Scotland and most of the workers making the products are outside Scotland. This is an enormous drain on Scottish wealth which should be supporting Scottish industry, not undermining it.

    Scotland should shift to ‘smart procurement’, using its procure- ment spend not only to buy the goods and services it needs but strate- gically to help support and grow Scottish businesses. That means that, whatever a public agency needs to buy, it should first start to talk to the Scottish business sector to identify if there is a Scottish business which can supply it. If there isn’t then they should find out if there is a business which could diversify and start producing it. Failing that it should explore whether there is the opportunity to create a new-start business to start producing it.

    The ‘smart’ in smart procurement doesn’t only mean spending it strategically, it means spending it developmentally. That means you don’t just ask businesses to provide the previous version of what you purchased in the past but to innovate and create new and better ver- sions. This could be major technological advancement, like procuring innovative hydrogen ferries. But it could also mean asking industry to provide a new version of something you previously purchased, but us- ing bioplastics rather than petrochemically-based plastics.

    By creating guaranteed order books, businesses can then devel- op and scale up with confidence. Almost all food should be procured from local producers. Most consumables could be manufactured in Scotland and so the target should be to make that happen. Big project spending (the 25-year need for insulation products to decarbonise, the advanced wood materials that would displace imported construc-

    tion materials) should become the basis both of building standards changes and the procurement of public buildings. In every penny the government spends it should ask first ‘can we spend this strategically in Scotland?’ and every possible option to achieve that should be ex- plored, in partnership with Scotland’s industry base.

    This is a process of ‘import substitution’, making for yourself what you used to import from elsewhere. When you use import substitu- tion to displace environmentally harmful products with domestically made environmentally beneficial ones, it is knows as ‘Green Import Substitution’. When you combine it with an industrial policy to rapidly expand the industry base it is known as ‘Green Import Substitution Reindustrialisation’. So the national aim is not just to substitute pub- licly-procured imported products with more environmentally friendly, Scottish produced ones, it is to create the critical mass of suppliers and the conditions in which they and the businesses they supply do this routinely. There are many tools for doing this, including smart pro- curement, regulation, tax incentives and disincentives and financial in- vestment. In particular an Externalities Tax (see Tax and Money chap- ter) means that well-produced, local and ethical goods immediately get a clear market advantage over harmful, polluting ones which have been transported across the world.

  • Another great opportunity Scotland has comes from its size. By be- ing smaller, the opportunity to achieve significant gains through Mu- tual Cooperative Development is significant. Cooperation between

    businesses (rather than them being cooperative businesses) can greatly help improve the impact of individual businesses. There are already good examples in Scotland of a group of similar businesses (particularly in a single area) coming together and creating a collective platform to help all of them improve their market access. This model should be the norm across industry sectors. If food producers want to have more leverage over supermarkets they should form coopera- tives, selling produce collectively so they gain bargaining power. If a group of manufacturing businesses are all selling in the same market, forming a cooperative can help them market themselves collectively into that market in a way none of them alone can. The ideology of ‘continual competition of all against all’ almost explicitly favours the very big players in a market and almost explicitly hobbles the poten- tial of smaller players. Encouraging cooperation as a default position to strengthen the position of individual businesses makes enormous sense in a Scotland which currently has very few big players but many smaller ones.

    A specific model of this is Platform Cooperation. Think about Uber, a technological approach to positioning a piece of software (effective- ly a sales platform) in between customers and suppliers. The purpose of the software is partly to make the process more user-friendly for the customer, but in reality it is about intervening between customer and supplier to extract as much wealth from the supplier as it can. What if the platform was there not to exploit the supplier but to sup- port them, while still making the experience more customer-friendly? What happens if rather than allowing foreign corporations to insert themselves between Scottish customers and Scottish businesses to syphon money away from both, the government instead created a not- for-profit platform which aimed to both keep the experience as pos-

    itive as possible for the customer and ensure the maximum amount of the profit generated goes into the pockets of the small business? Take the example of Uber – why not create a Scottish cooperative taxi app for your phone which connects customers directly with taxi drivers with the goal of maximising the convenience for one and the revenue streams for the other?

