Scotland the Brave requires innovation and dignity, too

I AM a proud Glasgow man: a descendant of the Scottish nation and peoples. My great-great-grandparents on my mother’s father’s side came from Glasgow in the 1850s. That seems to be enough these days for others to make great claims about their antecedents, so let’s go with it. My Cornish, English and Irish forebears can sit this one out; I will claim them later when I can find a use for them.

Anyway, there is my poor old homeland on the rack, thinking of breaking from mother England. The Scots have a rare moment to reflect on their good fortune and why it came to be so. The white paper, Scotland’s Future, opens with the silken words: “The central purpose of independence is to make life better for people living in Scotland. Only a Scottish parliament and government will always be able to put the interests of the people of Scotland first.” Apparently, being well off has something to do with ruling oneself.

Elsewhere it talks of “fostering high levels of trust and reducing income inequality, encouraging a stronger and shared sense of national purpose”. Apparently, being well off also has something to do with trust, equality and national purpose.

And, finally: “The Scots plan to establish a Fair Work Commission, which will guarantee that the minimum wage will rise at the very least in line with inflation and provide advice on fairness at work and business competitiveness.” A workers’ paradise at last!

Are any of these arguments valid? What is it that makes some people better off than others? This is the question posed by the renowned Chicago economist and historian Deirdre McCloskey, who was in Brisbane last week. Specifically, she asked, how did the average income in the world move from three dollars a day, where it had been for millennia, to $30 a day in very recent times? Did it have much to do with ruling oneself, trust, equality and a Fair Work Commission?

Only incidentally. McCloskey’s answer is bourgeois dignity. By which she does not mean Edinburgh types, as opposed to Glasgow types. Indeed, it may be the stuffiness of the upper class that stifles bourgeois dignity just as surely as trade unions or the welfare state.

McCloskey argues that economics alone cannot explain the modern world. She argues that innovation, much more than investment or exploitation, caused the industrial revolution. And Scotland had a big part to play in it.

Her radical interpretation of economic history is that “talk and ethics” caused the innovation. Moreover, it was the bourgeois virtues, all of them, which made the difference. Not prudence alone, as some argue, but justice, temperance, love, courage, hope and faith.

The McCloskey insight is that “economics is something that happens between people’s ears”. Valuations, opinions, talk on the street, imagination, expectations, hope are what drive the economy. In particular, dignity (or respect for innovation) and liberty (to be free to innovate) came to the fore.

She does not believe that the inefficiencies of the welfare state and unionised workforces are so great as to destroy innovation, but “When the bourgeois virtues do not thrive, and especially when they are not admired by other classes and their governments and the bourgeoisie itself, the results are sad.”

Since the Scottish parliament was re-established in 1999, responsibility for governing Scotland has been split. Edinburgh, like an Australian state government, is responsible for “devolved” matters, including the National Health Service, education, justice, social services, housing, the environment, farming, fisheries and aspects of transport.

Westminster has “reserved” responsibilities, much the same as our federal government, including defence, foreign affairs, macroeconomic policy, the welfare system, financial and business regulation and most aspects of taxation. Taxes raised in Scotland pay for both governments, but these taxes generally go directly to Westminster and devolved services are largely funded by a “block grant” determined by Westminster. Ditto, Canberra and the states.

The issue for the Scots is: will devolution generate the spontaneity that helped kick it all off 200 and more years ago? The lesson for Australian legislators is simple. Any proposals had better enhance innovation. The rest is just window dressing, rent-seeking, or self-aggrandisement.

There is one great advantage for English Conservatives in Scottish devolution. Labour has 40 of 59 Scottish MPs in the House of Commons, which consists of 650 members. Labour is far less likely to win a majority in England and Wales should Scotland secede, and so Labour’s chances of governing Britain will be permanently diminished.

By the way, there are 18 MPs from Northern Ireland in the House of Commons, none of whom is Conservative (or Lib/Dem). I am also a proud Galway and Wicklow man (mother and father’s mother’s side), but let us not get into that.