    There are lots of examples of where platform cooperation could make a difference – any occasions where Scottish businesses are effectively forced to sell via a corporate middle-man which extracts wealth from them is a potential opportunity for those selling business- es to come together, remove the middle-man and do it for yourself. This extends the reach and power of Scottish businesses via the power of working together.

    A final example of how effective cooperation can make a big dif- ference is through strategies for infrastructure investment. Scotland’s economy is currently made up largely of small and smaller-medi- um-sized businesses. This does not make them inefficient, but it lim- its their ability to make infrastructure investments. A single company may benefit greatly from a new manufacturing facility but may not have enough demand for it to make it a safe investment. But what if two businesses would both benefit from the facility? What if they shared it? Now both can make safe investments in capacity that they share, ena- bling both to grow. One of the key goals of industrial policy in Scotland should be to find synergies between businesses, to seek out collabo- rations and cooperation. We do this far too little just now, and it offers a very real opportunity to scale up many of our businesses.

  • Another great opportunity for Scotland is to embrace the Leasing Economy. Our society is based on the assumption that to have things means you have to buy them. This does not favour Scotland – if you’re buying things then marginal reductions in the cost of the item make a big difference (because you’re paying it all up front in one go). And that favours whomever can cut costs the most, by reducing quality and labour costs. That is not Scotland’s strength. Leasing changes that equation. If you lease an item over time, the quality of the item becomes much more important and the marginal cost of it less impor- tant. This favours those who can sell quality products and can support those products with long-term maintenance.

    This does four things. First and most importantly, it saves consum- ers a lot of money in the long term. If a product costs a little more to make and you spend a little more to maintain it well, that is a cost to the consumer – unless you spread it over time. If you do that the upfront cost is actually reduced but, because over its lifetime you only pay for one of the product rather than the two or three you pay for when you have to replace lower quality products two or three times, it saves significant money over the long term. It does something else for the consumer – you get a better product. For the producer, it means they can focus on producing the best product possible rather than seeking to cut costs. That favours a high-skill economy like Scotland’s. And, ef- fectively, it transfers jobs from the low-pay retail sector to the high-pay engineering and maintenance sector, creating more, better paid jobs.

    Scotland should set up a National Leasing Company as a National Mutual. This would offer high-quality products to its members which

    would be selected based on their ability to be maintained and repaired – the lease would come with a maintenance contract included. At first this would involve importing products to lease but, over time, it would become increasingly possible for Scottish manufacturing businesses to start building high-quality consumer goods, particularly designed for longevity, upgradeability and repairability. It would also offer an op- portunity for smaller specialist businesses to focus providing leasing options for customers – a music shop could develop a leasing model for musical instruments, a games shop for computer games consoles and so on. We need to be better at using resources anyway and if Scot- land moves more of its spending towards leasing rather than purchas- ing it slants the economic field back in the direction of higher-quality manufacturers.

The To Do List

  • When people spend money on products, the money spent is spread between the manufacturer, the retailer and the various transport and logistics companies which come between them. If the product isn’t manufactured in Scotland and the retailer is a multinational corpo- ration, that means that an awful lot of the ticket price of the item is funnelled out of the Scottish economy.

    Spending on recreation has a very different impact profile. If you spend less of your money buying things and more of your money doing things, the way your money is spread is different. When you’re buying leisure services (domestic tourism, entertainment, arts and culture, ac- tivities, eating and drinking and so on) much more of your money goes towards wages, domestic businesses and domestic supply chains. This

    means that the impact of spending your time and money doing things is much greater than if you spend your time and money buying things. There are many reasons Scotland should pursue a post-consumption social model (better wellbeing and mental health, better environmental impact) and these will be discussed later in the book.

    But one of the best is that shifting spend from consumption to ac- tivity has a much better wealth-building effect in Scotland. Govern- ment should actively encourage people to spend less time in shopping malls (or with online retailers) and more time enjoying themselves. Scotland is absolutely packed with wonderful opportunities to have a really enjoyable time and while our overseas tourism appeal is strong, we ourselves don’t make enough use of the potential around us.

    Every Development Council should be encouraged to think care- fully about what its own local ‘leisure offer’ is and to package it up to make it easy for people to find and access. To do that the government should create a Be Active phone and web app. Businesses and local areas can then populate the app with information about what options are available. People could then easily ask the app to suggest things to do – ‘a nice day out with some hill walking and some good food’, ‘a hotel-and-concert package’, ‘three great things to do for children under ten within 20 mile of my location’. This should then be heavily marketed to encourage Scots to spend a lot more time taking advan- tage of their own country’s opportunities.

    This also has an important wealth-sharing role because the options for being active are very geographically spread around Scotland. The more we can encourage and normalise the idea that you will gain much more out of your spending when you use it to buy experiences rather than products, the more critical mass of customers will be developed,

    the more viable it becomes for leisure sector businesses to invest and grow, the more opportunities there are – a genuinely virtuous loop. This will be explored in more depth later.

  • Scotland must shake itself out of its strange land-locked mentality and recognise that its coast and its seas represent a major opportuni- ty. We need a Coastal and Marine Industrial Policy to make the most of this potential. Again, there are too many possible elements of this to examine all of them here, but the following are some examples.

    First and foremost, Scotland cannot be reliant on another country to provide its main exporting infrastructure. Scotland imports and ex- ports primarily via ports in England, with goods transported by road from there. This is not sustainable for an independent country – we need at least one and possibly two major exporting ports on Scotland’s east coast and at least one on its West coast. These should be owned and operated by a National Transport Company set up as a National Mutual and the Export Agency should be based there. This means that the Export Agency can support Scottish businesses not only with the red tape of trading with Europe but also with exporting logistics. By working with Scottish exporting businesses to help create a critical mass, seeking cooperative ways to maximise capacity, it can help to build up the ports.

    The ports should also be important passenger hubs. Scotland, like the rest of the world, must reduce its reliance on air transport and so an Entrepreneurial State approach should be taken to build up ferry

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    transport capacity and strongly incentivise Scottish citizens to default to sea travel where they can. To do this, Scotland must get its act to- gether and rebuild its shipbuilding capacity properly. As our Green Hy- drogen industry is rapidly developing we should pioneer clean ferries powered by hydrogen. An enjoyable cruise should become an integral part of Scottish tourists’ holidays and ferries should be optimised for business travellers so they are able to work during journeys to make business travel viable. Sea transport can also help to maximise the potential of Scotland’s islands and coastal communities; it is unusual for an island nation like Scotland to have so few domestic ferry routes.

    There are also a number of potential industry sectors which could revitalise coastal communities. The way that fishing licenses are man- aged creates cartels and centralises the associated industries like fish processing. Taking a different approach to managing fish stocks and how we fish them should create more competition and diversity in our fishing fleet. That approach should also make it viable to have a wider range of coastal towns which can sustain fish processing. Modern aq- uaculture enables fish farming, which is sustainable and environmen- tally friendly, by bringing fish farming into onshore facilities which do not pollute the sea. These should be based in coastal areas to enable them to specialise in all the associated processing.

    There are a number of other economic opportunities for Scotland’s sea and coast. There are sea crops such as kelp which can have great value, but these must be farmed responsibility if we are to maintain marine ecosystems. A range of support industries would develop around an exporting port and in addition to this much of Scotland’s off-shore energy will be landed on Scotland’s coast and that means that both direct energy-related activity such as hydrogen production

    and secondary opportunities like attracting energy-intensive business- es. It makes sense that these are located near where energy is landed. Among other opportunities are domestic tourism and attracting peo- ple who are capable of home working.

  • These are just some examples of what could be possible in Scot- land if we had the capacity to use all of the powers an independent nation has to make opportunities out of its resources. But the real opportunity is to set Scotland’s talent free to create its own new ideas. This is just the start of what Scotland can be.